OCEAN CITY – In an Aug. 29 release, the Danish wind farm developer, Ørsted, said its first offshore wind farm in New Jersey will be delayed until 2026, and its U.S. offshore wind portfolio is expected to suffer impairments of over $2.5 billion.
The company implies that without further financial assistance from public sources, its projects, including Ocean Wind I, could no longer be viable.
According to Ørsted, several factors have impacted the projects, making initial contract bid amounts insufficient.
In a petition before the New York State Public Service Commission (PSC), Ørsted pointed to persistent supply chain challenges, high interest rates, and higher than expected inflation.
In the company’s Aug. 29 release, Ørsted also noted that “continued discussions with senior federal stakeholders about additional ITC qualifications for Ocean Wind I and Sunrise Wind are not progressing as we previously expected.” ITC references Investment Tax Credits. The company wants more public money through additional tax credits.
In New York, offshore wind developers are also asking for an average 48% increase in contract pricing to $167.25 per megawatt hour, a move that would translate directly into higher electricity rates for ratepayers.
The New York State Energy Research and Development Authority told the PSC that cancellations of contracts would lead to delays in renewable energy procurements. A new bidding process would also likely lead to higher prices anyway since recent bids for offshore energy projects have been significantly higher than past ones.
What happens in New York is likely to be a precursor of similar issues in New Jersey. Sen. Michael Testa (R-1) has called on Gov. Phil Murphy to “preemptively reject any additional bailouts for Ørsted.”
According to industry reports, the New York PSC is already considering petitions to adjust contract terms for 91 renewable energy projects of various types in the state.
Some New York utilities have urged caution when considering the petitions from clean energy developers. In an Aug. 28 letter to the PSC, a group of utilities warned that agreeing to proposed contract changes would set a dangerous precedent, encouraging clean energy developers to discount risk when bidding on contracts while expecting to be bailed out if the market shifts in unfavorable ways. The utilities argue that bidders should be forced “to prepare robust bids that appropriately reflect the risks that apply to many development projects today.”
Meanwhile, Ørsted says it will continue toward a final investment decision (FID) on Ocean I and other projects towards the end of 2023 or early 2024. The release added that, “Pending FID, Ørsted now expected to commission Ocean Wind I in 2026.” The original goal for Ocean Wind I was 2024. Earlier this year, the company admitted that it was running about a year behind schedule. That has now turned into two years.
All of this comes as polling shows that support for offshore wind projects in New Jersey has eroded since 2019. Although a majority of those polled continued to express support for the offshore wind initiative, the level of support had declined sharply in recent years.
Contact the author, Vince Conti, at vconti@cmcherald.com.
