Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

Why Offshore Wind Is Suddenly in Trouble

Is the East Coast’s most abundant source of renewable energy too expensive?

Wind turbines in a sea of money.
Heatmap Illustration/Getty Images

You may have heard about the problems offshore wind projects are having with whales — specifically the coalition of coastal homeowners, right-wing advocacy groups, the fishing industry, and Tucker Carlson that’s been promoting speculative claims about turbines killing them. But opposition to renewable energy is nothing new. A much bigger problem for offshore wind is less TV-friendly, but much more serious: It’s more expensive than originally thought.

Up and down the East Coast and even in Britain, offshore wind projects have been delayed or even cancelled thanks to costs rising faster than expected.

Until this summer, offshore wind had seem primed for a big breakout. The Biden White House has set a goal for 30 gigawatts of offshore wind by 2030. Many states, especially in the Northeast, are also relying on offshore wind to do much of the work decarbonizing their electric grids. With ample coastline and relatively little open space compared to the wind corridor of the Great Plains, these states envision large offshore wind sites delivering about a gigawatt of power from massive turbines that are far enough away to be hardly visible from the shore but close enough to major population centers to avoid some of the interconnection and transmission issues that plague renewable development.

Yet instead of a breakout, there’s been a constriction.

Just this week, the utility Rhode Island Energy pulled the plug on its Revolution Wind II project, a planned 884-megawatt wind farm that could have powered 500,000 homes. It only attracted a single bidder, a joint venture between Orsted and Eversource.

In Massachusetts, the companies behind Commonwealth Wind, a planned 1,200 megawatt project, asked in December to get out of a power purchase agreement with state utilities, citing higher costs. This week the companies agreed to pay $48 million in termination penalties.

New Jersey legislators passed a bill earlier this month to direct federal tax credits to Orsted, the developer of its Ocean Wind I project, leading the developer of another wind project to ask for “an industry-wide solution,” saying that “[t]ens of thousands of real, well-paid and unionized jobs are at risk. Hundreds of millions in infrastructure investments will be forgone without a path forward.”

And in New York in June, offshore wind developers, responsible for over 4,000 megawatts worth of planned projects, petitioned the state’s Public Service Commission for more money, citing inflation.

This is a lot of lost capacity. Amazingly, there are still only two operational offshore wind projects in the United States, adding up to just 42 megawatts — about 0.14% of what the Biden administration wants installed by the end of the decade and less than 2% of the offshore wind capacity of Belgium. The American Clean Power Association estimated in May there were 50 gigawatts worth of projects in some stage of development, albeit with a small fraction actually under construction and the majority in “early development.” But now that pipeline has gotten a little longer and a lot more expensive.

“I’m actually pretty concerned over some of the cost dynamics that we’ve seen in terms of longer term impacts in terms of pace and scale we can deploy,” Allegra Dawes, a fellow at the Center for Strategic and International Studies, told me.

Rhode Island Energy said the bid for its Revolution Wind II project would not “reduce energy costs," essentially meaning what the utility would have to charge its customers to pay for the construction wouldn’t ultimately be worth it. Rhode Island Energy specifically cited “[h]igher interest rates, increased costs of capital, and supply chain expenses, as well as the uncertainty of federal tax credits” as “all likely contribut[ing] to higher proposed contract costs. Those costs were ultimately deemed too expensive for customers to bear.”

The surge in costs has put developers into a difficult spot, explained Dawes. “They look at projects and the agreed upon price and are not seeing a path to profitability.”

While Orsted, the project developer for the cancelled Rhode Island project (and several other East Coast wind projects), was optimistic about the deal earlier this year, its executives have been clear-eyed that the industry has seen costs go up.

“We believe that generally we are operating in an industry which is clearly realizing that the conditions have changed both in terms of cost of capital and the Capex inflation,” Orsted’s Chief Executive Mads Nipper said in the company’s May call with analysts. The company's Chief Financial Officer Daniel Lerup further warned, “It is our clear expectation that we will see prices go up in the coming auctions.”

Analysts and the industry have blamed a bevy of factors for costs growing. Higher interest rates drive financing costs up. There’s also the higher costs for materials like steel, which wind developers blamed both on generalized inflation and specifically the Russian invasion of Ukraine, which led to price spikes across all sorts of commodities.

Last year, major wind turbine manufacturers hiked their prices, which Commonwealth Wind blamed in a December filing to get out of an agreement with the Massachusetts utilities that would buy power from its wind project.

“The prolonged war in Ukraine has unsettled markets and increased costs for many products, inflation has been persistent, interest rates have increased in a manner unprecedented in recent times, commodity prices have risen sharply, and supply shortages and supply-chain constraints once thought to be temporary remain pervasive ... Simply put, it is now far more expensive to construct the Project than could have been reasonably foreseen even earlier this year,” Commonwealth Wind said in its December filing.

