Biden Administration’s Offshore Wind Plan Plagued By Soaring Costs

The Biden Administration’s target to have 30 gigawatts (GW) of offshore wind by 2030 may not be feasible, analysts and industry professionals have told Reuters, as costs are rising and making projects more expensive than initially planned. 

The Biden Administration targets to build 30 GW of offshore wind by 2030 as part of a plan to decarbonize the grid.

However, interest rates, cost inflation, and supply-chain issues are making projects more expensive, while the industry wants less stringent requirements for subsidies than the current provisions in the Inflation Reduction Act.  

Commenting on the U.S. chances to reach 30 GW offshore wind by 2030, Kris Ohleth, director of the Special Initiative on Offshore Wind, told Reuters,

“It's just not going to be by that size by 2030. It's pretty clear at this point.”

Major energy and wind power developers are pressing the Administration to ease the requirements for subsidy eligibility for offshore wind, saying that the current rules under the IRA make many investments uneconomical.

Orsted, the Danish group leader on the offshore wind market, Norway’s energy major Equinor, and France’s Engie are some of the companies that have told Reuters that the current IRA provisions for tax credits are hampering the swift construction and project development.

Under the IRA, additional bonuses go to developers for local content in manufacturing, for locating facilities in low-income communities or on tribal lands, and in fossil-fuel-powered communities.

However, the offshore wind project developers say that they simply cannot meet such requirements because many of the components cannot be found in the U.S. and are not currently manufactured there.

Orsted warned at the end of August of up to $2.3 billion (16 billion Danish crowns) of impairments on its U.S. project portfolio due to supply chain delays, higher interest rates, and the possible inability to qualify for additional tax credits beyond 30%.

In a sign of the struggling offshore wind industry, the latest lease sale, the first-ever such sale in the Gulf of Mexico, was a flop last month, attracting just one bid, from Germany’s RWE. Out of three areas up for lease, two did not receive any bids.  

By Charles Kennedy for Oilprice.com

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