America’s Wind-Farm Revolution Is Broken
Offshore wind farms should be one of the best solutions to the climate crisis but are turning out to be a lousy business. Getting the struggling industry back on its feet will require a new approach from companies and politicians alike. The public face of the crisis is Ørsted, a former oil and gas producer that became the world’s largest offshore wind-farm developer.
The Danish company’s stock has lost more than $10 billion, or a third of its market value, since warning last week that it may take impairments of up to $2.3 billion on its U.S. projects. On Tuesday, ratings provider Moody’s downgraded the stock, a further challenge for a company that, like a property developer, needs debt to fund its plans.
Ørsted won contracts to develop wind farms off the coasts of Connecticut, New York and New Jersey in late 2018 and 2019. Since committing to sell the power from these projects at a fixed price, permitting delays, rising costs and higher interest rates have torched the returns it expected to make. The Biden administration wants to have 30 gigawatts of offshore wind capacity by 2030, from less than 50 megawatts today.
Generous subsidies in the Inflation Reduction Act are meant to turbocharge investment. Ørsted hoped bonus tax credits in the climate bill for using locally produced components would paper over financial cracks, but now says its wind farms may not qualify. The company says it will abandon projects if it doesn’t get more government support, and rivals are also rethinking their U.S.
plans. Shell and Avangrid face multimillion-dollar fines for calling it quits on offshore wind-farm developments in Massachusetts that they can no longer justify. There is trouble further up the supply chain, too.
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