NJ’s Atlantic City Due to the cancellation of two sizable offshore wind projects in New Jersey, whose financial difficulties are similar to those confronting the fledgling industry, wind energy developer Orsted is writing off $4 billion.
It introduced more unpredictability to a sector that proponents saw as a means of reducing the use of fossil fuels that warm the planet, while detractors mocked it for being fundamentally unfeasible without significant financial subsidies.
The Danish company announced Tuesday night that it was abandoning its Ocean Wind I and II projects off the southern New Jersey coast because of supply chain issues, increased borrowing costs, and an inability to secure the desired quantity of tax credits.
During a Wednesday earnings conference call, Orsted’s CEO, Mads Nipper, stated, “These are obviously some very tough decisions.”
The largest offshore wind developer in the world, he claimed, made the decision “to de-risk the most painful part of our portfolio, and that is the U.S.”
Concerns about the financial viability of the offshore wind industry in the northeastern United States, which is still in its infancy but has extensive plans from New England to the Carolinas, were addressed in that statement directly to the heart.
Numerous offshore wind developers are requesting better terms from governments they have already contracted with, and some projects have already been canceled. Two weeks ago, New York denied such a request.
In July, New Jersey granted Orsted a tax break that allowed it to retain federal tax credits that would have otherwise been passed along to ratepayers.
According to Louis Knight, an analyst at Third Bridge, a research firm that counsels private equity and other companies, “these projects ultimately come down to economics, so higher costs and lower power prices are working against offshore wind, while periodic local opposition in the U.S. made some headlines.” The cost of financing these projects is going up due to higher interest rates. In the United States, there are more affordable methods of producing electricity, such as solar and natural gas.
However, the fundamental draw of offshore wind for proponents such as environmental groups, numerous state governments, and the Biden administration is that it is not a fossil fuel industry. This year saw the hottest summer ever recorded in the Northern Hemisphere, according to the European Climate Service Copernicus and the World Meteorological Organization.
An irreversible reality, the urgency to switch to clean, renewable energy is what nearly forty environmental, labor, and community organizations from New Jersey—including the state’s Sierra Club chapter—signed on Wednesday. “Preserving the status quo of fossil fuel generation is not an option in a world of warming temperatures and extreme weather in what is probably the hottest year on record, as the cost of climate inaction is undeniably high.”
Around 26% less was invested in Orsted’s shares at Wednesday noon. The business stated that it intends to use steel and cable, among other materials it has already bought, for other projects.
The goal of the Orsted projects’ power was to reach land at the location of a defunct coal-fired power plant that blew up last week, where it was supposed to be connected to the grid.
The industry also confronts strong political opposition, primarily from Republicans in New Jersey and across the country, who have persuaded the US Government Accountability Office to investigate the sector.
The decision to abandon the projects was celebrated by Rep. Jeff Van Drew, a Republican who represents the southern New Jersey region where Orsted’s wind farms were planned.
He declared in a statement released late on Tuesday night that “David defeated Goliath!” and that wind farms were detrimental to the environment, the economy, and electric customers.
Several resident groups objected to the projects as well, stating similar worries and expressing a dislike for seeing wind turbines dotting the ocean horizon.
One of the most outspoken opposition groups, Protect Our Coast NJ, spokeswoman Robin Shaffer, said, “These projects never made sense and could not stand on their own without billions of dollars in tax breaks and subsidies.”
Despite the difficulties, certain wind projects are progressing. Orsted announced that it is moving forward with the Revolution Wind project in Rhode Island and Connecticut.
A utility’s plans for a massive wind farm off the coast of Virginia received significant federal approval on Tuesday. Federal regulators who examined the possible environmental effects of Dominion Energy’s proposal to erect 176 turbines in the Atlantic, more than 20 miles off Virginia Beach, gave the company a positive “record of decision.”
Furthermore, there are still a number of offshore wind projects in various stages of development in New Jersey; in August alone, four new proposals were submitted. They join Atlantic Shores, the lone project out of the three that the state initially approved. Shell New Energies US and EDF Renewables North America are the project’s sponsors.
While implying in a statement that it is also looking for more assistance, Atlantic Shores said on Wednesday that it is still dedicated to its project.
“We are actively having discussions with the administration, lawmakers, and regulatory bodies throughout New Jersey to find workable solutions that will not only maintain the current level of progress but also make it easier to carry out Atlantic Shores Project 1 successfully,” the company stated.
