While Denmark-based Orsted publicly attributed the cancellation of its Ocean Wind projects to a number of general factors, including high inflation, rising interest rates and supply chain constraints, it was becoming clear that a specific contributory factor was the delay of a vessel needed for the project.
Despite US officials and politicians putting a brave face on things, there was little doubt that the decision by Orsted to walk away from the two offshore wind farms off New Jersey last week was a reality check for the US, and Orsted company officials confirmed to Reuters that the decision was based in large part on big delays securing the ship it needed to build the project.
Orsted is ceasing all development on the Ocean Wind projects, even as it moves forward with developments off neighbouring New York
New Jersey Governor Phil Murphy was furious at the decision, but there was nothing he could do to force Orsted to change its mind. Part of his anger was doubtless because New Jersey had passed a law letting offshore wind developers like Orsted keep federal tax credits that were previously destined for ratepayers to offset their power costs. He had hoped that this would help keep the projects alive.
In a conference call with analysts the day after the decision, Orsted CEO Mads Nipper added some granularity when he said that “significant delays on vessel availability … in the entire market has now meant that it would implicate a multi-year delay of the entire project”. He said those delays would put Orsted in “a situation where we would need to go out and recontract all or very large scopes of the project at expectedly higher prices.”
In New York, Orsted is moving forward with construction of its 704-megawatt (MW) Revolution project and is taking “a cautionary approach” to its 924-MW Sunrise project.
Nipper told analysts that Orsted was still pursuing Sunrise, while quitting Ocean Wind, for several reasons, including the fact that the company has already lined up a vessel to build it.
He added that Orsted believes it can secure a 10% bonus federal tax credit for Sunrise – reserved for projects that use a certain amount of domestically-produced content – and more money for its power by rebidding the project in an expected expedited solicitation in New York.
Governor Murphy said New Jersey should receive $300m if Orsted’s projects failed to proceed and directed his administration to “review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honours its obligations. “The Biden administration could only say that it remained “committed to supporting” the developing US offshore wind industry.
The White House and Interior Department issued statements generally supporting the sector. Expansion of offshore wind is a key part of President Biden’s plan to decarbonize the US power grid.
“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding US offshore wind industry”, claimed White House spokesperson Michael Kikukawa
The Interior Department’s Bureau of Ocean Energy Management (BOEM) said that it was working to achieve the goal of deploying 30 GW of offshore wind by 2030, although few industry experts can see how this would be achievable. “While the industry is facing a variety of challenges, BOEM and its federal partners remain committed to supporting the build out of this new industry in a way that will benefit communities, strengthen our nation’s energy security, and address the climate challenge,” BOEM Director Liz Klein said.