Norway-based energy company Equinor and UK energy giant bp announced today the termination of an agreement with the New York State Energy Research and Development Authority (NYSERDA) for Empire Wind 2, one of the largest offshore wind projects in the U.S. with anticipated capacity of nearly 1.3 GW.

According to a statement from the companies, the decision to end the agreement followed “changed economic circumstances,” with higher inflation and interest rates, as well as supply chain disruptions preventing the Offshore Wind Renewable Energy Certificate (OREC) with the state from being viable.

Molly Morris, President of Equinor Renewables Americas, said:

“Commercial viability is fundamental for ambitious projects of this size and scale. The Empire Wind 2 decision provides the opportunity to reset and develop a stronger and more robust project going forward.”

Equinor and bp were initially selected for the Empire Wind 2 contract in early 2021, as part of the largest to-date award in the US offshore wind market. Originally anticipated to begin commercial operations in 2028, Empire Wind 2 is located approximately 14 miles offshore Long Island at its closest point, with a potential generation capacity of 1,260 MW. Equinor and bp formed a partnership in 2020 to develop offshore wind projects in the US, including the development of existing offshore wind leases on the US East coast.

The decision forms the latest in a series of setbacks for the U.S. offshore wind sector, closely following an announcement by energy company Orsted that it was ceasing development of the New Jersey offshore wind projects Ocean Wind 1 and 2 – also citing interest rate and supply chain issues – creating challenges at the state and federal levels to ramp up the development of renewable energy. New York has a mandatory goal in place to have 70% of electricity provided by renewable sources by 2030, as well as a target to achieve a zero-emission electricity sector by 2040. The Biden administration has set a goal to deploy 30 GW off offshore wind capacity by 2030.

Despite the cancelled contract, Equinor and bp framed the move as a “reset,” aimed at repositioning for the continued development of the project, “in anticipation of new offtake opportunities.”

Joshua Weinstein, bp’s President of Offshore Wind Americas, said:

“bp is supportive of NYSERDA’s leadership and commitment to offshore wind, which we believe is a critical part of New York State’s and America’s clean energy future. Offshore wind can deliver reliable renewable power as well as economic benefits to the state and its communities.”