US Offshore Wind Faces Challenges as Ørsted Warns of Potential £1.7 Billion Impairment
Posted 30/08/2023 14:00
Recent developments in the US offshore wind sector are raising concerns as Danish energy company Ørsted issues warnings of major impairments, potentially reaching up to 16 billion Danish kroner (£1.7 billion). The challenges include disappointing auction results and obstacles related to interest rates and investment tax credits.
Ørsted highlighted issues with suppliers for its Ocean Wind 1, Sunrise Wind, and Revolution Wind projects, contributing to impairments estimated at 5 billion kroner (£546 million). Additionally, higher interest rates pose a threat to offshore and onshore projects, potentially resulting in another 5 billion kroner impairment if rates remain constant by the end of the quarter.
A significant portion of the potential impairment comes from Ørsted's pursuit of investment tax credits (ITC) for Ocean Wind 1 and Sunrise Wind, which are not progressing as anticipated. The company is in discussions with federal stakeholders to qualify for more tax credits beyond the initial 30%. Failure to secure additional credits may lead to impairments of up to 6 billion kroner (£655 million). Ørsted aims to qualify for at least 40% ITCs on its projects.
Despite these challenges, Ørsted continues to work on its US offshore wind projects. The company plans to make a final investment decision on Ocean Wind 1, Sunrise Wind, and Revolution Wind later this year or in early 2024, with the goal of commissioning Ocean Wind 1 by 2026. Ørsted acknowledges that the US offshore wind sector is falling short of its expectations, but it remains optimistic about improvements in the future.
The inclusion of Revolution Wind in the list of challenging projects holds significance for the US Department of the Interior, which approved the project offshore Rhode Island. The federal government aims to achieve 30 GW of offshore wind capacity by 2030.
In parallel, the US Department of the Interior recently conducted its first auction for offshore wind in the Gulf of Mexico, with only one lease area being licensed for $5.6 million. RWE Offshore US Gulf secured the Lake Charles lease, which has the potential to generate 1.24 GW of offshore wind power.