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Released November 27, 2023 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It was not the first domino to fall, and likely won't be the last, but the late-October decision by Danish wind company Ørsted A/S (Fredericia, Denmark) to cancel development of the Ocean Wind I and II offshore windfarms off the coast of New Jersey may have been the loudest domino to fall to date.
That project, under development for nearly 15 years, had a total investment value (TIV) of about $4 billion. It had been delayed numerous times before being cancelled last month. Ørsted officials broke the news October 31 in their third-quarter earnings call, blaming high inflation, rising interest rates and supply-chain bottlenecks. Several Ørsted executives also departed after the company booked a $4 billion write-off on its third-quarter earnings report, driving the stock down 25%.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply-chain bottlenecks impacting our long-term capital investments," David Hardy, Ørsted's group executive vice president and chief executive for Americas, said October 31. "As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2. We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
The same day that Ørsted cancelled its Ocean Wind project, it made a final investment decision (FID) to proceed with the Revolution Offshore Windfarm, a 50/50 joint venture with Eversource Energy Incorporated (NYSE:ES) (Boston, Massachusetts). The Revolution project is a 704-MW, $4.3 billion offshore windfarm. Construction was scheduled to begin this past September and the project is scheduled to be operating by yearend 2025.
The cancellation of the Ocean Wind project added fuel to speculation that the Biden administration will not be able to realize its goal of having 30 gigawatts (GW) of offshore wind generation operating by 2030. Although several offshore wind projects were on the books before President Joe Biden took office in January 2021, project development shot up after he announced his "30 by 30" plan two months after taking office.
And, just as quickly, projects have been cancelled or placed on hold, as developers were hit by higher costs, local resistance, inflexible offtake agreements, regulatory delays, financing challenges and continued bottlenecks in the offshore wind supply chain.
According to Industrial Info's Global Market Intelligence (GMI) platform, 11 U.S. offshore wind projects that were scheduled to begin construction between January 2021 and December 2028 have been cancelled or placed on hold. The TIV of these 11 projects is about $14 billion.
On the other hand, about 29 offshore wind projects valued at about $56 billion remain active. New England, the West Coast, the Mid-Atlantic and the Northeast are the regions with the highest dollar value of active offshore wind power projects.
Roughly one month before Orsted cancelled the Ocean Wind project, developer Park City Wind LLC (Boston, Massachusetts), a unit of Avangrid Incorporated (NYSE:AGR) (Orange, Connecticut), pulled the plug on its planned $2 billion Park City Offshore Windfarm, an 840-MW project off the Massachusetts coast, citing financing issues. Before it was cancelled, that project also had been pushed back several times; it had been scheduled to begin construction in 2027 and be operating in 2030.
The canceled Park City Wind contract isn't unique in New England. This past summer, Avangrid paid Massachusetts a $48 million penalty to cancel its contract to sell that state power from the 1,200-MW Commonwealth Wind project.
Speaking November 14 at a conference organized by the American Public Power Association (APPA) (Washington, D.C.), Barry Moline, executive director of the California Municipal Utilities Association (Sacramento, California), said only 42 MW of offshore wind currently is operating in the U.S. while 1,600 MW is under construction and roughly 18,400 MW of projects have been cancelled or were stalled. Decarbonization goals, while admirable, are proving hard to realize, particularly on a tight timeframe, he said.
The U.S. has long trailed Europe and other world regions in its use of offshore windpower. The initial enthusiasm about U.S. offshore wind power has run into some hard realities around permitting, local opposition, rising costs that push up the delivered price of electricity, the ability to obtain financing and a snarled supply chain.
To take only one challenge, offshore wind turbines are so large that only a few ships in the world can transport them. In the U.S., the Jones Act, with its requirement that anything shipped from one U.S. port to another be shipped on U.S. flagged vessels, has long stymied several industries, including offshore windpower.
Britt Burt, Industrial Info's vice president of research for the Global Power Industry, said: "It's hard to see how the president's '30 by 30' ambitions for offshore windpower can be realized. Some areas targeted for development in the Atlantic and Pacific Oceans, have very high retail electric prices, and offshore wind is no one's idea of a low-cost resource--at least for now."
