The U.S. offshore wind industry, key to President Joe Biden’s climate agenda, has struggled in recent months due to inflation, rising interest rates, and mounting supply chain difficulties.
Several companies involved in offshore wind projects off the East Coast have experienced financial difficulties as inflation, supply chain difficulties, and rising interest rates have hampered the sector. [emphasis, links added]
Despite the wind industry receiving considerable support from subsidies in the Inflation Reduction Act (IRA), Biden’s signature climate bill, some firms have paid large fines to get out of energy deals they signed, while one company has seen its stock price tank because of impairments to its projects.
“Biden has a top-down ‘deindustrialization policy’ in much the same way Germany did,” Dan Kish, senior fellow for the Institute for Energy Research, told the Daily Caller News Foundation.
“It’s amazing to watch politicians try to design a system that will work to replace one we know works and made us the number one economy in the world.”
The IRA featured significant tax credits and manufacturing subsidies to drive offshore wind investment from the private sector, and companies have invested more than $7 billion in offshore wind projects since the IRA became law, according to the White House.
The administration is aiming to have offshore wind provide enough energy to provide electricity for 10 million American homes by 2030 in support of its wider goals to decarbonize the American power sector by 2035 and the overall U.S. economy by 2050.
Orsted, a Danish company involved in several East Coast offshore wind projects, announced in late August that it had updated its projections for several projects, marking down their anticipated value by $2.3 billion. The next day, the company’s stock price plummeted by about 25%.
“We continue to advance our projects, including investments that are creating American energy and American jobs,” an Orsted spokesperson told the DCNF.
“Macroeconomic challenges, such as supply chain constraints and high inflation, are impacting our projects, similar to how these factors are impacting all long-term capital investments in the U.S. and around the world.”
The company’s announcement followed difficulties in talks with Biden administration officials to unlock more federal subsidies, Reuters reported.
“We are still upholding a real option to walk away” from projects, said Mads Nipper, Orsted’s CEO, Bloomberg News reported Tuesday.
Orsted was one of numerous petitioners who asked the New York Public Service Commission, the state’s utility regulator, to renegotiate terms of energy deals with utility companies. Revised agreements could feature prices nearly 50% higher than initial contracts, according to the New York State Energy Research and Development Authority.
“The wind industry was already heavily subsidized before the Inflation Reduction Act, and after the IRA, there is more money and the favoritism is greater,” Daren Bakst, director of the Competitive Enterprise Institute’s Center for Energy and Environment, told the DCNF. “The wind industry, like any industry, should stand on its own without government handouts paid for by American taxpayers.”
Prior to the IRA, wind farm operators were still able to access tax credits, according to the Department of Energy. The IRA extended and increased those existing subsidy programs to further spur the offshore wind industry.
Orsted is not the only offshore wind company involved in East Coast operations that has encountered potential financial problems.
Avangrid, a subsidiary of the Spanish firm Iberdrola, paid the Massachusetts Department of Public Utilities (MDPU) $48 million in July to get out of a deal to sell power to utility companies, CommonWealth reported.
SouthCoast Wind, another company involved in offshore wind development off of the Massachusetts coast, paid MDPU $60 million in fines to get out of a deal it had reached to sell wind-generated power to several utility companies, the Nantucket Current reported.
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