(Bloomberg) -- New York has signed the biggest deal for offshore wind power ever done in the U.S.
On Thursday, Governor Andrew Cuomo awarded contracts for two projects off Long Island that will total 1,700 megawatts in capacity. Equinor ASA and a joint venture between Denmark’s Orsted A/S and Massachusetts-based Eversource Energy were chosen to build the farms, which will supply enough power to light up a million homes.
Cuomo is counting on the wind projects to achieve the most aggressive clean energy goal in the U.S.: getting all of the state’s power from emissions-free sources by 2040. He signed the renewable energy target into law right after announcing the wind contracts. New York’s ultimate plan is get enough turbines erected off its shores to generate 9,000 megawatts by 2035.
“To deny climate change is to deny reality,” Cuomo said Thursday, adding that the contracted wind farms will be completed by 2024. Based on cost estimates from BloombergNEF, the projects may be valued at more than $5 billion.
Shares of Springfield, Massachusetts-based Eversource gained as much as 1.1% on the news to $78.17.
Equinor will generate 816 megawatts from a project south of Long Island, and the Orsted-Eversource joint venture will provide 880 megawatts from a site off Long Island. Construction will begin in the early 2020s pending permits, said Thomas Brostrom, chief executive officer of Orsted Americas. “We have to go flying out of the gates to have service by 2024,” he said.
The contracts -- requiring utilities to buy power from the wind projects -- have proven crucial to the financing and development of offshore wind power in the U.S. Analysts have projected that the business could grow into a $70 billion industry along the East Coast, where states from New York to Massachusetts to New Jersey are holding auctions.
New York’s contracts were so sought-after that project developers spent months wooing officials in the state with promises of jobs, training programs and port upgrades leading up to the auction results.
Erecting wind mills in the ocean remains one of the most expensive ways to generate electricity. But costs are falling, and states see the technology as key in bringing clean energy to densely populated coastal areas. The U.S. government has leased more than a dozen sites to develop projects in the Atlantic from North Carolina to Massachusetts. New York’s request for bids drew offers from four developers who have building sites off Massachusetts, Rhode Island, New York and New Jersey.
In June, New Jersey awarded a contract to Denmark-based Orsted to supply 1,100 megawatts of offshore wind at an initial cost of $98.10 a megawatt-hour. That’s roughly triple the average wholesale power cost in the region.
Excluding subsidies, the cost of offshore wind power have plunged 64% since 2012 to a global average of $89 a megawatt-hour last year, according to BloombergNEF. That’s still more than double the $35 a megawatt-hour that New York City has paid on average for wholesale power over the past five years, according to data compiled by Genscape.