Politicians Waking up to Higher-cost Offshore Wind Power, Equinor Says

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Recent decisions in the United States and Britain to accept higher prices for offshore wind developments are a welcome sign that authorities are adjusting to higher costs in the industry, Equinor's head or renewables said on Tuesday.

"I believe that politics and markets will adjust, and that is also necessary in order to keep up the pace of offshore wind developments," Paal Eitrheim told Reuters on the sideline of the Norwegian company's autumn conference in Oslo.

The offshore wind industry has found itself in a perfect storm of rising inflation, interest rate hikes and supply chain bottlenecks, in some cases leading to project cancellations as support schemes failed to adjust.

Earlier this year, Equinor and partner BP unsuccessfully petitioned for an average 54% increase to previously agreed power sales terms for three New York projects with a combined capacity of 3,300 megawatts (MW).

Since then, a third offshore wind auction in New York cleared at rates above those of Equinor and BP's current deals, and the state, which aims for 9,000 MW of offshore capacity in 2035, announced a new tender also open to previously awarded projects.    

"I think it is encouraging to see that the New York 3 awards have been made on a price level that are closer to the cost level in this industry now," Eitrheim said, but added Equinor had not decided yet on whether to re-bid projects in the new auction.

Similarly, Britain has adjusted the price for next year's renewables auction higher by 66%, after failing to attract offshore wind bids in the previous round.

Equinor is considering extensions to existing offshore wind farms in Britain that could qualify for auctions in future, and Eitrheim defended higher prices in the near term after over a decade of cost reductions.

"Although it's dramatic right now, I think, as we are building this supply chain, we are going to come back to a price level for offshore wind that is competitive for governments, for companies and also consumers."

(Reuters - Reporting by Nora Buli/Editing by Terje Solsvik and Mark Potter)