Economic Challenges Threaten Progress of Offshore Wind Initiatives, Impacting Biden’s Renewable Energy Targets

by Andrew Wright
offshore wind setbacks

The recent revocation of two significant offshore wind endeavors in New Jersey marks a continuation of obstacles confronting the emerging U.S. offshore wind sector, potentially derailing the Biden administration’s aspirations to power 10 million residences using ocean-based turbines by the decade’s end, followed by a carbon-neutral electricity grid by 2035.

Ørsted, a Danish wind energy company, announced the abandonment of its Ocean Wind I and II projects off the coast of southern New Jersey, citing supply chain difficulties, escalating interest rates, and an insufficient allocation of tax credits the firm had anticipated. The combined output of these projects was expected to exceed 2.2 gigawatts.

This development ensues the withdrawal by New England developers from three other projects intended to generate an additional 3.2 gigawatts for Massachusetts and Connecticut, with financial feasibility concerns cited as the cause.

A monopile, the structural base of an Ørsted offshore wind turbine, was recently photographed stationary on transporters in Paulsboro, N.J., dated July 6, 2023. (AP Photo/Wayne Parry, File)

Collectively, these cancellations represent a considerable portion—almost 20%—of President Joe Biden’s target of achieving 30 gigawatts from offshore wind energy by 2030.

However, the White House emphasizes that offshore wind efforts are progressing, referencing recent New York state investments and the Department of the Interior’s approval of what is projected to be the largest offshore wind farm in the country, located in Virginia. Additionally, the Department’s Bureau of Ocean Energy Management has disclosed new offshore wind lease sites in the Gulf of Mexico.

Despite economic difficulties affecting certain projects, the White House maintains a positive outlook on the growth trajectory of the U.S. offshore wind industry, emphasizing the creation of quality union jobs in sectors like manufacturing and shipbuilding, alongside enhancing the power grid and introducing clean energy options for American households and businesses, as per their statement on Thursday.

Further details include:

  • The potential impact of climate change on traditional Navajo sheep herding.
  • The reluctance among farmers to adopt cover crops despite environmental benefits due to financial concerns.
  • The withdrawal of EPA’s investigation into Louisiana’s Cancer Alley, coinciding with the state’s openness to environmental concessions.

Although industry experts have revised expectations, suggesting that the U.S. might not reach the 30-gigawatt target by 2030, they project a feasible accomplishment of approximately 20 to 22 gigawatts or more, a stark increase from the current capacity provided by only a couple of small-scale demonstration projects.

Offshore wind is essential to the government’s renewable energy transition strategy, especially for densely populated East Coast states where land is scarce for turbines or solar installations. According to ClearView Energy Partners, a research firm based in Washington, legislation or executive actions in eight East Coast states mandate a cumulative addition of over 45 gigawatts of offshore wind capacity.

Timothy Fox of ClearView, while acknowledging the unlikelihood of meeting the Biden administration’s 2030 goals, remains optimistic about ultimately surpassing them.

The industry’s challenges, described as a “perfect storm” by Molly Morris, U.S. offshore wind president for Equinor, are exacerbated by inflation, supply chain woes, and increased costs of capital and materials, which heighten the expenses of projects. Ørsted is contending with a $4 billion write-off largely due to the scrapped New Jersey projects.

David Hardy of Ørsted emphasizes the need to reduce offshore wind costs in the U.S. to prevent a choice between affordability and sustainability. His commentary during a conference panel in Boston highlighted the ambitious yet premature expansion plans that overlooked the gradual learning and cost-reduction curve experienced by Europe.

According to Walt Musial from the National Renewable Energy Laboratory, there are 27 U.S. offshore wind projects with state agreements pre-dating the surge in costs, but these unexpected increases have since made many projects economically untenable.

