Analysis by Energy Workforce President Tim Tarpley
Last week saw two major announcements of significant offshore wind projects being canceled due to a variety of market forces. It’s too early to tell if these announcements are indicative of a large-scale collapse of the market or a mere bump in the road, but what does appear clear is they strike a huge blow in the Biden Administration’s goal to power 10 million homes through offshore wind by 2030.
In the first instance, Orsted, a Danish wind energy developer, announced it would scrap plans for its Ocean Wind 1 and 2 projects off southern New Jersey. The major issues Orsted credited with causing the cancellation of the projects were supply chain constraints, higher interest rates and their inability to obtain sufficient tax credits to support the project. The two combined projects would have delivered over 2.2 gigawatts of power to the region.
This follows a similar announcement in New England where developers of three projects that would have provided 3.2 gigawatts of power for Massachusetts and Connecticut were canceled due to the developers announcing they no longer felt the proposals were financially viable. Together these projects represent a fifth of the Biden Administration’s targets for wind production in his energy plan. Time will tell if additional proposed projects also meet the same fate. Wind is plagued by many of the same problems facing other large energy investments, including permitting delays and inflation. The added uncertainty of the reliance on government tax credits to ensure the viability of the projects only adds to this uncertainty.
Meanwhile, offshore and onshore leasing for oil and gas on both federal lands and waters got a bit of good news last week with the passage of the House Interior Appropriations bill on the floor. With House Speaker Mike Johnson now sworn in, regular business has resumed on the floor. The package included mandates that the Secretary of Interior conduct quarterly onshore oil and gas lease sales and requires oil and gas lease sales in the Central Gulf of Mexico Planning area, the Western Gulf of Mexico Planning Area and in the Alaska region. Additionally, language prohibiting the listing of the Dunes Sagebrush Lizard as an endangered species which Energy Workforce has worked with Rep. August Pfluger (R-TX-11) to support was included in the final package. This language is critical to ensure the Administration does not use the Endangered Species Act to slow or curtain oil and gas production in the Permian region.
While the passage of the Interior package is good news, it is still an uphill battle to ensure this favorable language survives until the final funding package. Negotiations will continue with the Senate, and ultimately it remains possible that a large omnibus funding package will be necessary at the end of next year. Funding for the current CR runs out in 10 days. Energy Workforce will continue to support the language and work with allies in the Senate to encourage support in that chamber.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.