The cost of offshore wind power on the U.S. Atlantic coast is rising sharply now because of inflation and supply-chain bottlenecks but that’s likely to be temporary and so is not expected to play a big role in Delaware’s current deliberations over whether to buy electricity from future offshore wind farms.
As Delaware officials consider how or whether the state should procure offshore wind power, and lawmakers begin to focus on whether to require a state commitment, discussions are dominated by requests by developers in other states for a renegotiation of their contracts. They argue that they won’t be able to make money by delivering power at the agreed price because their costs for inputs such as steel and wages have risen steeply over the past year.
Several developers in New York, Massachusetts, Rhode Island and New Jersey are seeking price increases of 26-48 percent from their existing contracts, according to a presentation to the Governor’s Energy Advisory Council by Willett Kempton, an offshore wind expert at the University of Delaware, and Kris Ohleth, director of UD’s Special Initiative on Offshore Wind, on Sept. 7.
Most states haven’t decided whether to agree to such big increases but even if they do, the effect on ratepayers’ bills would be only a fraction of those numbers, reflecting the proportion of a state’s overall power production is contributed by offshore wind, said Kempton, a longtime advocate for the industry.
“All of those dollars of rate increase will be borne by the ratepayers but if you look at your individual bill, you will never see a 26 percent increase because it might be one tenth of the power that the state buys,” Kempton said in an interview.
Still, he predicted that some opponents of offshore wind will seize on the new numbers to reiterate their longstanding arguments that Delaware should decide not to procure the power. Delaware is the only northeastern coastal state that does not have an official commitment to buying offshore wind power, a policy that underpins the industry’s confidence that it will have a ready market for its power.
The current deliberations represent Delaware’s latest reconsideration of offshore wind. In 2011, the developer Bluewater Wind walked away from plans that could have given Delaware the first U.S. offshore wind farm, after federal tax breaks were withdrawn. In 2017, a task force set up by Gov. John Carney to take another look at offshore wind decided the time wasn’t right for the state to procure power.
In July, DNREC Secretary Shawn Garvin told Delaware Public Media that his agency would recommend a procurement mechanism by the end of the year, as required by state law, but won’t necessarily say whether the state should buy offshore wind power.
Kempton argued that any new wind farm built off Delaware would likely not begin operating until the end of the decade, by which time inflation is expected to slow, and supply-chain bottlenecks will ease as the industry expands.
And despite the latest cost increases, the overall cost of offshore wind is still about half what it was when rejected by the Governor’s working group, Kempton said. Since then, costs have been driven down by improving technology, bigger turbines and more ships to install the wind farms, and the cost of offshore wind power is now about the same as that from other sources, he said.
But he acknowledged that the industry’s current concerns will set back state and federal targets for decarbonizing power and other sectors, and make it harder for Delaware to hit its clean-energy target of net-zero by 2050.
Whenever the state hits net-zero, it’s unlikely to be without offshore wind power, which would replace some natural gas-fired power at Delaware utilities, experts said.
“It’s not clear how Delaware gets to net zero without it,” said Jeremy Firestone, a professor in UD’s School of Marine Science and Policy. “We made great headway by switching from coal to natural gas but there’s only so much solar, there’s only so much land-based wind in our state. How else are you going to do it if you don’t do it with offshore wind?”
The industry will be needed to help the state convert not only its power sector to renewable sources but also to power transportation, homes, commercial buildings, and other carbon emitters, he predicted.
For now, Delaware’s deliberations over whether or how to procure offshore wind are being conducted by the 25-member Governor’s Energy Advisory Council, which is expected to recommend whether to commit to buying the power, and the Department of Natural Resources and Environmental Control, which is required to propose a mechanism for procuring it.
If the executive branches propose procurement, it will then be up to the General Assembly to craft a law requiring the state to buy a specific quantity of offshore wind power by a certain date.
