Wind Energy Opponents Try To Scapegoat The Jones Act For Industry Setbacks

The Jones Act is once again being targeted by its enemies in the wake of a series of setbacks facing the wind industry.

The Danish company Ørsted, the world’s largest wind energy developer, faced political heat and pushback when it announced October 31 that it was pulling out of the Ocean Wind 1 and 2 projects, located off the New Jersey shore. On completion, they would have delivered a combined 3,500 mw. of electricity, enough to power 500,000 homes. 

In a statement, Øersted said, “Ørsted has taken the decision to cease the development of the Ocean Wind 1 and 2 projects. This is a consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay. In addition, Ørsted has updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits. Finally, increases to long-dated U.S. interest rates have further deteriorated the business case.”

“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2,” said Mads Nipper, group president and CEO of Ørsted. “We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the U.S. renewables market and truly value the efforts by the U.S. government to support the build-up of the U.S. offshore wind industry.

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“However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects. At the same time, with an attractive forward-looking value creation, we progress the Revolution Wind project into the construction phase.” Revolution Wind is another offshore project, located in the Atlantic off Rhode Island. It’s a 50/50 partnership between Ørsted and Eversource, a U.S. utility with homegrown expertise in regional energy transmission, including more than 100 years of experience delivering power to the region.

Ørsted took a $4 billion write-down impairment on the Ocean Wind withdrawal. The projects were a centerpiece of New Jersey Gov. Phil Murphy’s energy plan and had become targeted by his Republican opponents. Murphy reacted strongly to Ørsted’s announcement, saying the pull-out called into question its “credibility and competence.”

Nowhere in its statement did Ørsted mention the Jones Act as a reason for its difficulties. But it didn’t take long for perennial Jones Act opponent the Cato Institute to weigh in with an attack article. “Jones Act Helps Sink New Jersey Offshore Wind Project,” it proclaimed, alleging that cost overruns and delays in building a wind support vessel were responsible. 

However, Cato did not explain why Ørsted also pulled out of a consortium that was to bid on wind projects in Norway just two days after it made the Ocean Wind announcement. Nor why other wind projects—on both land and sea—are also facing challenges. The business and financial press has been reporting on wind energy challenges since the summer. The Wall Street Journal reported in August that $19 billion in wind project contracts are being renegotiated to take account of rising costs and reduced profitability.

In September, a group of offshore wind developers released a report arguing that ports need $36 billion in federal investment to support offshore wind platforms—money that the developers can’t afford themselves. Their report was titled, “Building A National Network of Offshore Wind Ports: A $36B Plan for Domestic Energy Infrastructure.” In a November 2 article, Bloomberg reported that one-quarter of all wind energy projects in the U.S. had been canceled.

Jennifer Carpenter, CEO and president of The American Waterways Operators, remains optimistic about the long-term future of offshore wind. “I continue to see offshore wind as a tremendous opportunity for the U.S. and its maritime industry,” she told The Waterways Journal. She acknowledged there will be difficulties and setbacks.

“We are trying to build a brand-new industry from the ground up,” she said. “It’s an older industry in Europe. I’m less worried about meeting specific targets and timelines than I am encouraged about the trajectory I see of new opportunities for American vessel owners, shipyards and mariners.”

Carpenter pointed toward projects like Dominion’s Coastal Virginia Offshore Wind (CVOW) project that when fully constructed will generate enough clean, sustainable energy to power up to 660,000 homes. Unlike Ørsted, Dominion locked in many of its financing costs before inflation affected them. Besides inflation, developers also face the rising cost of capital and supply chain difficulties. “There have been delays in both foreign and U.S. shipyards,” Carpenter pointed out.

In short, she said, “This is not a Jones Act problem.”