Danish energy firm Orsted, the company behind nearly half of the offshore wind farms under construction in the United States, has delayed its controversial Ocean Wind 1 project off the New Jersey coast until 2026.
The company cited supply chain issues, inflation, and rising interest rates, among other factors.
Financial Woes
Ocean Wind 1 would be the first offshore wind farm in the state and is part of Gov. Phil Murphy’s push to make New Jersey a national leader in green energy.Mr. Murphy’s goal is to have offshore wind farms producing 11,000 megawatts of power in New Jersey by 2040. The state has already approved three offshore wind farms and wants to add more.
Designed to be built in federal waters, Ocean Wind 1 would be more than 12 nautical miles from the shore and would consist of hundreds of structures standing as tall as 1,000 feet and spread across millions of acres of ocean.
But the flagship project is in trouble.
On Sept. 5, Moody’s downgraded its outlook for Orsted from stable to negative after the company told analysts it may be forced to write off more than $2.2 billion in losses on the Ocean Wind 1 project.
Shares of Orsted plunged a record 25 percent last month, which equaled more than an $8 billion loss in market value, according to Moody’s Investors Service.
Orsted executives said in a conference call with Moody’s that the company is concerned about the uncertainty of receiving government tax credits in the United States.
The offshore wind industry has already received generous tax credits from the Inflation Reduction Act. But up-front costs remain high and many projects won’t come online and begin generating income for several more years.
Subsidies to Foreign Firms
But Republicans say it’s time to stop the subsidies, which they call an unwise giveaway to a foreign company.In July, the New Jersey Legislature approved a bill that allowed Orsted to keep federal tax credits that it otherwise would have been required to pass along to New Jersey utility ratepayers.
“Democrats like Governor Murphy who often complain about corporate welfare had absolutely no problem giving $1 billion to a foreign wind farm developer at the expense of New Jersey ratepayers,” said state Sen. Michael Testa, a Republican, in a news release.
“If we even consider the possibility of subsidizing Orsted for a second time, who’s to say they won’t ask for a third or a fourth bailout further down the road?
Spiking Energy Costs
U.S. Rep. Jeff Van Drew (R-N.J.), an outspoken critic of Orsted and the Ocean Wind 1 project, sees the delay as an opportunity for opponents to press the issue. He believes offshore wind farms will cause irreparable harm to the Jersey shore economy and environment and will also cause energy prices to skyrocket.“These projects will damage our oceans, compromise our national security, and decimate the fishing industry, which is New Jersey’s third largest industry,” Mr. Van Drew told The Epoch Times. “They allow foreign countries to control our domestic energy supply.”
“People shouldn’t think this will only affect those who live along the shore,” he continued. “It will cause utility bills to double or even triple no matter where you are.”
In fact, Mr. Nipper told Bloomberg that it is “inevitable” that consumer energy prices will increase as offshore wind farms are brought online in the United States, and “if they don’t, neither we nor any of our colleagues are going to build more offshore.”
In filings submitted to the New York state regulatory authority, other prominent offshore wind developers, such as Norway’s energy major Equinor and British oil major BP, have officially requested a 54 percent increase in the price of electricity generated at three planned offshore wind farms.
“The Northeast states would need to really balance their desire to increase offshore wind with what it would mean in terms of an increase in power prices for their customers,” he said. “And does that mean that lower income electricity customers may need to get more support from the state to offset the increase in power prices?”
The commitment to offshore wind goals established by the Biden administration and many states means developers like Orsted may have a strong negotiating position “to pull levers to try to get these projects a little more economical and see what the government is willing to provide in terms of support,” Beicke added.
Opponents Push Back
Mr. Van Drew characterized Orsted’s announcement that the wind farm will be delayed as a “victory,” but added that opponents will not let up on their pressure campaign until the project ultimately dies.“This is one of the few projects that I’ve seen that has no redeeming value at all,” he said. “The Biden administration and Gov. Murphy say they want to stop climate change, but offshore wind will have zero effect on the climate.”
Mr. Van Drew plans to call congressional hearings in the Natural Resources Committee later this month and is urging the General Accounting Office to evaluate the industry over the coming year.
