Orsted, a Danish company and the global leader in offshore wind energy, has announced that it is canceling two large offshore wind projects in New Jersey and writing off $4 billion in the process. The company cited supply chain issues, higher interest rates, and insufficient tax credits as the main reasons for the decision.
The scrapping of the Ocean Wind I and II projects, which were supposed to supply 2.5 gigawatts of green energy to the state, creates new doubts about an industry that is regarded as a vital answer to global warming. Offshore wind is a form of renewable energy that harnesses the wind from the sea to generate electricity.
Orsted’s CEO, Mads Nipper, described the move as “very tough decisions” and said that the company decided to “de-risk the most painful part of our portfolio, and that is the U.S.”. He added that the company remains committed to the offshore wind market in the U.S. and will focus on other projects in the region.
The cancellation of the New Jersey projects reflects the financial challenges facing the nascent offshore wind industry in the northeastern U.S., where some projects have already been scrapped and others are facing delays and cost overruns. Many offshore wind developers are seeking better terms from the state governments with whom they have already contracted, such as higher power prices or longer contract durations. However, some states, such as New York, have rejected such requests.
Critics of the offshore wind industry argue that it is unworkable without massive financial subsidies from the federal and state governments, and that it poses environmental and aesthetic risks to the coastal communities. They also point out that the offshore wind power is intermittent and unreliable, and that it requires backup sources of energy to ensure grid stability.
Supporters of the offshore wind industry, on the other hand, contend that it is a vital way to reduce greenhouse gas emissions and create jobs in the clean energy sector. They also claim that the offshore wind technology is improving and becoming more cost-competitive, and that the industry will benefit from economies of scale and learning effects as more projects are built.
Despite the challenges, nearly 40 environmental, labor, and community groups from New Jersey who support offshore wind issued a statement saying, They emphasized that shifting to clean, renewable energy is a non-negotiable necessity. They encouraged the state to persist in its efforts to reach its target of 7.5 gigawatts of offshore wind by 2035, and to collaborate with the federal government and the industry to resolve the challenges and hazards.