Major Offshore Wind Projects Canceled, Jeopardizing Biden’s Energy Goals
Orsted, a major offshore wind developer, has announced the cancellation of two projects off the coast of New Jersey, a move that deals a significant blow to the Biden administration’s offshore wind goals. The cancellations follow weeks of mounting financial problems for Orsted and the offshore wind industry more broadly.
The Denmark-based offshore wind firm has called off its Ocean Wind 1 and 2 projects due to changing macroeconomic factors, which have impacted the company’s long-term capital investments. David Hardy, group executive vice president and CEO of Americas at Orsted, explained the reasoning behind the cancellations and expressed disappointment, stating, “We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy.”
Orsted has also revealed that it is making a final investment decision on its Revolution Wind project off the Rhode Island coast, a project that the Bureau of Ocean Energy Management approved in August. This decision to allocate capital and resources to an already-approved project may indicate that the company is close to canceling a third project.
The struggles facing Orsted first became apparent in late August when the company announced a write-down of the expected value of some of its projects by over $2 billion. This financial setback eventually led to the cancellation of the Ocean Wind projects. Orsted’s stock price suffered a significant drop following the August announcement and has not fully recovered.
Orsted’s CEO, Mads Nipper, issued a warning in early September, suggesting that the company might walk away from its U.S. projects unless the financial situation improved quickly.
The offshore wind industry has faced immense challenges in recent months, including inflation, supply chain disruptions, higher interest rates, and logistical problems. Some experts have raised concerns that the industry might need a bailout to survive these challenging economic conditions.
The Biden administration has set ambitious goals for offshore wind energy, aiming to generate enough power to supply electricity to 10 million American homes by 2030. This is part of a broader initiative to decarbonize the American power sector by 2035 and the entire U.S. economy by 2050. However, with the cancellation of Orsted’s projects, the administration’s 2030 targets could be challenging to achieve. Even before these cancellations, some analysts believed that the goals were ambitious.
Orsted’s decision to cancel the Ocean Wind projects marks a significant setback for the offshore wind industry and raises questions about its future amidst challenging economic conditions. The offshore wind sector’s ability to contribute to the United States’ clean energy transition and decarbonization goals now faces uncertainties.