Faced with escalating economic challenges, including escalating interest rates and a supply chain crisis, Danish wind energy developer Orsted has halted the progression of two major offshore wind projects in New Jersey. This unfortunate revelation resounds ominously for an embryonic sector that is identified as a potentially cardinal player in countering the climate crisis. The move also deals a significant setback for President Joe Biden’s ambitious goals for clean energy, which largely rely on the immense energy generation possibility from offshore wind.
Orsted Americas CEO, David Hardy, expressed profound disappointment at the decision to terminate the projects.
“The economic landscape has undergone tremendous upheaval in a remarkably short period,” Hardy explained. “With rampant inflation, climbing interest rates, and supply chain stagnations posing significant challenges to our long-term capital investments. Consequently, we are left with no alternative but to suspend development of Ocean Wind 1 and Ocean Wind 2.”
The factors cited for the termination include extended supply wait times necessary for the project’s progression, and escalating interest rates in the US. Burdens on supplies like monopiles and other components, along with lengthy waiting periods for ship access to build the mammoth wind turbines in the ocean, bear significant weight in the decision.
The company’s CEO, Mads Nipper, announced that Orsted will “assess the best manner to preserve value while ceasing the projects’ development”.
The decision was met with criticism from New Jersey Gov. Phil Murphy, a staunch advocate of the projects.
“Orsted’s decision to relinquish its commitments to New Jersey is outrageous and raises doubts about the company’s credibility and competence,” Murphy stated, referring to the company’s previous public claims about the project’s feasibility.
Despite an administration striking an encouraging tone towards offshore wind energy, the activity in US waters remains negligible, lagging behind solar and onshore wind energy. Currently, offshore wind offers a meagre 42 megawatts, in contrast to the estimated 140 gigawatts of solar energy set to be installed in the US by year’s end.
Encouragingly, two large-scale offshore wind projects are under active construction – Vineyard Wind off the Massachusetts coast and South Fork Wind off the New York coast. The Biden administration also approved plans for Dominion Energy to construct what is to be the US’s largest offshore wind farm off the Virginia coast. When complete, the Dominion project could generate enough electricity to power over 900,000 homes.
Before the Dominion approval, Ocean Wind 1 was the largest approved project, slated to generate 1.1 gigawatts – sufficient to power over 380,000 homes.
Despite the economic challenges currently plaguing some projects, White House spokesperson Michael Kikukawa confidently asserted that momentum still favours the US offshore wind industry.
“These macroeconomic storms may be stirring up difficulty for some projects, but the tides still favour a burgeoning U.S. offshore wind industry,” Kikukawa stated, highlighting the industry’s potential for job creation, grid strengthening, and the provision of new, clean energy resources for American families and businesses.