State Sen. Stephanie Hansen (D-Middletown), who chairs the Senate’s Environment, Energy and Transportation Committee, said offshore wind is among energy sources that are being considered by policymakers, and that the industry’s challenges in other states are being taken into account.
"Delaware is focused on a wide range of long-term energy solutions that are both environmentally and economically sustainable..."State Sen. Stephanie Hansen (D-Middletown)
“Delaware is focused on a wide range of long-term energy solutions that are both environmentally and economically sustainable and when used together will add redundancy and enhance energy reliability in our communities,” Hansen said in a statement. “I am also confident that our utilities are capable of meeting our goals and similar goals set by neighboring states through a combination of renewable energy sources.
“Any issues being experienced by the offshore wind industry today will continue to evolve, and all of those conditions will be taken into consideration when our state reaches various decision points in the months and years ahead,” she said.
State Sen. Bryant Richardson (R-Sussex) said he is opposed to offshore wind and urged lawmakers not to subsidize any wind farm off Delaware. He said he voted against SB170, which requires DNREC to report by the end of this year on how to procure offshore wind, and hopes that the bill does not lead lawmakers to approve subsidies. “If the free market sees the projects as too risky, taxpayers should not be required to assume the risk,” he said.
Outside the Legislature, advocates urged lawmakers to approve procurement, albeit with safeguards that guard against the requests for contract negotiation being seen in some other states.
Dustyn Thompson, director of the Delaware Sierra Club, said any procurement policy should apply only to power production. He said it should not include economic factors like job creation, which have driven up offshore wind development costs in New Jersey and Maryland and contributed to the current request for contract renegotiation by Orsted, the Danish wind-energy giant that plans two wind farms off New Jersey.
That state, which has the second-biggest offshore wind target in the northeast after New York, is building a publicly funded port on the Delaware Bay to marshal and assemble wind-farm components before they are installed offshore.
“If I have to build a huge port and operate it over the course of the construction of that project, versus relying on someone else’s port, it is going to have a much larger impact on my project than if a state – maybe Delaware – doesn’t do that,” Thompson said.
Peggy Schultz of the advocacy group People for Offshore Wind Energy Resources (POWER) played down the current cost increases, saying critics are ignoring the costs to public health of continued greenhouse gas emissions. And she urged policymakers to agree on offshore wind procurement soon.
“We want DNREC to begin a procurement process with some sense of a timeline so that it doesn’t go on forever,” she said. “And we want the legislators to come to terms with what they want in a procurement bill so that when DNREC prepares the document asking for bids, they will know what they are looking for.”
Evan Vaughan, executive director of MAREC Action, a Maryland-based nonprofit that advocates for clean-energy developers, predicted that the industry’s current price woes won’t affect Delaware’s discussions over procurement because any new contracts would reflect the costs that have prompted the recent requests.
“Delaware will undoubtedly need offshore wind as a major component of any net-zero scenario, as it is the most easily scalable clean energy source in a land-constrained state like Delaware,” he said. “A mix of in-state offshore wind, solar, and battery storage, supplemented by zero carbon resources across the PJM grid is the most likely path to a net-zero Delaware.”
Meanwhile, the federal government said it will on Friday release an environmental impact study for a planned wind farm off Maryland and southern Delaware. Starting in 2025, the US Wind project plans to build 22 turbines some 20 miles off Ocean City, MD, generating 300 megawatts, enough to power 92,000 homes including those on the Delmarva Peninsula. The study kicks off a 45-day public-comment period that will include an in-person meeting in Sussex County.
Across the Atlantic coast, the contract woes signify a bump in the road for some developers rather than a significant disruption of the region’s offshore wind plans, argued Kempton of UD. He predicted that states will reject some contract requests, perhaps causing those developers to walk away, as one did in Massachusetts.
Even if some developers drop out, states will easily find others to take their place because “the world is filled with developers who want to bid,” he said. Although the number of offshore megawatts installed in 2024 and 2025 may be lower than planned, “the industry as a whole is on track,” he said.
