Business

Companies Are Abandoning Massive Offshore Wind Projects As Prices Skyrocket

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Billions of dollars in scheduled offshore wind developments in waters of the U.K. and U.S. have been paused or canceled in recent weeks, according to Bloomberg News.

Three major offshore wind-related contracts have fallen through as rising costs and economic concerns have saddled developments off the American and British coasts, according to Bloomberg. While offshore wind proponents remain confident in the long term viability of offshore wind, the recent cancellations may be a sign of more substantial troubles for offshore wind despite strong support from the Biden administration, according to Bloomberg.

Offshore wind energy is a key pillar of the Biden administration’s massive green energy agenda, as the administration wants offshore wind to produce enough energy to power 10 million American homes by 2030.

The cancellations and turbulence are partially attributable to increasing costs for steel needed to build the giant turbinesand the special ships needed for installation, according to Bloomberg. Steadily increasing interest rates make the price of debt even riskier for companies to take out to finance their offshore wind projects, according to Bloomberg.

A subsidiary of Iberdrola SA, a Spanish renewables firm, canceled a contract that would have enabled the firm to sell energy produced by an offshore wind farm located off the Massachusetts coast, according to Bloomberg. The firm agreed to pay nearly $50 million in fines to get out of the contract to sell offshore wind energy, asserting that inflation and rising interest rates no longer make the deal financially sensible, according to Recharge News.

Other companies involved in that particular project, Shell and OceanWind, are reportedly looking to change terms of their respective stakes in the development due to the turbulence, according to Recharge News.

Orsted, a Danish green energy company, lost its bid to generate offshore wind energy off the Rhode Island coast because costs had risen so sharply that the state’s leading utility provider determined the project to be too pricey, according to Bloomberg. “Price inflation on turbines, cables etc (sic) have gone up sharply,” Mads Nipper, the company’s CEO, wrote in a LinkedIn post regarding the lost bid, adding that “this means that price of renewable energy regrettably must come up temporarily.”

Vattenfall, a state-owned Swedish company specializing in green energy development, paused its construction of an offshore wind farm in British waters, according to Bloomberg. The firm pointed to inflationary pressures and spiking costs as the reason it has backed off the development, and there is no clear indication of when they may plan to resume construction on the project, according to Bloomberg.

The three canceled projects combined would have generated about 10% of the total fleet already installed in American and British waters, according to Bloomberg. More than two times that much offshore wind power generation may also be at risk as developers seek to rework or get out of other deals that no longer make as much sense due to cost increases and other market forces, according to Bloomberg.

Orsted, Iberdrola and the White House all did not respond immediately to requests for comment.