First US large-scale offshore wind farm a win for the industry after dismal 2023

The first large-scale offshore wind farm in the United States is now operational, located 14 miles off the coast of Martha’s Vineyard, Massachusetts. Dubbed Vineyard Wind 1, the project has five out of its planned 62 turbines currently generating energy — enough to power approximately 30,000 homes. Once all the turbines come online, it is projected to provide electricity for around 400,000 homes.

“After many decades of advocacy, research, policymaking and finally construction, America’s offshore wind industry has gone from a dream to reality,” said Massachusetts Gov. Maura Healey, D. “This will make the air we breathe safer and healthier, save customers money and bring us one step closer to achieving net-zero emissions.”

Healey lauded this development as a “turning point in the clean energy transition.” However, momentum has slowed for several other offshore wind projects along the East Coast. Multiple initiatives faced delays or cancellations in 2023, which in total accounted for more than a fifth of the power the Biden administration had been hoping to produce from offshore wind farms by 2030.

“The U.S. offshore wind market felt its growing pains over the past quarter, taking two steps forward and two steps back,” said Liz Burdock, the founder and chief executive officer of the Business Network for Offshore Wind. “We celebrated our first two utility-scale projects on the verge of delivering power to the grid — a monumental milestone a decade in the making — but simultaneously suffer project delays and continued supply chain challenges.”

Ørsted, a Danish energy company, abandoned two planned offshore wind farms in southern New Jersey, opting to incur a potential $300 million penalty rather than proceeding with construction. Similar situations unfolded in Massachusetts and Connecticut, where developers collectively paid out $124 million to terminate their contracts to build offshore wind farms.

“We’re probably a little bit too ambitious,” said David Hardy, the group executive vice president and CEO Americas at Ørsted. “We came in hot, we came in fast, we thought we could build projects that were inexpensive, large projects right out of the gate. And it turns out that we probably still need to go through the same learning curve that Europe did, with higher prices in the beginning and a little slower pace.”

New York witnessed its own challenges as energy companies struggled to honor initial wind farm leases. Wind farm developers lobbied the state to make its consumers take on as much as a 65% increase on their electricity bills to make these projects profitable.

Consequently, energy giants like Equinor, BP and Ørsted collectively faced a $5 billion value reduction over their U.S. offshore wind developments. Despite these setbacks, industry stakeholders remain optimistic about the future.

“State procurements and policies will continue to drive demand for offshore wind energy and federal support will enable more job creation, supply chain investment and domestic energy production,” said Ryan Ferguson, a spokesman for Ørsted.

Developers are exploring avenues to revive stalled projects, banking on more flexible contract terms and state incentives. New York has implemented measures allowing energy companies to cancel unfeasible contracts at no cost, provided they participate in subsequent offshore lease auctions. Connecticut is offering bidders the option to increase projected energy prices by up to 15% to accommodate economic fluctuations.

Some states have also introduced expedited solicitations to bolster offshore wind goals, streamlining approval processes and reducing bid fees on potential project sites. These initiatives are in addition to federal tax breaks for offshore wind under the Biden administration’s Inflation Reduction Act.

“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry — creating good-paying union jobs in manufacturing, shipbuilding and construction,″ said the White House in a statement.

However, the success of these measures hinges on the industry’s ability to navigate economic uncertainties and overcome logistical hurdles. For the federal government to see its goal of powering 10 million homes with offshore wind energy by 2030 realized, this year will have to mark a turnaround for the industry.