De-Risking Offshore Wind: Developing a New Sector through Turbulent Times 

Abstract

The U.S. East Coast from North Carolina to Maine has ideal conditions for offshore wind (OSW) power generation, with high and consistent wind speeds, a long and shallow continental shelf, and densely populated coastlines in need of affordable clean electricity. To realize this potential, states across the Northeast have set capacity goals and mandates ranging from 1,400 MW in Rhode Island to 23,000 MW in Massachusetts. The Biden administration created a U.S. federal target of 30,000 MW by 2030 and 110,000 MW by 2050, enough to power nearly 40 million homes. Despite the potential, ambitions, and flurry of development activities, progress has been slow and riddled with challenges. Most alarming are the near-existential struggles faced by U.S. OSW since the onset of COVID-19 in March 2020. The pandemic brought a series of global macroeconomic shocks—supply chain disruptions, rapid inflation, and high interest rates. These shocks were exacerbated by Russia’s invasion of Ukraine (February 2022). The cost of developing an OSW farm in the U.S. skyrocketed, increasing nearly 50%. The industry faced a series of major cancellations; specifically, canceled offtake agreements—long-term contracts specifying the price at which the OSW power generated will be sold to state-regulated utilities. As of August 2024, of the 22 projects that were awarded offtake agreements, 16 could no longer uphold their side of the agreements: 12 canceled while 4 were able to re-negotiate. This chapter explores two key questions. First, why did these cancellations and renegotiations happen, and what do they mean for the industry? Second, how have state governments responded, and what can they do to foster a smoother, less risky future? We approach these questions through a risk and risk management approach, using qualitative research methods: document analysis, literature review, and a comparative case study across four states—New Jersey, New York, Rhode Island, and Virginia.