The future of the offshore wind sector in America is uncertain. Recent challenges have emerged, causing delays for Northeastern states wanting to harness the power of the Atlantic Ocean’s winds.
Several projects intended to provide electricity to New York City and its surrounding areas are now in a state of uncertainty after being denied significant increases in subsidies. Furthermore, the cancelation of two offshore wind projects off the coast of New Jersey came as a surprise and disappointment to officials.
The company that canceled the New Jersey projects is called Orsted. Orsted is the world’s largest developer of offshore wind farms.
The company cited “macroeconomic factors,” such as inflation and rising interest rates, as reasons for the New Jersey projects’ cancellation. According to The New York Times, the New Jersey wind farms would have generated 2.25 gigawatts.
The decision by Orsted has sparked a political battle in New Jersey regarding the rush to encourage offshore wind farm construction. Democratic Governor Phil Murphy criticized Orsted for breaking its commitments. Murphy raised doubts about the company’s ethics.
Offshore wind’s uncertain future in New York
Similar to Governor Murphy, Kathy Hochul, New York’s Democratic governor, has presented an ambitious plan to transition power generation from fossil fuels to renewable sources.
Offshore wind plays a crucial role in Hochul’s target of achieving 70 percent of New York’s electricity generation from renewable sources like solar, wind, and hydro power by 2030. She has asserted that the ocean-based wind turbines could supply up to 9,000 megawatts of power, enough to meet the needs of 6 million households.
This week, Orsted confirmed that it will move forward with the construction of the South Fork Wind project, located off the eastern tip of Long Island. The project involving the assembly of 12 large turbines. The electricity from this project will be transmitted through a cable and connected to a substation in East Hampton.
Nevertheless, the cancelation of the New Jersey projects is causing Governor Hochul to doubt whether she can count on Orsted as much as she had planned.
While South Fork Wind is expected to power approximately 70,000 homes, its scale is relatively smaller compared to three other wind farms planned for the waters south of Long Island.
These three projects, namely Beacon Wind, Empire Wind 1, and Empire Wind 2, have signed contracts to supply electricity to New York. However, their future is now in limbo.
Due to increasing costs and disruptions in the supply chain, Orsted and its partners have requested additional compensation of $12 billion beyond their original agreements in order to proceed with the construction.
Orsted has suggested that without these increases, it may not be able to proceed with building the three wind farms. However, New York’s Public Service Commission rejected the requests and upheld the terms of the existing contracts.
While state officials remain optimistic about meeting the renewable energy targets, industry analysts believe it’s unlikely.
According to Timothy Fox, an analyst at ClearView Energy Partners, New York’s decision not to increase subsidies will likely cause delays. Developers will likely terminate their existing contracts and submit new bids with higher prices.
Moreover, Orsted might not even be interested in submitting new bids.
These project cancellations serve as ammunition for opponents of offshore wind farms. However, it’s unlikely that any states (except Virginia) will abandon their offshore wind plans.
Despite the setbacks, President Biden remains committed to generating 30 gigawatts of offshore wind by 2030. This target, which could provide electricity to over 10 million homes, was already considered challenging before the recent withdrawal of Orsted.
And unfortunately for President Biden, it’ll be ever harder to develop wind farms off the West Coast.
The waters off the coast of California are so deep that wind turbines cannot be anchored to the ocean floor. This creates expenses and logistical challenges that East Coast projects don’t have to contend with.
California will not have any operational offshore wind farms until at least 2030.