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

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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

More about offshore wind setbacks

• U.S. Department of Energy Offshore Wind Resources
• Biden Administration’s Clean Energy Plan
• Ørsted’s Official Statement on Project Cancellation
• Interior Department’s Offshore Wind Approvals
• National Renewable Energy Laboratory Offshore Wind Insights
• AP’s Climate Initiative
• ClearView Energy Partners Research
• American Clean Power Association
• Environmental Advocates NY Policy Work