Offshore wind developer Orsted announced on Nov. 1 that it is abandoning two massive projects planned off the New Jersey coast. The Danish wind giant cited supply chain issues, inflation, and rising interest rates, among other factors.
Its decision delivers a serious blow to the Biden administration’s ambitious goal of using offshore wind to address climate change.
The administration aimed to generate 30 gigawatts of energy from fixed-bottom offshore wind farms by 2030, which it claims could power 10 million homes, and 15 gigawatts from floating offshore wind infrastructure by 2035, potentially providing power to 5 million homes.
New Jersey Gov. Phil Murphy, a Democrat who has also made offshore wind a centerpiece of his climate agenda, was livid.
Opponents of offshore wind in the Atlantic celebrated, while those resisting offshore wind in the Pacific were encouraged.
The IRA Was Not Enough
Orsted claimed that, despite massive tax subsidies from the Inflation Reduction Act (IRA)—which provides a credit of up to 30 percent for projects that begin construction before 2026—the New Jersey project no longer pencils out.
“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments,” said David Hardy, group executive vice president and CEO of Americas at Orsted, in a statement to media.
The company announced a $4.02 billion loss of value in assets in the third quarter, with $2.8 billion of that related to its Ocean Wind 1 project.
“As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2.”
New Jersey had worked hard to partner with Orsted and help it overcome its financial challenges to completing the project.
In July, Democrat Gov. Phil Murphy backed a bill that allowed Orsted to keep additional federal tax credits that it otherwise would have been required to pass along to New Jersey utility ratepayers.
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” the governor said in a statement.
“As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project.”
His administration called Orsted’s decision a “setback” in the state’s goal of obtaining 100% clean energy by 2035.
Orsted’s Ocean Wind 1 and 2 projects would have generated 2.2 gigawatts of energy, enough to have powered about 1 million homes. Gov. Murphy’s administration is reviewing legal remedies to force Orsted to “honor its obligations.”
Battling a Boondoggle?
“These Green New Deal-style wind farms were bad for our economy, our environment, and would have been a complete disaster for hardworking middle-class families in South Jersey,” said Congressman Jeff Van Drew (R-N.J.).“From the beginning, these projects were all about lining the pockets of foreign-owned offshore wind companies.”
Orsted repeatedly asked for additional taxpayer funds and tax breaks “while expecting ratepayers to absorb a massive increase in utility costs,” said Mr. Van Drew.
The project was embroiled in legal battles.
Cape May County and Ocean City, New Jersey, filed multiple lawsuits against federal and state agencies in hopes of blocking the projects, which plaintiffs claim would hurt the environment and their economy while also increasing energy costs.
The suit accused federal agencies, including the Bureau of Ocean Energy Management (BOEM) and National Marine Fisheries Service, of ignoring and violating laws designed to protect the environment and marine life and failing to consider the negative impacts on Jersey Shore’s tourism industry.
West Coast Battle Brewing
Meanwhile, opposition to an even bigger offshore wind project is building on the Pacific coast. The BOEM has just concluded a 60-day public comment period on proposals for two floating offshore wind projects in Oregon. The reactions are trending negative.Two affected counties and one city have issued formal proclamations opposing the projects. They have strong support from local residents and those who make their living in the fishing and tourism industries.
“All of us can see that the numbers just don’t pencil, but developers and the administration have been trying desperately to tell a different story,” Heather Mann, executive director of the Midwater Trawlers Cooperative in Oregon, told The Epoch Times.
“When the rubber meets the road, and real money is at stake, these offshore wind energy dreams are going to fall apart.”
“I hope that Oregon Governor Tina Kotek will see Orsted’s decision for what it is—a gigantic alarm warning us to slow down,” Ms. Mann added. “Rushing into this boondoggle is not the right way forward.”