The cost issues were so dramatic that the companies were willing to pay some $48 million in fees. But that doesn’t mean that ratepayers are out of the woods. The companies are expected to re-bid on the projects at a higher price.

These problems aren’t distinct to the East Coast. The Swedish energy company Vattenfall said Thursday it was cancelling a planned wind project in the North Sea due to 40 percent cost increases. “Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable,” its chief executive Anna Borg said in in the company’s interim financial report.

None of this bodes well for the future of offshore wind. Thanks to larger turbines and stronger winds, offshore windfarms tend to produce more of their potential power than onshore wind or solar, but building them is also more logistically complicated and expensive. They thus require hefty financing — Vineyard Wind, for example, secured a $2.3 billion construction loan in 2021 — and can be quite sensitive to the cost of financing, i.e. interest rates.

If offshore windfarms can't show how they‘ll eventually recuperate these investments, coastal areas around the world may lose a vital source of renewable energy — or their residents will pay the price.

Yellow

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Adaptation

Why Renters Have to Fight for Their Right to Air Conditioning

The Pacific Northwest has become the unlikely vanguard in the movement to protect renters from extreme heat.

Drawing a line on eighty degrees.
Heatmap Illustration/Getty Images

Washington State’s 2026 legislative session ended not with a bang, but with an alarm. On a drizzly mid-March evening before adjourning for the year, lawmakers filed out of the capitol having narrowly averted a special session over a data center tax break bill. “Someone or something” had set off the rotunda’s fire alarm, according to a local news outlet; returning after the brief delay, legislators cast their final vote, approving the state’s $79.4 billion spending plan.

The alarm was, in many ways, a fitting end to the state’s adrenaline-pumping 60-day short session, which saw 1,669 new bills introduced. Most were DOA due to time and ever-present budget constraints. Among the casualties was HB 2265, a bill to “protect tenants from periods of extreme heat” by extending a landlord’s responsibilities to include adequate cooling in rental units alongside the usual standbys of basic habitability, heat and hot water.

Keep reading...Show less
Electric Vehicles

London’s Police Cars Are Going Electric With the Help of AI

The Metropolitan Police Service signed a deal with BetterFleet to manage the complicated logistics.

A police car and a lightning bolt.
Heatmap Illustration/Getty Images

Police officers can’t be stuck waiting for their black-and-whites to recharge when an emergency call comes in. That urgency makes it especially tricky to transition their fleets away from fossil fuels and the lightning-fast gas fill-ups that get cars back on the road.

But some cities and departments have begun to make the move, aided by artificial intelligence models to manage their many vehicles and ensure electric cars can do not just the next job, but every job. Around the world, trucking companies, buses, municipal vehicles, and other huge fleets want to go electric to save money on fuel and maintenance, and they’re looking to AI to give them the confidence to take the plunge.

Keep reading...Show less
Blue
AM Briefing

A Rare Earths Civil War

On Last Energy’s milestone, California CCS, and RFK Jr. vs. microplastics

A mining truck.
Heatmap Illustration/Getty Images

Current conditions: The summerlike heat in the Northeast is set to drop by double digits as cold Canadian air blows southward, sending temperatures in Boston as low as 50 degrees Fahrenheit by Saturday • Temperatures are nearing 100 degrees in Cordoba, Spain, as Western Europe’s record-breaking heatwave continues • Juba is also nearly 100 degrees as heavy thunderstorms roll into the capital of conflict-riven South Sudan.


THE TOP FIVE

1. America’s two rare earths champions are fighting each other

Last year, in a move so bold it made Biden administration officials jealous, President Donald Trump took an equity stake in MP Materials, making the federal government the largest shareholder in the United States’ only active domestic rare earths producer. The deal became a trend, with the U.S. government taking minority ownership stakes in at least a dozen more companies that produce or process critical minerals, of which China controls the global supply. In January, USA Rare Earth, a manufacturer of rare earth magnets that aims to eventually mine and process fresh ore in Texas, became the second large rare earths-focused company in the Trump administration’s portfolio. Now America’s two champions in the war against China’s metal monopolies are instead battling each other. On Wednesday afternoon, the Financial Times reported that MP Materials had filed a lawsuit against USA Rare Earth, accusing its rival of “stealing” its technology for making the permanent magnets that go into everything from phones and electronics to electric vehicles to fighter jets. “USA Rare Earth has repeatedly failed to meet its commercial and performance targets and is now resorting to stealing technology to dig itself out,” MP Materials alleged in a complaint filed last week in Texas court. In response, USA Rare Earth said: “MP Materials’ complaint has misrepresented our company, our culture, and our people, and we will defend ourselves vigorously.”

Keep reading...Show less
Yellow