NJ Ocean Wind Project Delayed Due to Economic Uncertainty
Danish energy firm Orsted, the company behind nearly half of the offshore wind farms under construction in the United States, has made an important announcement regarding its Ocean Wind 1 project off the New Jersey coast. Due to various factors including supply chain issues, inflation, and rising interest rates, the project has been delayed until 2026.
This news has sent shockwaves through the renewable energy sector and sparked concerns about the feasibility of such large-scale projects. It has also energized opponents of offshore wind, who are determined to see the project canceled altogether.
Financial Woes
Ocean Wind 1 is a flagship project that would establish the first offshore wind farm in New Jersey, aligning with Governor Phil Murphy’s vision to make the state a leader in green energy.
Governor Murphy’s ambitious goal is to have offshore wind farms generating 11,000 megawatts of power in New Jersey by 2040. The state has already approved three offshore wind farms and aims to add more.
The Ocean Wind 1 project is designed to be built in federal waters, more than 12 nautical miles from the shore. It would consist of hundreds of structures reaching heights of up to 1,000 feet, spread across vast expanses of the ocean.
However, this flagship project is facing significant challenges.
Last month, Moody’s downgraded its outlook for Orsted from stable to negative after the company revealed potential losses of over $2.2 billion on the Ocean Wind 1 project. This caused Orsted’s shares to plummet by a record 25 percent, resulting in an $8 billion loss in market value.
During a conference call with Moody’s, Orsted executives expressed concerns about the uncertainty of receiving government tax credits in the United States. While the offshore wind industry has received generous tax credits, high upfront costs and delayed income generation pose challenges.
Unless the White House provides more support and financial conditions improve, Orsted CEO Mads Nipper stated that the company is considering the possibility of walking away from its investments in the United States.
Subsidies to Foreign Firms
However, Republicans argue that it’s time to end the subsidies, which they view as an unwise giveaway to a foreign company.
In July, the New Jersey Legislature passed a bill allowing Orsted to retain federal tax credits that would have otherwise been passed on to New Jersey utility ratepayers.
“Democrats like Governor Murphy, who often criticize corporate welfare, had no issue giving $1 billion to a foreign wind farm developer at the expense of New Jersey ratepayers,” said Republican state Sen. Michael Testa in a news release.
“If we even consider subsidizing Orsted again, who’s to say they won’t ask for more bailouts in the future? Other wind farm developers are already seeking government assistance, which Governor Murphy is likely to grant. This further proves that wind power is economically unsustainable without massive subsidies.”
Spiking Energy Costs
U.S. Rep. Jeff Van Drew, a vocal critic of Orsted and the Ocean Wind 1 project, sees the delay as an opportunity for opponents to intensify their efforts. He believes that offshore wind farms will cause irreparable harm to the Jersey shore economy and environment, leading to skyrocketing energy prices.
“These projects will damage our oceans, compromise our national security, and devastate 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.”
He continued, ”People shouldn’t think this will only affect those living along the shore. Utility bills will double or even triple, regardless of where you are.”
In fact, Mr. Nipper stated to Bloomberg that it is ”inevitable” for consumer energy prices to rise as offshore wind farms come online in the United States. He added, “If they don’t, neither we nor any of our colleagues will invest in more offshore projects.”
Other prominent offshore wind developers, such as Equinor from Norway and BP from the UK, have officially requested a 54 percent increase in the price of electricity generated at their planned offshore wind farms, according to filings submitted to the New York state regulatory authority.
Morningstar Vice President of Project Finance and Infrastructure Kevin Beicke told Utility Dive that the potential for developers to abandon the market or cancel projects may result in pressure on the governmental players involved in the Northeast to address the situation.
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