File Photo by Gary C. Caskey/UPI | License Photo
Nov. 1 (UPI) -- Danish energy company Orsted announced Tuesday that it has canceled two wind energy projects that were planned for New Jersey.
The projects, Ocean Wind 1 and 2, were intended to be built about 15 miles off the coast of southern New Jersey as part of the Biden administration's efforts to promote clean energy
The company cited supply-chain factors as the main reason for the projects being canceled.
"This is a consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay. In addition, Orsted has updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permit," Orsted said in a statement Tuesday.
Orsted leadership said the company remains committed to the goal of creating renewable energy for U.S. markets.
"We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2. We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the US renewables market and truly value the efforts by the US government to support the build-up of the US offshore wind industry," said Orsted CEO Mads Nipper.
New Jersey Gov. Phil Murphy expressed disappointment in Orsted's decision, saying it "calls into question the company's credibility and competence."
Murphy said the company recently had indicated it was prepared to move forward with the project.
"As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project," Murphy said.
Murphy's administration tried to create a financial incentive for the Ocean Wind projects by passing a law that would have allowed Orsted to keep tax incentives that were initially intended to offset consumer costs.
Murphy said he has directed his administration "to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations."
The decision to cease the projects comes as the Biden administration this week announced the approval of the largest offshore wind project to date.
"The Biden-Harris administration today announced its approval of the Coastal Virginia Offshore Wind (CVOW) commercial project -- the fifth approval of a commercial-scale offshore wind energy project under President Biden's leadership," the Bureau of Ocean Energy Management said in a press release Tuesday.
Wind industry deals with blowback from Orsted scrapping 2 wind power projects in New Jersey
WAYNE PARRY
Updated Wed, November 1, 2023
Orsted-Offshore Wind Cancellations
A worker opens a section street in Ocean City, N.J. on Sept. 12, 2023, at the start of land-based probing along the right-of-way where a power cable for New Jersey's first offshore wind farm was proposed to run. Orsted scrapped the project on Oct. 31, 2023, citing supply chain problems and high interest rates.
Ella Nilsen, CNN
Wed, November 1, 2023
Wayne Parry/AP
Danish wind developer Orsted is halting the development of two massive New Jersey offshore wind projects due to cascading economic pressures, including skyrocketing interest rates and a supply chain crunch – two factors that have dogged wind energy projects up and down the East Coast.
The decision is ominous news for a nascent sector that could play a key role in solving the climate crisis, and one that is still trying to find its wings in the US, even as other major economies steam forward. It also deals a blow to President Joe Biden’s clean energy goals, which hinge in part on the massive potential for electricity generated from offshore wind.
Orsted Americas CEO David Hardy said the company was “extremely disappointed” to pull the plug on its development.
“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments,” Hardy said in a statement.
“As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2.”
More: Inflation, interest rates and whales – why offshore wind projects are on the rocks
A company statement blamed long wait times for supplies needed to build the project and rising interest rates in the US. In addition to a strain on supplies like monopiles and other components, there are long wait times for the ships needed to construct the towering wind turbines in the ocean.
Mads Nipper, Orsted’s CEO, said in a statement the company will “now assess the best way to preserve value while we cease development of the projects.”
New Jersey Gov. Phil Murphy, a major proponent of the projects, blasted the company’s decision.
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said in a statement, pointing to the company’s recent public statements about the project’s viability.
“I have directed my Administration to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”
Part of the reason the American industry has been slow to get off the ground – particularly compared to offshore-wind juggernauts like Europe and China – is US developers are essentially building it from scratch, industry experts have told CNN. And a combination of incredibly tight supply chains, lack of vessel availability and rising interest rates have made the first major US offshore wind projects very difficult to build.
Despite the Biden administration’s friendly posture toward offshore wind, the number of active turbines in US waters is still in the single digits, and the energy output lags significantly behind solar and onshore wind. There will be about 140 gigawatts of solar (including both utility scale and rooftop) installed in the US by the end of this year, Sam Huntington, director of S&P Global Commodity Insights’ North American power team, told CNN earlier this year, while offshore wind comprises a tiny 42 megawatts.
Two commercial-scale offshore wind projects – Vineyard Wind off the coast of Massachusetts and South Fork Wind off the coast of New York – are under active construction. The Biden administration announced earlier this week it approved plans for Dominion Energy to build what would be the largest offshore wind farm to-date in the US off the coast of Virginia. The Dominion project, known as Coastal Virginia Offshore Wind, is planned to be a 2.6-gigawatt wind farm that could eventually generate enough electricity to power over 900,000 homes.
