Some analysts are expressing concerns over the decline of the US offshore wind industry, linking it to the changes in federal policies during Donald Trump’s second presidency. However, the situation is more complicated than it appears. The recent difficulties faced by Danish developer Orsted in the US highlight broader issues within the industry.
Orsted made headlines again recently, particularly due to a controversial order issued by the Department of the Interior regarding its Revolutionary Wind Project off the coast of Rhode Island. The order aimed to “address concerns related to protecting national security interests and reasonable use of exclusive economic zones.” This marked the second significant setback for Orsted in just two weeks.
“This is a major hurdle for securing funding,” analysts at Sidbank noted in a comment to Reuters. They expressed amazement at the extent of the challenges faced. While Orsted has certainly been prominent in the US offshore wind landscape, it’s not alone; many companies are grappling with similar project viability issues. Trump’s policy shifts have undoubtedly made a significant impact, but Orsted’s hurdles are likely to persist for some time.
For instance, back in 2023, Orsted had to abandon its efforts on two offshore wind projects in New Jersey just as the Biden administration was pushing to expedite offshore development. The decision resulted in over $4 billion in write-offs. Orsted’s then-CEO, Mads Nipper, stated that the company allocated an additional $1.55 billion to cover potential cancellation fees, bringing the total financial hit to $5.55 billion.
In early 2024, BP faced its own struggles with an offshore wind project that had been in the works for two decades. The company reported a $1.1 billion loss tied to US projects and decided to divest its interests in two projects being managed by the Norwegian company Equinor. It also paused development on another project, Beacon Wind, off the Massachusetts coast. Equinor was still working on completing the Empire Wind Project near New York but faced a $955 million write-down after the Department of Interior issued a similar order to suspend work.
Another British oil giant, Shell, also withdrew from a significant project in New Jersey in February, abandoning its efforts to develop the Atlantic Shores project. This occurred just two months after announcing its intention to lead new wind initiatives.
While critics often point to Trump as the source of these issues, the current administration cannot entirely shift the blame. For instance, Shell’s decision to pull out of the Massachusetts Sea Wind Project was influenced by market dynamics during the Biden years, including inflation, supply chain challenges, and the complexities of business planning.
Trump’s policies have indeed affected the viability of US offshore wind ventures, but it’s crucial not to overlook the industry’s ongoing struggles that existed prior to his presidency. The challenges should not be misattributed solely to political leadership as they stem from deeper, systemic issues.
The grid manager for ISO-New England responded to the DOI’s suspension order, stating that it jeopardizes the reliability of the grid as demand rises. However, issues surrounding grid reliability have been developing for the past two decades, influenced by policymakers signaling green initiatives amidst a backdrop of poor decision-making.
In reality, the American offshore wind industry has faced sustainability challenges long before Trump’s second presidency. It’s essential, perhaps, to halt this ongoing blame game and look more into the fundamental shifts that are affecting project viability.