"The trouble is, developers and purchasers of the power have been locked into inflexible offtake contracts that took a long time to negotiate. It seems many people are eager to decarbonize their electric supply to fight climate change, until they see the price tag."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
That project, under development for nearly 15 years, had a total investment value (TIV) of about $4 billion. It had been delayed numerous times before being cancelled last month. Ørsted officials broke the news October 31 in their third-quarter earnings call, blaming high inflation, rising interest rates and supply-chain bottlenecks. Several Ørsted executives also departed after the company booked a $4 billion write-off on its third-quarter earnings report, driving the stock down 25%.
"Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply-chain bottlenecks impacting our long-term capital investments," David Hardy, Ørsted's group executive vice president and chief executive for Americas, said October 31. "As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2. We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy."
The same day that Ørsted cancelled its Ocean Wind project, it made a final investment decision (FID) to proceed with the Revolution Offshore Windfarm, a 50/50 joint venture with Eversource Energy Incorporated (NYSE:ES) (Boston, Massachusetts). The Revolution project is a 704-MW, $4.3 billion offshore windfarm. Construction was scheduled to begin this past September and the project is scheduled to be operating by yearend 2025.
The cancellation of the Ocean Wind project added fuel to speculation that the Biden administration will not be able to realize its goal of having 30 gigawatts (GW) of offshore wind generation operating by 2030. Although several offshore wind projects were on the books before President Joe Biden took office in January 2021, project development shot up after he announced his "30 by 30" plan two months after taking office.
And, just as quickly, projects have been cancelled or placed on hold, as developers were hit by higher costs, local resistance, inflexible offtake agreements, regulatory delays, financing challenges and continued bottlenecks in the offshore wind supply chain.
According to Industrial Info's Global Market Intelligence (GMI) platform, 11 U.S. offshore wind projects that were scheduled to begin construction between January 2021 and December 2028 have been cancelled or placed on hold. The TIV of these 11 projects is about $14 billion.
On the other hand, about 29 offshore wind projects valued at about $56 billion remain active. New England, the West Coast, the Mid-Atlantic and the Northeast are the regions with the highest dollar value of active offshore wind power projects.
Roughly one month before Orsted cancelled the Ocean Wind project, developer Park City Wind LLC (Boston, Massachusetts), a unit of Avangrid Incorporated (NYSE:AGR) (Orange, Connecticut), pulled the plug on its planned $2 billion Park City Offshore Windfarm, an 840-MW project off the Massachusetts coast, citing financing issues. Before it was cancelled, that project also had been pushed back several times; it had been scheduled to begin construction in 2027 and be operating in 2030.
The canceled Park City Wind contract isn't unique in New England. This past summer, Avangrid paid Massachusetts a $48 million penalty to cancel its contract to sell that state power from the 1,200-MW Commonwealth Wind project.
Speaking November 14 at a conference organized by the American Public Power Association (APPA) (Washington, D.C.), Barry Moline, executive director of the California Municipal Utilities Association (Sacramento, California), said only 42 MW of offshore wind currently is operating in the U.S. while 1,600 MW is under construction and roughly 18,400 MW of projects have been cancelled or were stalled. Decarbonization goals, while admirable, are proving hard to realize, particularly on a tight timeframe, he said.
The U.S. has long trailed Europe and other world regions in its use of offshore windpower. The initial enthusiasm about U.S. offshore wind power has run into some hard realities around permitting, local opposition, rising costs that push up the delivered price of electricity, the ability to obtain financing and a snarled supply chain.
To take only one challenge, offshore wind turbines are so large that only a few ships in the world can transport them. In the U.S., the Jones Act, with its requirement that anything shipped from one U.S. port to another be shipped on U.S. flagged vessels, has long stymied several industries, including offshore windpower.
Britt Burt, Industrial Info's vice president of research for the Global Power Industry, said: "It's hard to see how the president's '30 by 30' ambitions for offshore windpower can be realized. Some areas targeted for development in the Atlantic and Pacific Oceans, have very high retail electric prices, and offshore wind is no one's idea of a low-cost resource--at least for now."
"The trouble is, developers and purchasers of the power have been locked into inflexible offtake contracts that took a long time to negotiate. It seems many people are eager to decarbonize their electric supply to fight climate change, until they see the price tag."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