Before the Dominion announcement, Ocean Wind 1 was the largest project the administration had approved – expected to generate 1.1 gigawatts, enough to power over 380,000 homes. At the time, administration officials including Interior Sec. Deb Haaland had praised the project’s federal approval as a “milestone.”
White House spokesperson Michael Kikukawa reiterated there is still “momentum” for the US offshore wind industry.
“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry,” Kikukawa said in a statement, “creating good-paying union jobs in manufacturing, shipbuilding, and construction; strengthening the power grid; and providing new clean energy resources for American families and businesses.”
Biden's offshore wind agenda relied on plans that are being canceled
Timothy Puko, (c) 2023, The Washington Post
Wed, November 1, 2023
A slew of canceled offshore wind projects and contracts have jeopardized the Biden administration's push to expand the new industry and its promise of clean power for coastal states.
The latest setback came Tuesday night when the Danish developer Orsted said it is scrapping two large projects off the southern coast of New Jersey. Ocean Wind 1 and 2 became too expensive because of rising interest rates and competition for limited supplies and equipment, the company said. The projects had also become a hot-button political issue, with local grass-roots opposition and campaigns tied to fossil-fuel interests.
The Biden administration had planned an expansion to generate 30 gigawatts of offshore wind power by the end of the decade - projects that could not be undone by future administrations, with enough energy to power more than 10 million American homes and cut 78 million metric tons of carbon dioxide emissions. East Coast states saw their construction as a way to spur new, union-friendly manufacturing jobs, adding more appeal for the administration's policymakers.
But the nascent industry has encountered numerous obstacles this year, with companies in recent weeks also moving to end contracts to sell power to utilities in Massachusetts and Connecticut. Those cancellations have helped put into limbo more than half of the offshore power under development nationwide - 18 gigawatts, largely along the Atlantic coast, according to a tally from Timothy Fox, vice president of research at ClearView Energy Partners. The rising costs and unprofitability of these developments - and tepid interest in more of them - could dash President Biden's hopes for offshore wind power, Fox and several industry lobbyists said.
"That tipping point is already past," Fox said. "With the cancellation of three different projects that are very huge, it seems unlikely."
Fox added the White House goal deserves credit for helping spark the industry's development to date. A White House spokesman, Michael Kikukawa, said in an email that the administration's strategy is producing results, including $7.7 billion in investment from the offshore wind industry since last summer, when the president signed the Inflation Reduction Act, which boosted climate spending.
"While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry," Kikukawa said in a statement.
Kikukawa noted that last week New York announced what it called the state's largest-ever investment in offshore wind. That announcement - which came after the state had declined to renegotiate existing offshore wind power contracts - commits hundreds of millions of dollars in new spending to several projects. And the Interior Department on Tuesday granted environmental approvals to the largest project in the country, a 2.6-gigawatt development from Dominion Energy, more than 20 miles off the coast of Virginia Beach.
In its Tuesday announcement, Orsted said it will still move forward with its Revolution Wind project, a smaller joint venture to send power to Rhode Island and Connecticut. The onshore part of its construction was already underway, and, unlike with other projects, company executives say they can ensure timely access to the giant vessels needed to build these sites in the ocean, leaving them to believe Revolution Wind can still eke out profits.
Other Orsted projects in New York and Maryland are still in limbo, with talks with officials in those states ongoing, the company said in its statement. Orsted said that it is still committed to the industry but that its portfolio is also still under review, with more decisions due in the coming months.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments," David Hardy, chief executive of Orsted's Americas division, said in a statement. "We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
Ocean Wind had been divided into two developments, the first of which alone included up to 98 wind turbines the size of skyscrapers about 15 miles offshore and enough new power for a half-million homes. Ocean Wind 2 would have doubled that capacity, going up to more than 2.2 gigawatts combined.
New Jersey Democrats had called Ocean Wind vital for meeting a state goal of reducing overall greenhouse gas emissions by 80 percent by 2050. State leaders have also attempted to make New Jersey into an industry hub, and Gov. Phil Murphy (D) on Tuesday slammed Orsted, pledging to ensure the company pays $300 million he said it promised to pay to support the offshore wind sector if it backed out of Ocean Wind.
"Today's decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company's credibility and competence," Murphy said in a statement. "I remain committed to ensuring that New Jersey becomes a global leader in offshore wind - which is critical to our economic, environmental, and clean energy future."
