Consider This from NPR - A Second Wind For Wind Power?

Episode Date: February 19, 2024

About two years ago, New Jersey's Democratic Governor Phil Murphy said that the state would be partnering with the Danish company Orsted, the largest developer of offshore wind projects in the world. The company had agreed to build Ocean Wind 1, the state's first offshore wind farm, powering half a million homes and creating thousands of jobs in the process. The following year, Orsted inked another deal with the state for Ocean Wind 2, a second offshore wind farm with similar capacity. After years of review, the projects were approved in summer 2023. Construction of the first turbines was slated to begin in the fall. And then Orsted backed out, cancelling the contracts full stop.Despite the setbacks, Murphy is still all-in on wind. A month after Orsted dropped out, Murphy directed the state's Board of Public Utilities to seek new bids from offshore wind developers. And the state just approved two new offshore wind contracts.After several setbacks, could this mean a second wind for offshore wind? For sponsor-free episodes of Consider This, sign up for Consider This+ via Apple Podcasts or at plus.npr.org. Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Getting away from fossil fuels in the energy sector is important, and offshore wind, along with solar and batteries, is the way to do it, according to the federal government and many states. That's reporter David Borax, who has been reporting on wind energy for years. The reason getting away from fossil fuels is important is because it's key to fighting climate change. One of the states embracing wind energy? New Jersey. About two years ago, the state's Democratic governor, Phil Murphy, triumphantly announced a new partnership for offshore wind projects. So all in all, this is a huge moment. This truly is a vision turning into reality. This is, if you will, New Jersey's if you build it, they will come moment. He said that the state would be partnering with the Danish company Ørsted, the largest developer of offshore wind projects in the world. The company had agreed

to build Ocean Wind One, the state's first offshore wind farm, powering half a million homes and creating thousands of jobs in the process. But even with this progress, we're still not done. We know that the industry is going to need a highly trained workforce. After all, windmills don't just magically appear. They need women and men who know how they go together and work to put them together and to make them work. The following year, Orsted inked another deal with the state for Ocean Wind 2, a second offshore wind farm with similar capacity. After years of review, the projects were approved in summer 2023. Construction of the first turbines was slated to begin in the fall.

And then… Danish developer Ørsted is scrapping plans to build wind farms off the coast of the Jersey Shore. In a stunning announcement Tuesday night, the developer… Ørsted backed out, canceling the contract's full stop. The company said that supply chain issues, inflation, and rising interest rates meant the projects were no longer financially viable. Governor Phil Murphy put it another way. He called Orsted's decision outrageous and said it calls into question the company's credibility and competence. But despite the setbacks, Murphy is still all in on wind. A month after Orsted

dropped out, Murphy directed the state's Board of Public Utilities to seek new bids from offshore wind developers. Earlier this year, in his State of the State address, he made it clear that his ambitions for renewable energy hadn't dimmed. We have set one of the most ambitious clean energy goals in the entire country. And it is a goal we remain firmly committed to, 100% clean energy by the year 2035. Now... To that end, New Jersey just approved two new offshore wind contracts. The state's trying again. Consider this. Offshore wind had a terrible year, but it's still a cornerstone of the country's efforts

to fight climate change. Can the wind power industry regain its momentum? From NPR, I'm Camilla Dominovsky. It's Sunday, February 18th. It's Consider This from NPR. After the high-profile cancellations last year, offshore wind developer Orsted is striking a cautious note. Here's an analyst from Morgan Stanley pushing the CEO on a recent earnings call. What further confidence can you give everyone in the market

that whatever went wrong last time, the risk management with the supply chain will not be repeated? Orsted's CEO Mads Nipper said they're learning from their mistakes, but he also said... We won't pretend that it's fully stable or without risks. It is not. Everybody who says something different is not telling the truth. David Borax is a freelance reporter based in North Carolina who's been following offshore wind projects for years. Thanks for being here. It's always nice to talk with you.

Oh, you're welcome, Camilla. Nice to talk to you again, too. So can you start by laying out the stakes here? Why is offshore wind in particular important to climate targets? Offshore wind is one of a portfolio of different solutions that states and the federal government are looking that, especially in the energy sector. And getting away from fossil fuels in the energy sector is important. And offshore wind, along with solar and batteries, is the way to do it, according to the federal government in many states. Right. So there are several different kinds of energy you mentioned there. Could the U.S. meet its climate goals without offshore wind? I think it will be difficult, Camila. Offshore wind is a proven technology.

