One turbine gives offshore wind hope amid bleak outlook

America’s offshore wind industry is facing challenges due to inflation and rising interest rates. However, despite these headwinds, some developers are making progress in the sector. In Virginia, the first foundations for a large-scale project were delivered to a port in Norfolk. Meanwhile, a Danish wind developer recently posted a $100 million performance bond for a delayed project in New Jersey. Additionally, the first turbine for the Vineyard Wind project off the coast of Massachusetts was erected this week.

These developments highlight the uneven progress of offshore wind in the United States. New York regulators recently made a decision that puts the future of four projects in the state at risk, which has sent shockwaves through the emerging U.S. industry. Other projects are also facing uncertainty as offshore wind developers canceled power contracts with officials in Massachusetts and Connecticut.

Analysts believe that the U.S. may fall short of President Joe Biden’s target of building 30 gigawatts of offshore wind capacity by the end of the decade. BloombergNEF has revised its projections to estimate that only 16.4 GW of offshore wind capacity will be built before 2030, a 29 percent drop from its previous estimate. S&P Global Commodity Insights also reported that half of the contracted offshore wind projects have been canceled or revised, with more projects potentially at risk.

The dimming outlook for the industry can be attributed to rising costs for labor, raw materials, and financing, which have made many projects financially unviable. Offshore wind developers in New York, such as Ørsted, Equinor, and BP, have requested significant price increases for the power they generate from their projects. The industry is now facing the question of whether developers will cancel their current power contracts or move forward in a climate of financial uncertainty.

Despite these challenges, analysts expect offshore wind to eventually overcome its growing pains. New York is currently reviewing bids for a new round of offshore wind projects, and the successful construction of Vineyard Wind and South Fork Wind demonstrate the industry’s capability to progress. However, the risks remain substantial, as delays or cancellations of projects could hinder the establishment of offshore wind component factories in New York.

In terms of specific projects, Dominion Energy’s Coastal Virginia Offshore Wind project in Virginia, which is the largest offshore wind project in the U.S., is expected to receive a final federal permit later this month. Dominion is a regulated utility that will earn a rate of return on its $10 billion project, providing some insulation from economic headwinds. In New Jersey, Ørsted posted a $100 million performance security to ensure the construction of Ocean Wind 1, mitigating concerns about the project’s future. And in Massachusetts, Avangrid and Copenhagen Infrastructure Partners announced the installation of the first turbine for the Vineyard Wind project, marking a significant milestone in the development of American offshore wind.

While the offshore wind industry in the U.S. is currently facing challenges, there is still potential for growth and progress in the long run. However, it is likely that the industry’s growth trajectory will be longer and flatter than initially envisioned by the Biden administration and the states. The industry’s ability to overcome its current obstacles will depend on factors such as financial stability, regulatory support, and the availability of tax credits.

Original Story at – 2023-10-20 10:49:00

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