Ocean Wind had faced stiff opposition, especially from Republicans in coastal Cape May County. That included a lawsuit Protect Our Coast NJ filed against Orsted and the state in late July to block a tax break for the wind farm.
Leaders with the group said Wednesday that there is excitement and relief after Orsted's decision but also concern that the project will get revived. They asserted that offshore wind development could threaten fisheries and marine mammals, claims that contradict the conclusions of leading scientists.
"I'm optimistic, but we're just going to have a measured response to it," said Barbara McCall, a Protect Our Coast NJ board member.
Orsted also faced soaring costs. Offshore wind projects are multibillion-dollar investments, with full payoffs decades away. So interest rate hikes that governments have used to fight inflation have hit capital-intensive businesses, such offshore wind, especially hard. That led Orsted to reduce the estimated value of its assets by $900 million in the first nine months of 2023, company executives said Wednesday.
And with countries on both sides of the Atlantic Ocean trying to boost offshore wind, developers have pursued too many projects for the available supplies and equipment to build them. In Orsted's earnings call Wednesday, chief executive Mads Nipper said the giant vessels that build these wind farms were the central problem for Ocean Wind 1. Finding available vessels would have meant several years of delays and would have forced the company to redo many other contracts, probably increasing costs almost across the board, he said.
"It meant massive impact because of the uncertainty," Nipper said.
Company executives said Wednesday that Orsted would take a total write-down equaling $4 billion for the year through September, the vast majority of it tied to Ocean Wind 1 and 2. Company shares plummeted by 25 percent in trading Wednesday after that announcement.
In an interview with The Washington Post published Tuesday, the recently departed No. 2 at the Interior Department, Tommy Beaudreau, said the offshore wind industry has a long history of gradual growth despite major challenges. He also noted several other industries facing similar turmoil tied to the economy's rebound from the pandemic.
"It has overcome challenges before, and I truly believe it will overcome some of the economic challenges we're seeing today," Beaudreau told The Climate 202.
Lobbyists and ClearView's Fox said the Treasury Department is one avenue the Biden administration could use to improve the industry's fortunes. The department is still setting rules for tax breaks created by Congress in last year's climate-spending package, and one of its biggest remaining decisions applies to offshore wind.
The rules will affect how wind developers qualify for credits designed to boost the amount of steel and other materials used from U.S. manufacturers, and how much the wind-power supply chains will spur job growth. Developers and their advocates in Washington say the proposed rules are too restrictive. Looser rules could provide hundreds of millions of dollars more for each project, making many more of them viable, they said.
There are "real challenges with getting a new industry off the ground," the American Clean Power Association, a renewable-energy trade group, said in a statement Wednesday. "The news is also a reminder that we need strong partnerships with government and stakeholders, now more than ever."
Rachel Frazin
Wed, November 1, 2023
Republicans are cheering the cancellation of two offshore wind farms that would have been built off the coast of New Jersey.
The company Orsted announced Tuesday it was canceling its planned Ocean Wind 1 and 2 projects, which would have generated electricity via wind in the Atlantic Ocean.
The move was met with cheers from the GOP, including former President Trump, who has been particularly critical of wind energy over the years.
In a post on Truth Social, Trump criticized the projects as “horrendous” and congratulated GOP Rep. Jeff Van Drew (N.J.) on their defeat.
“Congratulations to a truly great Congressman, Jeff Van Drew, for his perseverance and success in defeating the horrendous Orsted Ocean Wind One & Two projects, which were to be built off the coast of South Jersey. This monstrosity required massive government subsidies, and ultimately, just didn’t work,” Trump wrote.
The former president has often railed against wind energy, including by spouting unfounded claims it causes cancer.
Van Drew, a former Democrat, also was among those who celebrated the cancellation. He wrote in a post on X, formerly known as Twitter, he was glad Orsted “has decided to pack up its offshore wind scam and leave South Jersey’s beautiful coasts alone.”
He called the move a “tremendous win for South Jersey residents, our fisherman, and the historic coastline of the Jersey shore.”
Rep. Chris Smith (R-N.J.) was also among those cheering the cancellation — saying he hoped other projects would similarly falter.
“Orsted’s decision was a first step in exposing the economic unsustainability and environmental dangerousness of ocean wind turbines … and Orsted’s pulling out of the deal may help slow and eventually halt similar projects off New Jersey’s coast,” Smith said in a statement.
The company cited supply chain challenges that led to delays in construction and rising interest rates as its reasons for canceling the projects.
Orsted CEO Mads Nipper said in a statement the company still “firmly believe[s] the US needs offshore wind to achieve its carbon emissions reduction ambition.”
