High-price US steel could hit ‘viability’ of offshore wind projects in New York: Nyserda

New York is giving developers more time to submit comments on its draft round 3 offshore wind tender on concerns that American-made steel in project proposals could cause major cost escalations and supply chain issues, according to a new report.

The study, carried out by consultancy Advisian for the New York State Energy Research and Development Authority (Nyserda), the agency charged with managing the New York’s offshore wind sector, said the recently enacted legal requirement that only American-made steel is used in state-funded industrial projects would lead to development costs spiralling to “unreasonable” levels.

“Development of offshore wind projects is challenging and complex, and the costs of Nyserda’s procurements of ORECs [offshore wind renewable energy credits] are ultimately borne by ratepayers across New York State through electricity bills,” the agency noted in a memorandum. Based on the results of the study, Nyserda concluded, use of US-made steel would “affect the cost to ratepayers” and impact “the viability of offshore wind projects”.

Advisian’s report determined that US steel mills could either not supply enough steel to meet the needs of the state’s tender or would produce steel at such high prices that they would raise incremental costs to “between $98,000/MW and $393,000/MW compared to globally sourced structural iron and steel”, Nyserda said.

“For a suite of projects with an aggregate generation capacity of 4,640MW, this translates to additional capital expenditure costs ranging from $475m-$1.9bn.”

As the lead agency sponsoring the tender, Nyserda determined that the requirement was “not in the public interest” and removed it from the draft request for proposals (RfP), prompting the agency to extend the comment period.

Article continues below the advert

Supply chain links would be overstretched

The US is pushing hard for an American-made offshore wind supply chain, with the Bureau of Ocean Energy Management (BOEM), the federal regulator of offshore wind development, including incentives to buy American-made components in its recent New York Bight lease auction, and state tenders typically require local investments. Offshore wind capex reached $6.9bn through 2021, according to industry advocate American Clean Power Association, with new cable making and blade finishing plants having been announced, as well as new support vessels being built.

New York’s nation-leading 9GW of offshore wind by 2035 mandate is spurring vast economic investment into the state’s industrial base. The joint venture of oil-majors turned offshore wind developers Equinor and BP recently announced a $250m investment into the South Brooklyn Marine Terminal in support of its 3.3GW of projects for which it has signed OREC purchase and sales agreements (PSA) with Nyserda.

New York governor Kathy Hochul also announced in January up to $500m in investment in port and supply chain capacity to support the development of offshore wind, and Nyserda notes that its round 3 proposals will be evaluated based upon 70% price, 20% economic benefits, and 10% viability.

But these goals are running into complications on the ground that may result in either forcing developers to continue to source from foreign supply chains or to raise the costs of developing the industry.

The US steel making industry offers a case in point. New York’s “Buy American” law would require that developers source steel for towers, platforms, transition pieces, foundations, and other “load-bearing components” of an offshore wind farm from US steel makers, but Advisian was “unable to identify any US steel mill capable of producing steel slab/plate” that meets the 13-foot, 30-ton requirements for monopiles.

President Biden’s signature Build Back Better bill would have provided substantial investments into clean energy supply chains, but opposition from Senator Manchin and Senate Republicans stalled the bill earlier this year and the bill has fallen off the agenda amid the Russian invasion of Ukraine.

Yet, the fight for an American-made offshore wind supply chain continues. The just-announced lease sale in Wilmington East wind energy area off of the Carolinas provides a 20% credit for investment into the US offshore wind supply chain, which industry advocate the Business Network for Offshore Wind sees generating as much as “a hundred million dollars directly invested into domestic factories, local small businesses and suppliers, and workforce training”, according to a statement from CEO and founder Liz Burdock.

High-price US steel could hit ‘viability’ of offshore wind projects in New York: Nyserda News

Source link

High-price US steel could hit ‘viability’ of offshore wind projects in New York: Nyserda Resources

Renewable Energy