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Major energy and wind power developers are pressing the U.S. Administration to ease the requirements for subsidy eligibility for offshore wind, saying that the current rules under the Inflation Reduction Act 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, projects can receive stackable bonus credits for any or all of the following; meeting domestic manufacturing thresholds of 100% domestic steel or iron, 40% domestically-manufactured components for land-based wind, or 20% domestically-manufactured components for offshore wind. Additional bonuses go to developers for locating facilities in low-income communities or on tribal lands, in fossil-fuel-powered communities, or in a low-income residential building or economic benefit project.
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.
“The components needed for our projects to progress simply do not exist in the U.S. at this time, and we see no signs that the supply chain will be ready in time to meet our procurement schedule,” David Marks, a spokesperson for Equinor’s U.S. renewables division, told Reuters.
Orsted warned last week 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 week, attracting just one bid, from Germany’s RWE. Out of three areas up for lease, two did not receive any bids.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.