The projects had been supported by New Jersey Governor Phil Murphy (D), who authorized a tax break for them earlier this year.
In a written statement, Murphy blasted the decision to walk away from the projects as “outrageous” and said it “calls into question the company’s credibility and competence.”
In New Jersey, the popularity of offshore wind has fallen in recent years according to Monmouth University polling, which found that just over half of New Jerseyans support it now, compared to more than three-quarters in 2019.
The Biden administration has embraced offshore wind as a method for combating climate change, saying it hopes that by 2030, the U.S. will generate enough offshore wind energy to power 10 million homes.
WAYNE PARRY
Updated Wed, November 1, 2023
Orsted-Offshore Wind Cancellations
A worker opens a section street in Ocean City, N.J. on Sept. 12, 2023, at the start of land-based probing along the right-of-way where a power cable for New Jersey's first offshore wind farm was proposed to run. Orsted scrapped the project on Oct. 31, 2023, citing supply chain problems and high interest rates.
(AP Photo/Wayne Parry)
ATLANTIC CITY, N.J. (AP) — Wind energy developer Orsted is writing off $4 billion, due largely to the cancellation of two large offshore wind projects in New Jersey whose financial challenges mirror those facing the nascent industry.
It added fresh uncertainty to an industry seen by supporters as a way to help end the burning of planet-warming fossil fuels, but derided by opponents as inherently unworkable without massive financial subsidies.
The Danish company said Tuesday night it is scrapping its Ocean Wind I and II projects off the coast of southern New Jersey due to problems with supply chains, higher interest rates, and a failure to obtain the amount of tax credits the company wanted.
“These are obviously some very tough decisions,” Mads Nipper, Orsted's CEO, said on an earnings conference call Wednesday.
He said the company, the world's largest offshore wind developer, decided “to de-risk the most painful part of our portfolio, and that is the U.S.”
That statement went straight to the heart about concerns over the financial viability of the offshore wind industry in the northeastern U.S., which is in its infancy but has extensive plans from New England to the Carolinas.
Some projects already have been canceled, and many offshore wind developers are seeking better terms from governments with whom they have already contracted. New York rejected such a request two weeks ago.
New Jersey approved a tax break for Orsted in July, letting it keep federal tax credits that otherwise would have gone to ratepayers.
“While periodic local opposition in the U.S. made some headlines, these projects ultimately come down to economics, so higher costs and lower power prices are working against offshore wind,” said Louis Knight, an analyst at Third Bridge, a research firm advising private equity and other businesses. “Higher interest rates are adding to financing costs for these projects. There are other, cheaper ways to develop power in the U.S., most notably with solar and natural gas.”
But the main appeal of offshore wind for supporters, including environmentalists, many state governments and the Biden administration is precisely that it is not a fossil fuel business. The hottest Northern Hemisphere summer ever measured hit this year, according to the World Meteorological Organization and the European climate service Copernicus.
“The urgency to transition to clean, renewable energy is an irreversible reality,” read a statement signed Wednesday by nearly 40 environmental, labor and community groups from New Jersey who support offshore wind, including the state's chapter of the Sierra Club. “In a world of warming temperatures and extreme weather in likely the hottest year on record, maintaining the status quo of fossil fuel generation is not an option as the cost of climate inaction is undeniably high.”
Orsted's stock price was down over 26% at midday Wednesday. The company said it hopes to re-use some supplies it has already purchased, such as cable and steel, on other projects.
Power generated from the Orsted projects was intended to come ashore and connect with the electrical grid at the site of a former coal-fired power plant that was blown up last week.
The industry also faces stiff political headwinds, in New Jersey and nationally, most of it from Republicans, who have convinced the U.S. Government Accountability Office to look into the industry.
Rep. Jeff Van Drew, a Republican who represents the area in southern New Jersey where Orsted's wind farms would have been built, exulted in the decision to scrap the projects.
“David defeated Goliath!” he said in a statement late Tuesday night, calling wind farms bad for the economy, the environment and electric customers.
Numerous resident groups also opposed the projects, citing similar concerns, and said they do not want to see the ocean horizon dotted with wind turbines.
“Without billions of dollars in tax breaks and subsidies, these projects never made sense and could not stand on their own,” said Robin Shaffer, a spokesman for Protect Our Coast NJ, one of the most vocal opposition groups.
Despite the challenges, some wind projects are moving forward. Orsted said it is proceeding with its Revolution Wind project in Connecticut and Rhode Island.
