Mounting Headwinds Threaten Offshore Wind Progress

As electric demand in the Northeast rises with electrification and data center growth, states have turned to offshore wind as a long-term solution. From New York and New Jersey to Massachusetts and Connecticut, procurement targets and interconnection plans have been in motion for years. But many projects now face financial and logistical strain, prompting a closer look at what offshore wind entails, what the region stands to gain, and whether the investments are worth the risk.

What Are These Projects?

Offshore wind projects involve large turbines located in coastal waters, typically 10 to 50 miles from shore, that deliver clean electricity back to the mainland. Projects such as Empire Wind, Sunrise Wind, South Coast Wind, and Ocean Wind were selected through competitive state solicitations and awarded long-term power purchase contracts intended to bring thousands of megawatts of zero-carbon electricity to ISO-NE, NYISO, and PJM.

In aggregate, the Northeast has over 20 gigawatts of offshore wind capacity in various stages of planning or development. These projects are essential components of state decarbonization goals and are intended to help meet Renewable Portfolio Standards, capacity obligations, and emissions targets over the next two decades.

Source: NREL.gov

What Does It Take to Build Offshore Wind?

Developing an offshore wind farm requires years of coordinated effort and infrastructure investment, including:

• Permitting and environmental review from federal and state agencies such as BOEM and state public utility commissions.
• Upgrading and expanding port infrastructure to accommodate turbine staging and assembly.
• Chartering specialized vessels capable of transporting and installing turbines, many of which must comply with the Jones Act.
• Installing undersea transmission cables that carry power from offshore substations to onshore grid interconnection points.
• Securing long-term contracts and financing in an environment of rising interest rates, steel and copper price volatility, and labor constraints.

The process from award to operation often spans seven to ten years and is capital intensive, with per-project costs reaching into the billions.

What Are the Current Headwinds?

Several major offshore wind projects in the Northeast have been delayed, restructured, or canceled due to overlapping challenges:

• Construction costs have increased substantially due to inflation in materials, labor, and financing, rendering many projects financially unviable under their original contracts.
• Developers are facing a shortage of qualified vessels and installation crews, making scheduling difficult and prolonging construction timelines
• Permitting delays and interconnection constraints have added uncertainty to completion dates.
• High-profile technical setbacks, such as turbine blade failures at the Vineyard Wind site in ISO-NE, have raised questions about long-term reliability and operations and maintenance planning.
• Several developers have exited previously awarded contracts, forcing states to rebid those projects under new, higher pricing structures.

These issues have cast doubt on whether offshore wind will materialize at the pace and cost originally envisioned.

What Are the Benefits?

If delivered as planned, offshore wind provides significant long-term value:

• Adds large volumes of zero-fuel-cost generation close to coastal demand centers, helping reduce reliance on natural gas and imported power.
• Helps states meet clean energy mandates and capacity needs without adding emissions.
• Provides long-term hedges against volatile fossil fuel prices.
• Drives regional investment in transmission infrastructure and port development.
• Offers substantial job creation and economic development opportunities in coastal communities.

Once built, offshore wind energy has low operating costs, and the marginal cost of generation is effectively zero. This contributes to downward pressure on wholesale energy prices during high-demand periods.

What Are the Counterpoints?

Despite the promise, there are legitimate concerns:

• Cost per megawatt-hour has risen sharply. Recent project rebids are coming in well above the cost of solar, onshore wind, and even gas-fired power
• Delays and cancellations mean that offshore wind is unlikely to meaningfully contribute to grid reliability until late this decade or beyond
• Onshore renewables, energy storage, and transmission upgrades may offer faster, cheaper, and less risky pathways to decarbonization
• Technical reliability is still unproven at scale in the U.S., as proven by the blade issue at Vineyard Wind
• Ratepayers are already bearing the cost of pre-construction activities through delivery charges, even if the projects do not reach completion

These trade-offs have led some to argue that offshore wind should be considered an aspirational supplement rather than a essential pillar of the Northeast's grid strategy.

Offshore wind presents a compelling vision for the future of electricity in the Northeast. But realizing that vision means navigating significant economic and logistical headwinds. While the long-term benefits may include cleaner, more stable, and locally sourced power, the path forward remains uncertain. For regulators, developers, and end users, the challenge is balancing ambition with affordability and ensuring that offshore wind development does not compromise grid reliability or overburden ratepayers.

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