Major Company Halts Two Offshore Wind Projects in Blow to Biden Climate Goals

Wind turbines located at the Block Island Wind Farm near Block Island, R.I., on July 7, 2022. John Moore/Getty Images

One of the largest wind power companies in the world halted the development of two U.S. offshore New Jersey projects due to higher costs and supply chain problems, according to the Danish firm Ørsted’s CEO.

‘We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2,” Mads Nipper said in a statement on Nov. 1.

“We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the U.S. renewables market and truly value the efforts by the U.S. government to support the build-up of the U.S. offshore wind industry.”

The Ocean Wind 1 and 2 projects were scheduled to be constructed off the coast of Cape May County.

“However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects,” Mr. Nipper added.

“At the same time, with an attractive forward-looking value creation, we progress the Revolution Wind project into the construction phase.”

President Joe Biden (L) with Interior Secretary Deb Haaland during a cabinet meeting at the White House on June 6, 2023. Kevin Dietsch/Getty Images

Ørsted, the world’s largest offshore wind developer, said in August that it may see impairments of 16 billion Danish crowns, or $2.3 billion, on its U.S. offshore developments due to supply chain problems, soaring interest rates, and a lack of new tax credits.

Rising costs from inflation, interest rate hikes, and supply chain delays have cast doubt on plans by President Joe Biden and several states to use offshore wind to replace fossil fuels in energy production over the next several years.

Analysts said Ørsted has already warned that it will write down at least 5 billion Danish crowns and noted that those impairments could reach as much as 16 billion Danish crowns if interest rates in the U.S. are above a certain level.

“You could say it looks pretty certain that they (Ørsted) won’t be able to stick to the 5 billion” Danish crowns in impairments, Jacob Pedersen, senior analyst at Sydbank, a Danish bank, told Reuters.

The Ocean Wind 1 project was awarded under the Obama administration in 2015 to Ørsted. In March 2021, the Bureau of Ocean Energy Management initiated the project’s permitting process.

Massachusetts and Rhode Island

Approval earlier this year of Ocean Wind by the Interior Department is the administration’s latest move toward meeting its goal of developing 30 gigawatts of offshore wind in the United States by 2030 on every shoreline.

Interior previously approved Vineyard Wind off Massachusetts and South Fork off Rhode Island, both of which are under construction.

Ocean Wind could power up to 380,000 homes and create 3,000 jobs from development through a three-year construction cycle, according to the Interior Department.

“Today’s approval for the Ocean Wind 1 project is another milestone in our efforts to create good-paying union jobs while combating climate change and powering our nation,” Interior Secretary Deb Haaland said in a statement in July.

Weeks before the project was scrapped, Mr. Nipper issued a warning that the company was at risk of shutting down its wind projects in the U.S. if he didn’t get more federal funds, including subsidies from the Democrat-backed Inflation Reduction Act, enacted in August 2022.

“We are still upholding a real option to walk away,” the executive said at the time. “But right now, we are still working toward a final investment decision” on projects in America. He added that it would be “inevitable” that energy prices will increase for consumers because wind farms are highly labor- and capital-intensive.

“And if they don’t, neither we nor any of our colleagues are going to build more offshore,” he said. “It’s very simple.”

County Files Lawsuit

Earlier in the month, several plaintiffs led by officials in Cape May County filed a lawsuit against the Biden administration over the Ocean Wind projects.

“As we’ve said many times, we spent the better part of two years trying to negotiate with Ørsted to redesign this project in a way that would cause less damage to the environment and less damage to our tourism and fisheries interests,” Cape May County Board of Commissioners Director Len Desiderio said in a statement in mid-October.

Saying that his county’s proposals “fell on deaf ears,” Mr. Desiderio stated that federal and state regulators “rubber-stamped” Ocean Wind’s permits without proper consideration.

“We believe the federal permitting process was fatally flawed, and we have assembled a great legal team to pursue these issues in the federal courts,” he continued.

“There is far too much at stake to do nothing. This suit brings together important stakeholders in Cape May County willing to fight to protect our economy, our environment, and our future.”

Reuters contributed to this report.