In Virginia, a utility’s plans for an enormous wind farm off that state’s coast gained key federal approval Tuesday. Dominion Energy received a favorable “record of decision” from federal regulators who reviewed the potential environmental impact of its plan to build 176 turbines in the Atlantic, more than 20 miles (32 kilometers) off Virginia Beach.
Pro-wind groups including the American Clean Power Association and the Oceantic Network acknowledged the setback posed by Orsted's cancellations. But both were heartened by progress on the Virginia project and Orsted's decision to continue with Revolution Wind, and both said the future of the industry is promising.
And New Jersey still has several other offshore wind projects in various stages of development, with four new proposals submitted in August alone. They join the one remaining project of the three originally approved by the state, Atlantic Shores. That is a project by Shell New Energies US and EDF Renewables North America.
Atlantic Shores said Wednesday it remains committed to its project, though it hinted in a statement that it, too, is seeking additional help.
“We are actively engaging in conversations with the administration, regulators, and elected leaders across New Jersey to identify viable solutions that will not only preserve the progress made thus far, but also facilitate the successful execution of Atlantic Shores Project 1,” the company said.
___
Follow Wayne Parry on X, formerly Twitter, at www.twitter.com/WayneParryAC
ATLANTIC CITY, N.J. (AP) — Wind energy developer Orsted is writing off $4 billion, due largely to the cancellation of two large offshore wind projects in New Jersey whose financial challenges mirror those facing the nascent industry.
It added fresh uncertainty to an industry seen by supporters as a way to help end the burning of planet-warming fossil fuels, but derided by opponents as inherently unworkable without massive financial subsidies.
The Danish company said Tuesday night it is scrapping its Ocean Wind I and II projects off the coast of southern New Jersey due to problems with supply chains, higher interest rates, and a failure to obtain the amount of tax credits the company wanted.
“These are obviously some very tough decisions,” Mads Nipper, Orsted's CEO, said on an earnings conference call Wednesday.
He said the company, the world's largest offshore wind developer, decided “to de-risk the most painful part of our portfolio, and that is the U.S.”
That statement went straight to the heart about concerns over the financial viability of the offshore wind industry in the northeastern U.S., which is in its infancy but has extensive plans from New England to the Carolinas.
Some projects already have been canceled, and many offshore wind developers are seeking better terms from governments with whom they have already contracted. New York rejected such a request two weeks ago.
New Jersey approved a tax break for Orsted in July, letting it keep federal tax credits that otherwise would have gone to ratepayers.
“While periodic local opposition in the U.S. made some headlines, these projects ultimately come down to economics, so higher costs and lower power prices are working against offshore wind,” said Louis Knight, an analyst at Third Bridge, a research firm advising private equity and other businesses. “Higher interest rates are adding to financing costs for these projects. There are other, cheaper ways to develop power in the U.S., most notably with solar and natural gas.”
But the main appeal of offshore wind for supporters, including environmentalists, many state governments and the Biden administration is precisely that it is not a fossil fuel business. The hottest Northern Hemisphere summer ever measured hit this year, according to the World Meteorological Organization and the European climate service Copernicus.
“The urgency to transition to clean, renewable energy is an irreversible reality,” read a statement signed Wednesday by nearly 40 environmental, labor and community groups from New Jersey who support offshore wind, including the state's chapter of the Sierra Club. “In a world of warming temperatures and extreme weather in likely the hottest year on record, maintaining the status quo of fossil fuel generation is not an option as the cost of climate inaction is undeniably high.”
Orsted's stock price was down over 26% at midday Wednesday. The company said it hopes to re-use some supplies it has already purchased, such as cable and steel, on other projects.
Power generated from the Orsted projects was intended to come ashore and connect with the electrical grid at the site of a former coal-fired power plant that was blown up last week.
The industry also faces stiff political headwinds, in New Jersey and nationally, most of it from Republicans, who have convinced the U.S. Government Accountability Office to look into the industry.
Rep. Jeff Van Drew, a Republican who represents the area in southern New Jersey where Orsted's wind farms would have been built, exulted in the decision to scrap the projects.
“David defeated Goliath!” he said in a statement late Tuesday night, calling wind farms bad for the economy, the environment and electric customers.
Numerous resident groups also opposed the projects, citing similar concerns, and said they do not want to see the ocean horizon dotted with wind turbines.
“Without billions of dollars in tax breaks and subsidies, these projects never made sense and could not stand on their own,” said Robin Shaffer, a spokesman for Protect Our Coast NJ, one of the most vocal opposition groups.
