U.S. Offshore Wind Industry Faces Hurdles in Pursuit of Renewable Energy Targets

Credit: Orsted

The cancellation of two major offshore wind projects in New Jersey has cast a shadow over the emerging U.S. offshore wind industry, posing a potential threat to the Biden administration's renewable energy objectives. These goals include powering 10 million homes with towering ocean-based turbines by 2030 and establishing a carbon-free electric grid by 2035.

Danish wind energy developer Ørsted announced that it is discontinuing its Ocean Wind I and II projects off southern New Jersey due to several challenges. These challenges include issues with supply chains, higher interest rates, and the failure to secure the desired amount of tax credits. The combined capacity of these two projects was expected to provide over 2.2 gigawatts of power.

This development follows the cancellation of power contracts for three projects in New England, which were set to deliver an additional 3.2 gigawatts of wind power to Massachusetts and . The developers cited financial infeasibility as the reason for scrapping their projects.

In total, these cancellations represent nearly one-fifth of President 's target of achieving 30 gigawatts of offshore wind power by 2030.

Despite these setbacks, the White House maintains a positive outlook for the offshore wind industry. Recent investments by New York state and the Interior Department's approval of the nation's largest planned offshore wind farm in Virginia signal a continued commitment to renewable energy. The Interior's Bureau of Ocean Energy Management has also announced new offshore wind lease areas in the Gulf of Mexico.

The White House released a statement acknowledging the challenges posed by macroeconomic factors but expressed confidence in the industry's momentum. It highlighted the creation of well-paying union jobs in manufacturing, shipbuilding, and construction, as well as the strengthening of the power grid and the provision of clean energy resources for American households and businesses.

Industry experts acknowledge that while reaching the 30-gigawatt goal by 2030 may be challenging, significant progress in offshore wind power is still attainable, with estimates ranging from 20 to 22 gigawatts or more. This would be a substantial increase from the current capacity, which is only a fraction of a single gigawatt from two small demonstration projects.

Large offshore wind farms are crucial to the government's plans to transition to renewable energy, particularly in densely populated East Coast states with limited land for traditional wind turbines or solar arrays. Eight East Coast states have established offshore wind mandates through legislation or executive actions, committing to adding over 45 gigawatts of capacity, according to ClearView Energy Partners, a Washington-based research firm.

Although challenges persist, offshore wind developers remain committed to the industry's growth. They have cited high inflation, supply chain disruptions, and rising capital and material costs as factors contributing to project expenses. Industry leaders now acknowledge the need to lower the levelized cost of offshore wind in the United States to make clean energy more affordable.

While Ørsted's decision to cancel the New Jersey projects is a setback, experts believe it is not a fatal blow to the industry. The Biden administration recently approved the project, a 2.6 gigawatt wind farm off Virginia Beach that will power 900,000 homes. Additionally, Ørsted announced its partnership with utility Eversource to proceed with the construction of , and Connecticut's first utility-scale offshore wind farm, a 704-megawatt project.

According to S&P Global Commodity Insights, the current outlook is for 22 gigawatts of offshore wind capacity by 2030, although recent developments may prompt a revision of these projections. New York state has also made significant strides in offshore wind capacity, with plans to obtain 70% of its electricity from renewable sources by 2030 and 9 gigawatts of offshore wind by 2035.

Environmental advocates stress the urgency of offshore wind development to reduce reliance on fossil fuel-burning power plants. Timely implementation is crucial for improving air quality and advancing the transition to cleaner energy sources. New Jersey remains committed to offshore wind despite the recent cancellations, reinforcing its clean energy goals.

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