The Biden administration’s plans to power 10 million homes with towering ocean-based turbines by 2030 and create a carbon-free electric grid five years later are in jeopardy due to the cancellation of two sizable offshore wind projects in New Jersey. These setbacks are the most recent in a string of unfortunate events for the fledgling offshore wind industry in the United States.
This Monday, the Danish wind energy developer Orsted announced that it was abandoning its Ocean Wind I and II projects off the coast of southern New Jersey. The reasons for the abandonment were supply chain issues, increased loan rates, and the inability to secure the desired number of tax credits. The projects were expected to produce more than 2.2 gigawatts of electricity when combined.
The announcement follows the cancellation of power agreements for three projects by New England developers, which would have given Massachusetts and Connecticut access to an additional 3.2 gigawatts of wind power. They claimed that the financial viability of their projects had been lost.
The cancellations add up to about one-fifth of President Joe Biden’s 2030 offshore wind power target of 30 gigawatts.
The White House stated that offshore wind is still progressing despite the obstacles, citing recent investments made by New York State and the Interior Department’s approval of the largest proposed offshore wind farm in the country, which is located in Virginia. New offshore wind lease sites in the Gulf of Mexico were also announced, by the Interior Department’s Bureau of Ocean Energy Management.
“A growing U.S. offshore wind industry is generating well-paying union jobs in manufacturing, shipbuilding, and construction, strengthening the electrical grid, and offering new clean energy resources for American families and businesses, even though macroeconomic headwinds are posing challenges for some projects,” the White House stated in a statement on Thursday.
Experts in the field currently estimate that even though the United States probably won’t reach 30 gigawatts by 2030, at least 20 to 22 gigawatts of offshore wind power will still be achievable at that time. Even with just two small demonstration projects producing a tiny fraction of a gigawatt of power, that is significantly more than the country now possesses.
Government efforts to switch to renewable energy are centered on large, ocean-based wind farms, especially in the states along the East Coast that are densely populated and have little space for solar or wind farms. According to ClearView Energy Partners, a Washington-based research company, eight East Coast states have offshore wind mandates either by law or administrative decisions that require them to add a total capacity of more than 45 gigawatts.
Vice president of ClearView Timothy Fox stated, “I think very few would argue that the U.S. will have the gigawatts the Biden administration wants by 2030.” “However, I do believe that we will eventually reach it and probably surpass it.”
Developers of offshore wind farms have openly bemoaned the storms blowing through the world economy. According to Molly Morris, president of Equinor’s U.S. offshore wind division, the sector is experiencing a “perfect storm.”
While developers work to establish the first sizable U.S. offshore wind farms, high inflation, supply-chain interruptions, and the rising cost of finance and construction materials are driving up project costs. Orsted is deducting $4 billion, mostly as a result of the two New Jersey projects being canceled.
In order to prevent Americans from having to choose between affordability and clean energy, David Hardy, group executive vice president and CEO of Americas at Orsted, stated that it is imperative to reduce the leveled cost of offshore wind in the country. Hardy and Morris participated on a panel at the offshore wind conference, held by the American Clean Power Industry Association in Boston last month.
He remarked, “We’re probably a little bit too ambitious.” We assumed we could construct big, low-cost projects right away when we entered the market quickly and with a lot of vigor. It turns out that, with higher initial costs and a slightly slower pace, we most likely still need to go through the same learning curve as Europe.
Walt Musial, offshore wind chief engineer at the National Renewable Energy Laboratory, an arm of the Energy Department, stated in May that there were 27 offshore wind projects in the United States that had signed deals with states to provide power before the brunt of the cost rises struck. According to him, several projects became financially untenable due to the wait between signing purchase agreements and receiving final approval to build.
Orsted’s statement was a blow to the business, but Musial said it was “not a fatal blow by any means.”
The nation’s largest offshore wind project was approved, according to a Tuesday announcement from the Biden administration. Over 900,000 households will be powered by a 2.6 gigawatt wind farm off the coast of Virginia Beach as part of the Coastal Virginia Offshore Wind project. Concurrently with revealing the cancellations in New Jersey, Orsted declared that it will be collaborating with Eversource, a utility, to advance the development of Revolution Wind, the 704-megawatt offshore wind farm that will be the first of its kind in Rhode Island and Connecticut.
S&P Global Commodity Insights’ current projection, which calls for 22 gigawatts by 2030, is subject to revision in light of recent announcements from the industry.
As part of its goal to source 70% of its electricity from renewable sources by 2030 and 9 gigawatts of offshore wind by 2035, New York State recently announced the awarding of 4 gigawatts of offshore wind capacity. This declaration was made soon after regulators in New York denied a request for increased compensation for four offshore wind projects with a total power output of 4.2 gigawatts. The developers claimed to be evaluating the projects’ viability.
Environmental advocates argue that any delay in offshore wind would entail a continuous reliance on fossil fuel-burning power facilities.
“Our air quality improves faster the quicker they come online,” stated Environmental Advocates NY’s head of policy, Conor Bambrick.
Under Democratic Governor Phil Murphy, New Jersey has set more ambitious renewable energy targets, with a goal of 100% clean energy by 2035 as opposed to 100% by 2050. Although Murphy referred to Orsted’s decision as “outrageous” and a betrayal of its pledges, the two-term Democrat stated that New Jersey intends to proceed with offshore wind. There are yet more offshore projects pending before the utility regulators in the state.
Executive Director Catherine Klinger of Murphy’s Climate Action and Green Economy remarked, “We definitely remain optimistic.” “There is much more offshore wind than Orsted.”
The first commercial-scale offshore wind farms in the United States are presently being built: South Fork Wind in Rhode Island and New York, and Vineyard Wind off the coast of Massachusetts.
The business, according to Catherine Bowes, a senior director at Turn Forwards, a charity that promotes offshore wind, is still gaining traction because of the high caliber of wind resources off coasts and the rising need for clean electricity to fulfill decarbonization targets. The charity is in favor of 100 gigawatts of offshore wind energy in the United States.
As of right now, Bowes stated on Thursday, “The bumpiness we’re seeing in no way indicates an inability of offshore wind to play a major role in the U.S. electric grid.”
Contracts that have been terminated may be rebid, probably at a higher price to account for development expenses. In order to support the startup of these initial projects, offshore wind developers are requesting that the federal government guarantee that the sector can benefit from tax incentives under the Inflation Reduction Act.
At the clean power conference, Michael Brown, CEO of Ocean Winds North America, stated that while the business will grow in the United States, “it might be a little bit slower than we all want it.” Ocean Winds North America is constructing multiple offshore projects, one of which is in New Jersey.
