The CEO of Danish wind energy developer Ørsted told analysts on Wednesday that the higher tax credits available for Revolution Wind had saved the planned wind farm from cancellation, even as the company warned of much higher than anticipated losses from its portfolio of planned projects off the coast of the United States.
Hours after the first turbine for an Ørsted-owned wind project off the eastern seaboard departed from New London on Tuesday night, CEO Mads Nipper told analysts on a quarterly earnings call that the company was counting a $4 billion loss on offshore wind through the first three quarters of the year, about 70 percent higher than the wind-related losses it announced in August. The company announced on Tuesday day it was canceling Ocean Wind 1 and 2 off of southern New Jersey.
Nipper said that while the company reviews its offshore wind portfolio in the U.S., it will focus on completing Revolution Wind – the only offshore wind project currently contracted to sell power to Connecticut – and on negotiating a new contract for Sunrise Wind with the State of New York, a wind farm slotted for staging from State Pier.
Ørsted said $2.8 billion of its offshore wind losses come from now-cancelled Ocean Wind. Nipper said the company made the decision to cancel that project after more supply chain and permitting delays pushed back its schedule even further.
“It is obviously some very tough decisions that we have already made and will have to make in the coming months,” Nipper said. “We have taken measures to de-risk the portfolio by reducing the number of projects that will be realized, and will focus on how we preserve the value of the remaining contracted projects.”
In August, Nipper announced Ørsted had lost $2.34 billion on offshore wind and said the company may walk away from U.S. offshore wind projects if it didn’t obtain favorable tax credits from the federal government. The company followed through on the threat by canceling Ocean Wind on Tuesday.
But Nipper said Ørsted expects both Revolution Wind and Sunrise Wind will qualify for 40 percent federal tax credits instead of the 30 percent Ocean Wind was expected to qualify for – leading Ørsted and its wind project partner Eversource to commit yesterday to moving forward with Revolution Wind.
He said the company has completed an “extensive risk review” of Revolution Wind and found the project still had a positive financial outlook despite rising interest rates and the expected cost increase of barging transport turbines to accommodate delays in the arrival of Dominion’s offshore wind ship Charybdis.
Nipper said he expects offshore construction of Revolution Wind will start in 2024, and the project will come online toward the end of 2025.
The future of Sunrise Wind remains in doubt, however, after New York energy regulators in October rejected requests by Ørsted and other developers to renegotiate the prices of wind contracts with the state. The companies claim their bids are no longer feasible given high interest rates and supply chain issues.
Ørsted said the state’s decision made Sunrise Wind very challenging, but Nipper said they were planning to re-bid the project in an “accelerated” auction for offshore wind that New York announced as a path forward for the unworkable projects.
He estimated the likelihood of a favorable price at 50 percent, down from the company’s earlier projects of 75 percent.
Nipper also said that price forecasts have dropped, meaning lower than expected revenues if the projects are completed, and he said that a lack of investment in expanding the supply chain would be a continued constraint into the future.