New York agreed to the biggest-ever offshore wind power deal in U.S. history, a pact stemming from rising interest among Northeastern states, increasing government support, falling costs and investors placing more money behind bets on wind. 

Governor Andrew Cuomo signed the accord last week for two wind farms off Long Island with almost 1.7 gigawatts of capacity, a step toward the state’s goal of switching to emissions-free electricity by 2040. Each will be bigger than the U.K.’s Walney Extension, the largest offshore wind project in the world. Cuomo sees 1,600 new jobs, as demand for equipment and services surges.

“States on the East Coast are looking to increase their renewable energy and offshore wind and solar are the only options,” said Paul Flemming, managing director at ESAI Power LLC, an energy consultancy in Wakefield, Massachusetts. 

Most of the world’s offshore-wind capacity is in northern Europe off the coasts of the U.K., Germany, the Netherlands and Denmark. China, Japan and Taiwan are seeing a surge of investment that will make Asian waters another center for electricity production. The U.S. is a latecomer but is primed for growth as states demand carbon-free power and costs decline.  

Norway’s Equinor ASA and a joint-venture between Denmark’s Orsted A/S and U.S.-based Eversource Energy will build the farms that will supply electricity for more than 1 million homes when they come online in 2024. This will be a boon for Siemens Gamesa Renewable Energy SA, which conditionally received an order to supply turbines to the Orsted-Eversource project.

  • New York’s announcement is expected to intensify competition among East Coast states for jobs and supply chain investment in the offshore wind market, which is projected to be one of the world’s fastest growing renewables markets during the next decade.
  • Offshore development in the U.S. is ramping up after being hindered by high cost and lawsuits. The only commercial wind farm in the U.S., the 30-megawatt Block Island Wind Farm, came online in 2016. The project, supplying Rhode Island’s Block Island, has led to cheaper power while concerns about a negative impact haven’t panned out. There are now proposed projects in states from Virginia to Massachusetts.
  • “Offshore wind has the highest barriers to entry of sustainable power because of the high cost, with costs easily topping $1 billion,” Flemming said. “The contracts are highly prized though, because on the farms are running there’s a steady stream of income.”
  • While the turbine housings themselves are unlikely to be built in the U.S. anytime soon, other major components, including foundations, towers and blades, can be sourced domestically, according to a March report on the supply chain written by Stephanie A. McClellan and published by the University of Delaware’s Special Initiative on Offshore Wind.
  • Karma Takeaway:New York’s accord may be the start of a tsunami of deal as states seek to meet the higher demand for clean energy. With the supply chain in its infancy in the U.S., opportunities abound for social-impact investors.