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Wind temporarily taken out of Ørsted project’s sails

Katie Tabeling

Ørsted manages the first offshore wind farm in the United States, which includes five turbines about four miles off Block Island, Rhode Island seen here. The same company is looking to develop 12 turbines as a Maryland project, about 19 miles off Bethany Beach. | PHOTO C/O BLOCK ISLAND TIMES

FENWICK ISLAND – The $720 million Skipjack Wind Farm, the center of the controversy for a deal to make landfall at Fenwick Island State Park, has been pushed back until 2023.

Ørsted, the Danish company developing the wind farm, announced the project is moving at a slower pace due to the U.S. Bureau of Ocean Energy Management (BOEM) prolonging its study on the impact of offshore wind buildouts. In turn, that delays the Notice of Intent, a milestone toward receiving final approval.

“Our projects are moving forward, although at a slower pace than originally expected … it is no longer realistic to receive the Notice of Intent from BOEM in due time to meet the commissioning date in late 2022,” Henrik Poulsen, Ørsted president and CEO, said in an April earnings call.

The Skipjack project, proposed to be 19 miles off the Maryland-Delaware coast, would include 12 megawatt turbines about 800 feet tall. It would generate enough electricity for 35,000 homes in the Delmarva region.

The wind project is approved in a federal offshore wind lease area and the Maryland Public Service Commission (PSC) signed off on it, so Maryland will claim the renewable energy credits.

Maryland will also see some economic benefits, as the Maryland PSC mandated that Ørsted spend 34% of construction and development costs in-state. Skipjack is also required to “realize” direct jobs in Maryland, but Ørsted leaders said the need for subcontractors could require it to tap into the Delaware market. The entire project should create about 1,400 jobs in all.

In October 2019, the Delaware Department of Natural Resources and Environmental Control (DNREC) and Ørsted announced a proposal that would build an interconnection facility on Fenwick Island State Park.

In exchange, Ørsted would pay $18 million in park improvements. These improvements could include a two-story parking structure, a pedestrian crossover connecting the bay and the ocean, an outdoor amphitheater, housing for lifeguards, a new park bathhouse and a new building for the Bethany-Fenwick Area Chamber of Commerce and an overall improvement in roadway infrastructure.

David Stevenson, policy director for the Caesar Rodney Institute, a state libertarian think tank, said that Skipjack’s delays could lead to some financial difficulty ahead, specifically since the clock is ticking on investment tax credits that Ørsted could claim. Those tax credits were offered at 20% in 2020, but lower to the floor of 10% in 2022.

Since Skipjack was financed with $1.7 billion in subsidies, it’s subject to offering the lowest price possible when it’s selling electricity on the Northeast region’s grid, the PJM Interconnection.

Power generators are paid for electricity created and the capacity to meet the future demand. In the PJM market, auctions are held where generators can bid into to sell supplies to utilities. In theory, renewable energy sources would eliminate the next-highest generator on the market since it bids zero, according to Jeremy Firestone, director of University of Delaware’s Center for Research in Wind.

“In those auctions, the wind farm effectively bids zero,” Firestone told the DBT in a previous interview. “So that should lower the entire market clearing price every hour the wind farm in generating energy. People should see a slight decrease in their electricity bills.”

But while that may seem ideal for users, a recent rule may cost power generators and customers down the line. The Federal Energy Regulatory Commission passed a new market rule that effectively raises the bidding price for the PJM market for power generators that receive state subsidies, leaving Maryland lawmakers concerned that it limits their offshore wind goals.

For Skipjack, Stevenson said it makes that much harder turn a profit, even considering with 20% to 30% revenue coming from the capacity auctions.

“With the financial impacts here, that may make it difficult for Skipjack to get off the ground,” Stevenson said. “And that’s ignoring the fact that DNREC still hasn’t granted approval for this transmission site, and other areas like Ocean City, Maryland, said, ‘No thanks.’”

— Katie Tabeling


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