It's working in other places around the world. The U.S. is a little bit behind on this, and we need it. And we've got sites selected across the East Coast and down to the Gulf Coast. And many of the states see it as an important part of what they're trying to do. In some places, some of those other technologies you talked about aren't really a good option. There's no space for big solar farms or wind farms. And it just makes more sense to include offshore wind as part of the solution. Right. So what exactly happened last year? Why were these projects in New Jersey and other places being canceled?

There's a couple of different things that happened here. In some places like Massachusetts, the original contracts that these companies signed with the states to supply electricity included prices that now, given the current economic circumstances, they're way too low. The companies can't make a profit at that level of prices that they're charging. So they've canceled their contracts, but they haven't canceled their agreements to work with the states. And so they're trying to renegotiate those contracts at higher prices so that they can make a profit and still provide what they promised. In the case of Orsted, the Danish company that canceled two projects off of New Jersey, it was a little more complicated. There was certainly the price issue with the

state of New Jersey there, but it was also facing rising interest rates, inflation, the cost of doing these projects was going up, and supply chain issues. Some of those were blamed on Orsted's oversight and planning, but in any case, it looked like they weren't going to be able to get what they needed when they needed it. And then there was a fourth element, lack of the specialized ships needed to construct turbines has also hit some of these companies, and that was a factor in New Jersey. So if you've got some companies renegotiating these contracts, pushing the price up, in New Jersey where Orsted pulled out, they got new companies to come in and strike new deals to build wind farms, but at a higher price. Does this mean that rate payers are going to be paying more for their electricity than it looked like they were going to? Definitely. The companies are going to get paid higher prices for the electricity,

and that'll get passed on to consumers. It's not quite as cheap as we thought it was going to be. But also, right at this moment, with the industry just getting off its feet in the US, prices for offshore wind power were among the highest of the renewable energies that we're looking at. So that is going to be a factor going forward. So wind and solar on shore, they've gone down in price a lot, right? They're actually cheaper in some cases than traditional polluting ways of making energy. But you're saying that offshore wind didn't have that advantage to start with? Because it's a startup industry in the U.S. and we don't have the infrastructure to build the turbines and the generators and the columns that are needed for these. We don't have

any of that in place. We were relying on companies primarily from Europe to supply us. So the price for doing this was going to be higher. And add to this the delays now and the need to charge higher prices, and it's just pushing up the costs overall. What does that mean politically? This is, as you can imagine, this is a difficult political bite for folks who support offshore wind energy. When Orsted canceled the two New Jersey projects at the end of October, the opponents of offshore wind were having a field day. They came out and made all kinds of announcements about how this was a sign that the offshore wind industry is not viable. They declared the death of the industry and said, this is just like we told you was going

to happen. And they've really made a lot of hay about that. Now, you know, I think it's important for us to look at this over a much longer arc than just one announcement by one company. And at the same time that Orsted was pulling out, other projects were moving forward. And so I think there's a longer timeline here to these things, but it definitely has given opponents something to talk about. How confident are other states with these projects that are moving forward that they are going to happen as planned? Well, they have the assurances of these companies that have said, look, we can't do it at the original terms of the contract.

We can do it at these new prices and terms that we're setting. There are, you know, every day new companies that are signing agreements for these things, like the two in New Jersey that happened last week. And so I think the companies are confident that it's going to happen. You know, it certainly could happen again, that there's some unforeseen circumstance that steps in to make it difficult. But I think at this point, there's a resetting going on of the industry. And I think the companies and the buyers of the electricity are seeing it as a positive. Big picture here, rocky year last year for offshore wind. Which way do you think the winds are blowing and how steadily right now?

Well, I think that things are moving forward. As I mentioned, even as some projects are being canceled, others are moving forward. The Biden administration has been pushing hard to sell more leases for these things, especially off the East Coast. They also did a sale off the Gulf Coast last summer, which was a little disappointing. Only a couple of companies applied. But I think that it's going to be an important part of the Biden administration's strategy to try and meet its goals in the coming years. The companies themselves are adjusting. We mentioned Orsted, which canceled the two projects in New Jersey. They have promised layoffs. They've taken a big charge, $4 billion last year to pay for their expenses.

And they also had to pay like $1.4 billion in cancellation fees. They're telling investors that they're back on track with all of this, and this is going to allow them to weather the storm and be in a good position to keep pursuing their goal of being the biggest offshore wind company in the world. Reporter David Borax, thanks so much for joining us. You're welcome. This episode was produced by Avery Keatley. It was edited by Courtney Dorney. Our executive producer is Sammy Yenigan. It's Consider This from NPR. I'm Camilla Dominovsky.