Despite these challenges, significant advancements are occurring, such as the Biden administration’s recent approval of the Coastal Virginia Offshore Wind project, aimed at powering 900,000 homes with a 2.6 gigawatt capacity, and Ørsted’s continued investment with Eversource in the 704-megawatt Revolution Wind project for Rhode Island and Connecticut.

S&P Global Commodity Insights’ current forecast predicts 22 gigawatts by 2030, pending adjustments based on recent industry updates.

New York has also demonstrated its commitment by awarding 4 gigawatts of offshore wind capacity to achieve 70% renewable electricity by 2030 and 9 gigawatts of offshore wind by 2035. Conversely, New York regulators recently denied higher payment requests for four offshore wind projects totaling 4.2 gigawatts, with developers reassessing their project viability.

Environmentalists stress the urgency of transitioning to offshore wind to reduce dependency on fossil fuels and improve air quality. Conor Bambrick of Environmental Advocates NY insists that delays only benefit oil and gas companies, prolonging the harmful emissions affecting climate and public health.

The U.S. Department of Energy estimates that reaching 30 gigawatts of offshore wind capacity could generate $109 billion in new activity and support up to 77,000 jobs by 2030.

In conclusion, the U.S. offshore wind sector faces a challenging environment as it strives to meet ambitious government targets. The economic pressures of high interest rates, supply chain disruptions, and insufficient tax incentives contribute to project cancellations and delayed progress. Nevertheless, advancements in other areas and continued investment indicate an optimistic, albeit slower, growth trajectory towards renewable energy goals.

Frequently Asked Questions (FAQs) about offshore wind setbacks

What economic challenges are affecting the U.S. offshore wind industry?

The U.S. offshore wind sector is facing economic challenges such as supply chain issues, higher interest rates, and a shortfall in tax credits, leading to the cancellation of significant projects in New Jersey and New England.

How do the project cancellations impact President Biden’s clean energy goals?

The abandonment of several offshore wind projects, amounting to nearly one-fifth of the 30-gigawatt target set by President Biden for 2030, presents a serious hurdle in achieving the administration’s clean energy objectives.

What is the current progress of the U.S. in offshore wind power generation?

The U.S. currently has a modest offshore wind power capacity with only two small demonstration projects in operation. However, significant capacity expansion is planned, aiming for 20 to 22 gigawatts by 2030.

What is the projected offshore wind power capacity for the U.S. by 2030?

Despite recent setbacks, industry experts project that the U.S. may achieve around 20 to 22 gigawatts of offshore wind power by 2030, short of the 30-gigawatt target but significantly more than the current capacity.

Are there any offshore wind projects currently under construction in the U.S.?

Yes, the U.S. has begun construction on its first commercial-scale offshore wind farms, Vineyard Wind off Massachusetts and South Fork Wind off Rhode Island and New York.

What are the potential economic benefits of achieving the 30-gigawatt offshore wind capacity target?

Reaching the 30-gigawatt offshore wind capacity could result in $109 billion in new economic activity and support up to 77,000 jobs by 2030, as estimated by the U.S. Department of Energy.

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Tom Sanders November 4, 2023 - 10:59 pm

just read about the offshore wind farms being canceled, that’s a big setback for the clean energy goals. gotta wonder if we’ll ever get there with the way the economy’s going

JerryMcG November 4, 2023 - 11:08 pm

wind industry’s facing a ‘perfect storm’, ironic isnt it. All this tech and progress still at the mercy of economics and politics as usual.

Mike R. November 5, 2023 - 5:17 am

Saw the news on the wind projects, big oof for Biden’s plans. those turbines were supposed to power millions of homes, really wanted to see that happen.

Emily Johnston November 5, 2023 - 8:28 am

so Ørsted is scrapping the Ocean Wind projects, huh? Not surprised with the supply chain being what it is. interest rates are no joke either, everythings more expensive now.

Sarah K. November 5, 2023 - 12:12 pm

the article on offshore wind, pretty informative. did anyone else catch that Orsted is writing off $4 billion though? that’s huge, wonder how they’ll recover from that hit.


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