Orsted, the Danish wind energy behemoth, has hit the brakes on two prominent offshore wind projects off the New Jersey coast. The decision sends ripples of concern through an industry critical to addressing climate change and pivotal to President Joe Biden’s clean energy agenda.
David Hardy, CEO of Orsted Americas, conveyed a deep sense of disappointment as the company was compelled to cease the development of the Ocean Wind 1 and Ocean Wind 2 projects. “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,” Hardy explained. The halt is a direct response to the economic tumult affecting the sector, with particular emphasis on the ripple effects of interest rate hikes and a supply chain in disarray.
These pressures have exacerbated the challenges for an industry still in its American infancy and struggling to match the pace of established wind giants in Europe and China. Mads Nipper, Orsted’s CEO, further described the company’s strategic pivot, stating, “We will now assess the best way to preserve value while we cease development of the projects.”
The suspension of these projects isn’t just a setback for Orsted but also a blow to New Jersey’s clean energy aspirations. Governor Phil Murphy was forthright in his criticism of Orsted’s withdrawal, underscoring the potential repercussions for the state’s renewable energy landscape. “Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said, referencing Orsted’s earlier affirmations of the project’s viability.
Murphy’s statement also highlighted the state’s proactive stance, with his administration directed to examine “all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”
The setbacks come as industry insiders point to the arduous task of building an offshore wind infrastructure from scratch, a venture made even more daunting by tight supply chains, scarce vessel availability, and the aforementioned economic factors.
The current situation starkly contrasts with the administration’s supportive measures for offshore wind. Despite these efforts, the active turbines in U.S. waters remain a single-digit figure, and the energy produced falls significantly short of other renewables.
Even so, the sector has witnessed some progress.
Projects like Vineyard Wind and South Fork Wind are currently under construction, and the Biden administration has just greenlit Dominion Energy’s Coastal Virginia Offshore Wind project, which stands to be the largest of its kind in the nation.
Before Orsted’s retreat, Ocean Wind 1 was touted as a flagship project, anticipated to generate enough electricity to power over 380,000 homes. Officials, including Interior Secretary Deb Haaland, had lauded its approval as a “milestone.”
Despite the current headwinds, White House spokesperson Michael Kikukawa reaffirmed the administration’s commitment to the industry’s growth. “While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry,” said Kikukawa. His statement emphasized the sector’s potential to generate “good-paying union jobs” and “new clean energy resources.”
As Orsted reassesses its strategy in light of economic pressures, the broader implications for the U.S. offshore wind sector’s trajectory remain uncertain. The industry’s proponents continue to advocate for its expansion, seeing it as essential to achieving a robust and sustainable clean energy future.
On the other hand, this may well be good news for whales off the coast!