Despite the challenges, some wind projects are moving forward. Orsted said it is proceeding with its Revolution Wind project in Connecticut and Rhode Island.
In Virginia, a utility’s plans for an enormous wind farm off that state’s coast gained key federal approval Tuesday. Dominion Energy received a favorable “record of decision” from federal regulators who reviewed the potential environmental impact of its plan to build 176 turbines in the Atlantic, more than 20 miles (32 kilometers) off Virginia Beach.
Pro-wind groups including the American Clean Power Association and the Oceantic Network acknowledged the setback posed by Orsted's cancellations. But both were heartened by progress on the Virginia project and Orsted's decision to continue with Revolution Wind, and both said the future of the industry is promising.
And New Jersey still has several other offshore wind projects in various stages of development, with four new proposals submitted in August alone. They join the one remaining project of the three originally approved by the state, Atlantic Shores. That is a project by Shell New Energies US and EDF Renewables North America.
Atlantic Shores said Wednesday it remains committed to its project, though it hinted in a statement that it, too, is seeking additional help.
“We are actively engaging in conversations with the administration, regulators, and elected leaders across New Jersey to identify viable solutions that will not only preserve the progress made thus far, but also facilitate the successful execution of Atlantic Shores Project 1,” the company said.
___
Follow Wayne Parry on X, formerly Twitter, at www.twitter.com/WayneParryAC
Energy company pulls the plug on two major offshore wind projects on East Coast
Ella Nilsen, CNN
Wed, November 1, 2023
Wayne Parry/AP
Danish wind developer Orsted is halting the development of two massive New Jersey offshore wind projects due to cascading economic pressures, including skyrocketing interest rates and a supply chain crunch – two factors that have dogged wind energy projects up and down the East Coast.
The decision is ominous news for a nascent sector that could play a key role in solving the climate crisis, and one that is still trying to find its wings in the US, even as other major economies steam forward. It also deals a blow to President Joe Biden’s clean energy goals, which hinge in part on the massive potential for electricity generated from offshore wind.
Orsted Americas CEO David Hardy said the company was “extremely disappointed” to pull the plug on its development.
“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments,” Hardy said in a statement.
“As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2.”
More: Inflation, interest rates and whales – why offshore wind projects are on the rocks
A company statement blamed long wait times for supplies needed to build the project and rising interest rates in the US. In addition to a strain on supplies like monopiles and other components, there are long wait times for the ships needed to construct the towering wind turbines in the ocean.
Mads Nipper, Orsted’s CEO, said in a statement the company will “now assess the best way to preserve value while we cease development of the projects.”
New Jersey Gov. Phil Murphy, a major proponent of the projects, blasted the company’s decision.
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said in a statement, pointing to the company’s recent public statements about the project’s viability.
“I have directed my Administration to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”
Part of the reason the American industry has been slow to get off the ground – particularly compared to offshore-wind juggernauts like Europe and China – is US developers are essentially building it from scratch, industry experts have told CNN. And a combination of incredibly tight supply chains, lack of vessel availability and rising interest rates have made the first major US offshore wind projects very difficult to build.
Despite the Biden administration’s friendly posture toward offshore wind, the number of active turbines in US waters is still in the single digits, and the energy output lags significantly behind solar and onshore wind. There will be about 140 gigawatts of solar (including both utility scale and rooftop) installed in the US by the end of this year, Sam Huntington, director of S&P Global Commodity Insights’ North American power team, told CNN earlier this year, while offshore wind comprises a tiny 42 megawatts.
Two commercial-scale offshore wind projects – Vineyard Wind off the coast of Massachusetts and South Fork Wind off the coast of New York – are under active construction. The Biden administration announced earlier this week it approved plans for Dominion Energy to build what would be the largest offshore wind farm to-date in the US off the coast of Virginia. The Dominion project, known as Coastal Virginia Offshore Wind, is planned to be a 2.6-gigawatt wind farm that could eventually generate enough electricity to power over 900,000 homes.
Before the Dominion announcement, Ocean Wind 1 was the largest project the administration had approved – expected to generate 1.1 gigawatts, enough to power over 380,000 homes. At the time, administration officials including Interior Sec. Deb Haaland had praised the project’s federal approval as a “milestone.”
White House spokesperson Michael Kikukawa reiterated there is still “momentum” for the US offshore wind industry.
“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry,” Kikukawa said in a statement, “creating good-paying union jobs in manufacturing, shipbuilding, and construction; strengthening the power grid; and providing new clean energy resources for American families and businesses.”
