Energy company pulls the plug on two major offshore wind projects on East Coast

(CNN) — Danish wind developer Orsted is halting the development of two massive New Jersey offshore wind projects due to cascading economic pressures, including skyrocketing interest rates and a supply chain crunch – two factors that have dogged wind energy projects up and down the East Coast.

The decision is ominous news for a nascent sector that could play a key role in solving the climate crisis, and one that is still trying to find its wings in the US, even as other major economies steam forward. It also deals a blow to President Joe Biden’s clean energy goals, which hinge in part on the massive potential for electricity generated from offshore wind.

Orsted Americas CEO David Hardy said the company was “extremely disappointed” to pull the plug on its development.

“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,” Hardy said in a statement.

“As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2.”

More: Inflation, interest rates and whales – why offshore wind projects are on the rocks

A company statement blamed long wait times for supplies needed to build the project and rising interest rates in the US. In addition to a strain on supplies like monopiles and other components, there are long wait times for the ships needed to construct the towering wind turbines in the ocean.

Mads Nipper, Orsted’s CEO, said in a statement the company will “now assess the best way to preserve value while we cease development of the projects.”

New Jersey Gov. Phil Murphy, a major proponent of the projects, blasted the company’s decision.

“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said in a statement, pointing to the company’s recent public statements about the project’s viability.

“I have directed my Administration to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”

Part of the reason the American industry has been slow to get off the ground – particularly compared to offshore-wind juggernauts like Europe and China – is US developers are essentially building it from scratch, industry experts have told CNN. And a combination of incredibly tight supply chains, lack of vessel availability and rising interest rates have made the first major US offshore wind projects very difficult to build.

Despite the Biden administration’s friendly posture toward offshore wind, the number of active turbines in US waters is still in the single digits, and the energy output lags significantly behind solar and onshore wind. There will be about 140 gigawatts of solar (including both utility scale and rooftop) installed in the US by the end of this year, Sam Huntington, director of S&P Global Commodity Insights’ North American power team, told CNN earlier this year, while offshore wind comprises a tiny 42 megawatts.

Two commercial-scale offshore wind projects – Vineyard Wind off the coast of Massachusetts and South Fork Wind off the coast of New York – are under active construction. The Biden administration announced earlier this week it approved plans for Dominion Energy to build what would be the largest offshore wind farm to-date in the US off the coast of Virginia. The Dominion project, known as Coastal Virginia Offshore Wind, is planned to be a 2.6-gigawatt wind farm that could eventually generate enough electricity to power over 900,000 homes.

Before the Dominion announcement, Ocean Wind 1 was the largest project the administration had approved – expected to generate 1.1 gigawatts, enough to power over 380,000 homes. At the time, administration officials including Interior Sec. Deb Haaland had praised the project’s federal approval as a “milestone.”

White House spokesperson Michael Kikukawa reiterated there is still “momentum” for the US offshore wind industry.

“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry,” Kikukawa said in a statement, “creating good-paying union jobs in manufacturing, shipbuilding, and construction; strengthening the power grid; and providing new clean energy resources for American families and businesses.”

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