Much of the focus on problems for the development of the offshore wind sector has been on the US East Coast and Gulf Of Mexico. However, a Danish offshore wind project has also been paused after objections from environmentalists on how and when the number of bats in the region are counted.
The developers of the Aflandshage Vindmøllepark project have said that this was creating uncertainty about whether the project would receive the permits required for it to proceed.
Aflandshage Vindmøllepark would be located in the southern Øresund region near Copenhagen and was to be operated for HOFOR, a utility company that provides energy, water, gas, sewage, and other services to the Copenhagen region. The project is advanced in the planning process and was one of the few projects on track to be operational by 2030.
However, HOFOR has said that uncertainties have arisen because of the environmental complaints and a lack of clarity over the permit process. It taking a write-down of more than $70m because the costs of developing the project will have to be recognized in the accounts for 2023.
Susanne Juhl, chairman of the board of HOFOR, said that “we are now putting the investment in the Aflandshage project on hold. The project will be abandoned completely unless it proves possible to continue the project in another form in the near future.”
HOFOR said that the location of the project was selected with consideration for migration patterns and wildlife as well as the Swedish territorial border, the nearby airport, and busy sailing routes. The plan, which had been approved in Q3 2022, would see 26 offshore wind turbines built with a total height of up to 721ft to the top of the blade. The total output would be 300 MW.
The permit included conditions regarding the monitoring of bird and bat migration. HOFOR reported it had agreed to a counting of the bats during the construction phase for the wind farm to develop a preservation plan for when it was in operation. Potentially, the wind farm would have to stop operations at certain times to prevent bird or bat strikes.
However, the company’s permit was cancelled in July 2023. The requirement for the bat count was moved from “during construction” to before any kind of construction could begin. HOFOR has now responded, stating that, based on the current stipulations, it was uncertain whether they would ever receive the permits. Therefore there was an enormous financial risk for both HOFOR and the Municipality of Copenhagen.
Juhl said that “the experiences from the Aflandshage project confirm the need to look at the overall authority processes in wind turbine projects. We have experienced stumbling blocks in our project that cause us to put an otherwise ready-and-ready project on hold.”
HOFOR is nevertheless proceeding with the bat count, it being relatively cheap so to do and also the minimum requirement to regain the permits. However, HOFOR said that as the count proceeded it raised the prospect of further delays with environmental groups possibly trying more delaying tactics via complaints. Juhl has said that HOFOR was confident the wind turbines and bats would have been able to live side-by-side and meet the renewable energy goals, but that the financial risks threatened the entire existence of the project.
Meanwhile, back in New Jersey, USA, Denmark-based Ørsted was reported to be seeking the return of $200m from the state after it pulled the plug on the development of two offshore wind farms that would have provided 2.5 GW of power. According to a report from the Associated Press, the day after the company told investors it was cancelling the projects, Ørsted wrote to New Jersey’s regulators saying it wanted back the $200m, which constituted two-thirds of the total guarantee it was scheduled to pay.
At this point, things become legally rather complex.
Less than a month ago New Jersey’s Board of Public Utilities approved the deal with Ørsted relating to the development of Ocean Wind 1 and Ocean Wind 2. The company already had the federal approvals for the first proposed wind farm. The second one was still under federal review, but had approvals from New Jersey for the project.
New Jersey was also working with Ørsted to provide incentives for the development of the infrastructure including a wind port. New Jersey Governor Phil Murphy passed a law to permit Ørsted to keep federal tax credits that it otherwise would have had to return to New Jersey ratepayers. At the time he said that the law was necessary due in part to the financial pressures companies were facing in developing the industry and the projects.
As part of that agreement, Ørsted committed to completing the first phase of the project, Ocean Wind 1 by no later than December 2025. The company confirmed it was committed to the projects and on October 4th it began transferring the guarantee bonds to the state, but with the understanding they would be placed in escrow. If the projects did not proceed because federal permits were withheld, Ørsted was to get back the $100m guarantee for Ocean Wind 1 and the $200m additional guarantee for the additional projects. On the other hand, if Ørsted failed to meet the agreed deadlines then the monies were to be surrendered to New Jersey ratepayers.
Ørsted on October 31st told the state and its investors that the company had decided to cancel both of the New Jersey offshore wind farms. A few months previously it had warned that its US wind portfolio was under review due to inflation pressures, rising costs, supply chain challenges, and an inability to realize tax credits. Key to the supply chain problem was the lack of a regulatorily compliant vessel capable of bringing in the massive blades.
Associated Press said that Ørsted claims the $300m agreement was not in effect because the board had not yet ratified it, so it would like back the $200m it had placed into escrow. Given that Governor Murphy said last week that the company’s withdrawal was “outrageous”, and that New Jersey would move to ensure that Ørsted fulfilled all its obligations, the likelihood of New Jersey meekly returning the cash would seem close to zero.
The extent to which the economics of offshore wind have changed in the past 18 months was indicated by Ørsted’s willingness to take a $2.8bn charge for not proceeding with Ocean Wind 1 and a total charge of approximately $4b. The company also warned investors that there could be as much as $1.5bn in additional charges due to potential contract cancellation fees and other costs.
Associated Press says the agreement called for the company and the state to negotiate any disputes. However, relations between New Jersey and Ørsted at the moment are so cold that it is hard to see an agreement being reached amicably in the short term.