Ørsted—a Danish multinational energy company specializing in offshore wind development—announced on Halloween it’s scrapping two planned offshore wind farms in New Jersey, Ocean Wind 1 and 2, due to supply chain issues and rising interest rates. The cancellation will reportedly cost the company over $1 billion.
“Ørsted has taken the decision to cease the development of the Ocean Wind 1 and 2 projects,” the company said in a press release. “This is a consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay. In addition, Ørsted has updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits. Finally, increases to long-dated US interest rates have further deteriorated the business case.”
This development comes after Ørsted announced in August 2023 that it would delay the aforementioned projects until 2026.
Ørsted is not the only clean energy company to rescind offshore wind deals. Avangrid Inc.—a subsidiary of the Spanish renewable energy company Iberdrola—canceled two offshore wind projects this year. The first project, the Commonwealth Wind Project, was terminated this past summer and came with a $48 million penalty. Last month, the company announced it was paying $16 million to exit out of the ParkCity Wind Project in Connecticut on account of it becoming “unfinanceable.”
The Wall Street Journal reported last month that wind companies and Democratic governors want the federal government to bail out these failed projects. The publication noted developers like Ørsted and Northeastern governors are lobbying the Biden administration to “boost” Inflation Reduction Act subsidies to cover 50% of project costs.
Ørsted CEO Mads Nipper said wind projects can only survive if taxpayers and ratepayers pitch in.
“And if they don’t, neither we nor any of our colleagues are going to build more offshore,” Nipper said. “It’s very simple.”
Unsurprisingly, calls to rescue these heavily subsidized projects have come from six Northeastern U.S. governors—all Democrats—representing Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, and Rhode Island.
“Absent intervention, these near-term projects are increasingly at risk of failing,” the governors said in a statement. “Without federal action, offshore wind deployment in the U.S. is at serious risk of stalling because states’ ratepayers may be unable to absorb these significant new costs alone.”
One investment analyst had this dire warning for the offshore wind industry: “The wind power sector has stalled, with virtually no companies in the industry now turning a profit.”
Offshore wind projects have faced increased scrutiny for their intermittent baseloads, expensive construction and maintenance costs, noise concerns, and potential adverse impacts on endangered whales and marine life.
Sean Hayes, chief of protected species at the National Oceanic and Atmospheric Administration (NOAA) Northeast Fisheries Science Center, warned the Biden administration in a May 2022 letter that offshore wind could imperil endangered North Atlantic right whales.
Hayes explained, “The development of offshore wind poses risks to these species, which is magnified in southern New England waters due to species abundance and distribution. These risks occur at varying stages, including construction and development, and include increased noise, vessel traffic, habitat modifications, water withdrawals associated with certain substations and resultant impingement/entrainment of zooplankton, changes in fishing effort and related potential increased entanglement risk, and oceanographic changes that may disrupt the distribution, abundance, and availability of typical right whale food.”
This trend of project cancellations spells doom for the Biden administration’s goal of producing 30 gigawatts of offshore wind energy by 2030.
The White House should concede here, do a course correction on the Inflation Reduction Act, and not foot taxpayers with the bill.
Learn more about problematic ocean industrialization efforts HERE.