Biden's offshore wind agenda relied on plans that are being canceled
Timothy Puko, (c) 2023, The Washington Post
Wed, November 1, 2023
NIMBY
A slew of canceled offshore wind projects and contracts have jeopardized the Biden administration's push to expand the new industry and its promise of clean power for coastal states.
The latest setback came Tuesday night when the Danish developer Orsted said it is scrapping two large projects off the southern coast of New Jersey. Ocean Wind 1 and 2 became too expensive because of rising interest rates and competition for limited supplies and equipment, the company said. The projects had also become a hot-button political issue, with local grass-roots opposition and campaigns tied to fossil-fuel interests.
The Biden administration had planned an expansion to generate 30 gigawatts of offshore wind power by the end of the decade - projects that could not be undone by future administrations, with enough energy to power more than 10 million American homes and cut 78 million metric tons of carbon dioxide emissions. East Coast states saw their construction as a way to spur new, union-friendly manufacturing jobs, adding more appeal for the administration's policymakers.
But the nascent industry has encountered numerous obstacles this year, with companies in recent weeks also moving to end contracts to sell power to utilities in Massachusetts and Connecticut. Those cancellations have helped put into limbo more than half of the offshore power under development nationwide - 18 gigawatts, largely along the Atlantic coast, according to a tally from Timothy Fox, vice president of research at ClearView Energy Partners. The rising costs and unprofitability of these developments - and tepid interest in more of them - could dash President Biden's hopes for offshore wind power, Fox and several industry lobbyists said.
"That tipping point is already past," Fox said. "With the cancellation of three different projects that are very huge, it seems unlikely."
Fox added the White House goal deserves credit for helping spark the industry's development to date. A White House spokesman, Michael Kikukawa, said in an email that the administration's strategy is producing results, including $7.7 billion in investment from the offshore wind industry since last summer, when the president signed the Inflation Reduction Act, which boosted climate spending.
"While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry," Kikukawa said in a statement.
Kikukawa noted that last week New York announced what it called the state's largest-ever investment in offshore wind. That announcement - which came after the state had declined to renegotiate existing offshore wind power contracts - commits hundreds of millions of dollars in new spending to several projects. And the Interior Department on Tuesday granted environmental approvals to the largest project in the country, a 2.6-gigawatt development from Dominion Energy, more than 20 miles off the coast of Virginia Beach.
In its Tuesday announcement, Orsted said it will still move forward with its Revolution Wind project, a smaller joint venture to send power to Rhode Island and Connecticut. The onshore part of its construction was already underway, and, unlike with other projects, company executives say they can ensure timely access to the giant vessels needed to build these sites in the ocean, leaving them to believe Revolution Wind can still eke out profits.
Other Orsted projects in New York and Maryland are still in limbo, with talks with officials in those states ongoing, the company said in its statement. Orsted said that it is still committed to the industry but that its portfolio is also still under review, with more decisions due in the coming months.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments," David Hardy, chief executive of Orsted's Americas division, said in a statement. "We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
Ocean Wind had been divided into two developments, the first of which alone included up to 98 wind turbines the size of skyscrapers about 15 miles offshore and enough new power for a half-million homes. Ocean Wind 2 would have doubled that capacity, going up to more than 2.2 gigawatts combined.
New Jersey Democrats had called Ocean Wind vital for meeting a state goal of reducing overall greenhouse gas emissions by 80 percent by 2050. State leaders have also attempted to make New Jersey into an industry hub, and Gov. Phil Murphy (D) on Tuesday slammed Orsted, pledging to ensure the company pays $300 million he said it promised to pay to support the offshore wind sector if it backed out of Ocean Wind.
"Today's decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company's credibility and competence," Murphy said in a statement. "I remain committed to ensuring that New Jersey becomes a global leader in offshore wind - which is critical to our economic, environmental, and clean energy future."
Ocean Wind had faced stiff opposition, especially from Republicans in coastal Cape May County. That included a lawsuit Protect Our Coast NJ filed against Orsted and the state in late July to block a tax break for the wind farm.
Leaders with the group said Wednesday that there is excitement and relief after Orsted's decision but also concern that the project will get revived. They asserted that offshore wind development could threaten fisheries and marine mammals, claims that contradict the conclusions of leading scientists.
"I'm optimistic, but we're just going to have a measured response to it," said Barbara McCall, a Protect Our Coast NJ board member.
Orsted also faced soaring costs. Offshore wind projects are multibillion-dollar investments, with full payoffs decades away. So interest rate hikes that governments have used to fight inflation have hit capital-intensive businesses, such offshore wind, especially hard. That led Orsted to reduce the estimated value of its assets by $900 million in the first nine months of 2023, company executives said Wednesday.
