The Great Lakes Offshore Wind Project (Glow) was envisaged as a 150MW offshore wind farm on either Lake Erie or Lake Ontario.
The NYPA said it had voted to end the tender after viewing submissions for the project and discovered GLOW would need a subsidy of around $60-100 million.
In a statement, NYPA said: "Evaluation of the proposed project’s economics determined that it would not be fiscally prudent for the Power Authority to commit to the initiative."
The submissions were from Apex Offshore Wind, Great Winds, NRG Bluewater Wind Great Lakes, Pattern Renewables and RES Americas. The tender went out at the end of 2009.
The decision to cancel the project will be welcomed by a number of campaigners who were against the project. State senator George Maziarz told Windpower Monthly the deep waters in Lake Ontario ruled it out as a suitable location.
At the time the tender went out, there were questions over whether the NYPA understood the costs of offshore wind and whether it would award a contract at the high rates that would support private financing of project construction.
GLOW is not the first offshore wind project to be cancelled by the NYPA. In 2006, costs projections forced it to abandon plans to develop a 140MW wind farm off Long Island.
However, the Long Island project was revived last year and is unaffected by the NYPA decision on GLOW.
The NYPA’s decision follows a similar move by Ontario, which put a moratorium on offshore development in Lake Ontario. The provincial government said more scientific study is needed before it can develop rules for offshore development.