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Ørsted ‘re-evaluating’ project off Delaware coast

January 26, 2024 |By Katie Tabeling

This rendering demonstrates how wind turbines would look off the coast of Bethany Beath — This rendering demonstrates how wind turbines would look off the coast of Bethany Beach | PHOTO COURTESY OF BUREAU OF OCEAN ENERGY MANAGMENT

This rendering demonstrates how wind turbines would look off the coast of Bethany Beach, with 10 miles of visibility.| PHOTO COURTESY OF THE U.S. BUREAU OF OCEAN ENERGY FENWICK ISLAND — Offshore wind developer Ørsted announced Thursday night it was withdrawing plans for its Skipjack projects off the coast of Delaware,

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This rendering demonstrates how wind turbines would look off the coast of Bethany Beach, with 10 miles of visibility.| PHOTO COURTESY OF THE U.S. BUREAU OF OCEAN ENERGY[/caption] FENWICK ISLAND — Offshore wind developer Ørsted announced Thursday night it was withdrawing plans for its Skipjack projects off the coast of Delaware, with high inflation and interest rates making the approved plans less financially viable. The Danish wind turbine developer announced it would extensively review its agreement with Maryland, which approved the project in federal waters back in 2018, and plans to resubmit a revised construction and operation plan. Skipjack 1 and 2 were slated to bring 966 megawatts of energy to the grid, powering around 300,000 homes. With Skipjack, the tax credits and power would be credited to Maryland while Delawareans would still see the turbines, as it would be 15 miles from Fenwick Island. Ørsted officials pointed to market difficulties in supply chain costs and inflation over the past five years since Maryland approved credits for Skipjack 1. Back in 2017 when that project was approved, the Maryland Public Service Commission awarded credits at a price of $131.93 per megawatt hour over the course of 20 years. In late 2021, its second proposal for credits was approved at $76.61. These amounts “are no longer commercially viable,” according to a statement provided by Ørsted. “Today’s announcement affirms our commitment to developing value creating projects and represents an opportunity to reposition Skipjack Wind, located in a strategically valuable federal lease area and with a state that is highly supportive of offshore wind, for future offtake opportunities,” Ørsted Group Executive Vice President and Americas CEO and David Hardy in a statement. “As we explore the best path forward for Skipjack Wind, we anticipate several opportunities and will evaluate each as it becomes available. We will continue to advance Skipjack Wind’s development milestones.” Ørsted has several seabed lease areas along the East Coast and indicated it would be strategically positioned in the offshore wind sector. The late Thursday announcement did not come as a surprise, as the future of Ørsted’s American projects was thrown into doubt last year. The wind turbine developer had pulled out of its projects in New Jersey due to “macroeconomic challenges” last October — after the New Jersey legislature approved $1 billion in federal tax credits. The scrapped New Jersey wind farms are an estimated $4 billion in losses, according to industry reports. Still, Ørsted forges on with re-submitted projects in New York and started construction for a project off the coast of Rhode Island and Connecticut. The Skipjack project may have been credited to Maryland, but it would be visible from the coast of Delaware’s beaches. For years, the First State has studied offshore wind but until Senate Bill 170 spurred more direct action in the industry, it seemed unclear how Delaware would tap in. A recent study prepared by Delaware Department of Natural Resources and Environmental Control (DNREC) with Synapse Energy Economics and Zooid Energy suggests that the next step would be to create a procurement process through fixed or index credits or a power-purchase agreement. Sen. Stephanie Hansen (D-Middletown) who sponsored SB 170 and plans to introduce legislation on what procurement system would work best, told the Delaware Business Times that Ørsted’s decision on Skipjack was another setback and not the end of the offshore wind industry as a whole. “This is instead another example of a market reset occurring in the industry. Other states, utilities, and wind project developers are taking a step back from the procurement systems they had in-place and looking for new, more flexible models,” she said. Delaware has the benefit of seeing how this situation is playing out elsewhere and our intent is to be thorough with our analysis and flexible in our development of a offshore wind model moving forward.” The senator pointed out that after setbacks in procuring offshore wind energy Connecticut, Rhode Island and Massachusetts separately, those states created the first interstate agreement to buy wind power. “As we review models from around the nation and the world, I believe we can learn from that history and this latest development in Maryland, as we work to diversify Delaware's renewable energy portfolio to include multiple clean and sustainable sources of electricity capable of benefiting consumers and the future of Delaware for generations to come,” the senator told DBT. Others like the Caesar Rodney Institute’s Dave Steveson pointed that the market data on wind energy costs is rapidly outpacing the technology and market forces, which is going to complicate matters moving forward. He pointed out that some New York offshore wind projects were bid out on an average of $145 per megawatt hour on market value a few months ago, when the developers were starting to seek $167 per megawatt hour. “If you look at the lower [bid] number, you’re looking at adding dollars to residential electricity bills for this. Looking at the prices now, seven more offshore wind projects are likely to be canceled. We’re going to learn so much by June of next year when other projects [on the East Coast] are under construction, and we will know so much more about the environmental impacts as well,” Stevenson said at a Energy Stakeholders’ Group on Jan. 12. Meanwhile, Gov. John Carney is exploring the best possible way for the state to get involved in offshore wind energy. In December, he signed a non-binding term sheet to bring a transmission line for a project developed by U.S. Wind close to the Indian River Substation in Dagsboro. The governor’s office declined to comment to DBT on what Ørsted’s announcement spells for the state’s next course of action in offshore wind.