And with countries on both sides of the Atlantic Ocean trying to boost offshore wind, developers have pursued too many projects for the available supplies and equipment to build them. In Orsted's earnings call Wednesday, chief executive Mads Nipper said the giant vessels that build these wind farms were the central problem for Ocean Wind 1. Finding available vessels would have meant several years of delays and would have forced the company to redo many other contracts, probably increasing costs almost across the board, he said.
"It meant massive impact because of the uncertainty," Nipper said.
Company executives said Wednesday that Orsted would take a total write-down equaling $4 billion for the year through September, the vast majority of it tied to Ocean Wind 1 and 2. Company shares plummeted by 25 percent in trading Wednesday after that announcement.
In an interview with The Washington Post published Tuesday, the recently departed No. 2 at the Interior Department, Tommy Beaudreau, said the offshore wind industry has a long history of gradual growth despite major challenges. He also noted several other industries facing similar turmoil tied to the economy's rebound from the pandemic.
"It has overcome challenges before, and I truly believe it will overcome some of the economic challenges we're seeing today," Beaudreau told The Climate 202.
Lobbyists and ClearView's Fox said the Treasury Department is one avenue the Biden administration could use to improve the industry's fortunes. The department is still setting rules for tax breaks created by Congress in last year's climate-spending package, and one of its biggest remaining decisions applies to offshore wind.
The rules will affect how wind developers qualify for credits designed to boost the amount of steel and other materials used from U.S. manufacturers, and how much the wind-power supply chains will spur job growth. Developers and their advocates in Washington say the proposed rules are too restrictive. Looser rules could provide hundreds of millions of dollars more for each project, making many more of them viable, they said.
There are "real challenges with getting a new industry off the ground," the American Clean Power Association, a renewable-energy trade group, said in a statement Wednesday. "The news is also a reminder that we need strong partnerships with government and stakeholders, now more than ever."
Republicans cheer cancellation of New Jersey offshore wind projects
Rachel Frazin
Wed, November 1, 2023
Republicans are cheering the cancellation of two offshore wind farms that would have been built off the coast of New Jersey.
The company Orsted announced Tuesday it was canceling its planned Ocean Wind 1 and 2 projects, which would have generated electricity via wind in the Atlantic Ocean.
The move was met with cheers from the GOP, including former President Trump, who has been particularly critical of wind energy over the years.
In a post on Truth Social, Trump criticized the projects as “horrendous” and congratulated GOP Rep. Jeff Van Drew (N.J.) on their defeat.
“Congratulations to a truly great Congressman, Jeff Van Drew, for his perseverance and success in defeating the horrendous Orsted Ocean Wind One & Two projects, which were to be built off the coast of South Jersey. This monstrosity required massive government subsidies, and ultimately, just didn’t work,” Trump wrote.
The former president has often railed against wind energy, including by spouting unfounded claims it causes cancer.
Van Drew, a former Democrat, also was among those who celebrated the cancellation. He wrote in a post on X, formerly known as Twitter, he was glad Orsted “has decided to pack up its offshore wind scam and leave South Jersey’s beautiful coasts alone.”
He called the move a “tremendous win for South Jersey residents, our fisherman, and the historic coastline of the Jersey shore.”
Rep. Chris Smith (R-N.J.) was also among those cheering the cancellation — saying he hoped other projects would similarly falter.
“Orsted’s decision was a first step in exposing the economic unsustainability and environmental dangerousness of ocean wind turbines … and Orsted’s pulling out of the deal may help slow and eventually halt similar projects off New Jersey’s coast,” Smith said in a statement.
The company cited supply chain challenges that led to delays in construction and rising interest rates as its reasons for canceling the projects.
Orsted CEO Mads Nipper said in a statement the company still “firmly believe[s] the US needs offshore wind to achieve its carbon emissions reduction ambition.”
The projects had been supported by New Jersey Governor Phil Murphy (D), who authorized a tax break for them earlier this year.
In a written statement, Murphy blasted the decision to walk away from the projects as “outrageous” and said it “calls into question the company’s credibility and competence.”
In New Jersey, the popularity of offshore wind has fallen in recent years according to Monmouth University polling, which found that just over half of New Jerseyans support it now, compared to more than three-quarters in 2019.
The Biden administration has embraced offshore wind as a method for combating climate change, saying it hopes that by 2030, the U.S. will generate enough offshore wind energy to power 10 million homes.
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