Plowing through rough seas toward offshore wind
No one should have expected that the journey to offshore wind-power development would be smooth sailing. Indeed, the news of the last couple of weeks has been as stomach churning as the ride up a nor’easter-generated wave and the slide down the other side.
On May 19 the cargo ship Claude A. Desgagnes arrived from Denmark to a State Pier in New London. It carried both the first components for offshore wind turbine construction and the promising possibilities that this will become a major new industry, benefiting the region and state while combating climate change. The turbine parts are destined for the South Fork Wind project, the first undertaken in U.S. federal waters.
But the ship’s arrival at a pier still under reconstruction was a sobering reminder that much work remains and that significant uncertainty still surrounds the undertaking. Just how vast this industry will grow, and how big will be the pier’s part in supporting it, remains an open question.
A week later Eversource confirmed what had long been expected. The New England utility giant is selling its share in a 187,000-acre wind-power lease area off Massachusetts to partner Ørsted for $625 million. It is also seeking buyers for 50% stake in three other planned wind farms. As part of the deal, Ørsted announced it is taking full ownership of wind turbine assembly projects at State Pier in New London, the Port of Providence, Port of Davisville, and Quonset Point, the latter three all in Rhode Island.
Eversource expects the sell-off to generate losses between $220 million and $280 million.
The company did not explain its reasoning for bailing, but it appears the risk involved with offshore wind-power construction proved to be too high for the utility’s liking. Eversource has operated in a largely regulated industry of electric and natural gas distribution where profits are pretty much assured.
Little is assured in the effort to set up an offshore wind-power industry. Changes in political winds could undermine the support the undertaking now has with the Biden Administration. Delays, opposition and potential litigation could confront plans to construct turbines in lease areas. The same challenges could arise where turbine power lines connect to the mainland. And assuring adequate supply chains will be a challenge.
Ørsted has a track record of overcoming obstacles, though not yet in this country. It operates more offshore wind-energy projects than any other company. It would have taken the lead on offshore wind even if Eversource had remained its partner.
The most recent news arrived when the Connecticut Port Authority finally provided the details of just how large the latest overrun will be for the State Pier project. The port authority revealed it will need nearly $54 million to complete the job.
That brings the total project cost to $309 million.
It is not shocking that a public works project of this magnitude would run into unforeseen costs. The former two piers have been converted into a single laydown area capable of handling the massive components necessary for offshore wind-power development. The project is transforming New London into a heavy-lift port of call.
But the number and size of the overruns have been shocking. When it comes to staying within budget, the port authority and administration of Gov. Lamont keep overpromising and underdelivering. Port authority officials are blaming inflationary pressures, supply chain challenges, and unanticipated expenses to drive pilings for the latest cost increases.
This may be true, but this project must be scrutinized. We know the State Contracting Standards Board is already investigating the handling of the contracting work. The Auditors of Public Accounts also need to take a deep dive to determine if these higher costs are truly the result of unforeseen circumstances or evidence of fiduciary negligence.
But the state must finish the project. There is no turning back now.
There was some good news. Ørsted (and Eversource for now) agreed to cover $24 million of the added costs. They can recoup some of that money by subleasing space to other offshore wind developers. This is reasonable. The partnership is paying $2 million annually to lease the facility.
Massive undertakings come with big risks. Offshore wind energy is a massive undertaking. But it remains a risk worth taking to reduce greenhouse gas emissions while building a greener economy. Just hang on for more rough seas ahead.
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