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
Energy

China Is Making a Major Offshore Wind Push in Europe

It’s already conquered solar, batteries, and EVs. With a $2 billion new turbine factory in Scotland, it may have set its next target.

A Chinese flag and a wind turbine.
Heatmap Illustration/Getty Images

Batteries, solar panels, electric vehicles. The story of renewable energy deployment globally is increasingly one of China’s fiercely competitive domestic industries and deep supply chains exporting their immense capacity globally. Now, it may be wind’s turn.

The Chinese turbine manufacturer Ming Yang announced last week that it plans to invest $2 billion in a factory in Scotland. The facility is scheduled to start production in late 2028, churning out offshore wind equipment for use in the United Kingdom, which has over 15 gigawatts of offshore wind capacity, as well as for export, likely in Europe.

Keep reading...Show less
AM Briefing

The Firings Begin

On Interior’s denial, ethane exports surge, and Spain’s grid fears

The Department of Energy.
Heatmap Illustration/Getty Images

Current conditions: A major Pacific storm is drenching California and bringing several inches of snow to Montana, Idaho, and Wyoming • A tropical storm in the Atlantic dumped nearly a foot of water on South Carolina over three days • Algeria is roasting in temperatures of more than 105 degrees Fahrenheit.

THE TOP FIVE

1. Energy Department starts firing workers amid shutdown

The Department of Energy notified workers in multiple offices Friday that they were likely to be fired or reassigned to another part of the agency, E&E News reported Tuesday. Staffers at the Office of Clean Energy Demonstrations and the Office of State and Community Energy Programs received notices stating that the offices would “be undergoing a major reorganization and your position may be reassigned to another organization, transferred to another function or abolished.” Still, the notice said “no determination has been made concerning your specific position” just yet.

Keep reading...Show less
Red
Podcast

How Julian Brave NoiseCat Changed His Mind About Climate Politics

Rob talks with the author and activist about his new book, We Survived the Night.

Julian Brave NoiseCat.
Heatmap Illustration/Getty Images

Julian Brave NoiseCat is a writer, Oscar-nominated filmmaker, champion powwow dancer, and student of Salish art and history. His first book, We Survived the Night, was released this week — it uses memoir, reporting, and literary anthology to tell the story of Native families across North America, including his own.

NoiseCat was previously an environmental and climate activist at groups including 350.org and Data for Progress. On this week’s episode of Shift Key, Rob talks with Julian about Native American nations and politics, the complexity and reality of Native life in 2025, and the “trickster” as a recurring political archetype.

Keep reading...Show less
Green