PROVIDENCE – Orsted A/S, a developer of the Revolution Wind project with Eversource Energy, has warned they might write off as much as $2.12 billion because of supply chain problems and other issues at three giant offshore wind projects off the U.S. East Coast, the New York Times reported Thursday.
The wind farms that were affected by the announcement would supply power customers in Rhode Island, New, York, Connecticut and New Jersey. Currently, Orsted owns the five-turbine wind farm off Block Island and is developing seven others off the East Coast, according to the report.
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The company said the projects were being hit by delays from suppliers and contractors, such as wind turbine component manufacturers and the specialized ships needed to install the large machines.
“There is a continuously increasing risk in these suppliers’ ability to deliver on their commitments and contracted schedules,” Orsted said in a statement on Aug. 29.
Orsted warned supply chain delays could lead to extra costs and slower-than-anticipated receipts of revenues from the power generated by the turbines. It also said that at this point, it would continue to perform preliminary work on building the wind farms — although withdrawing was an option, according to the report.
“We are willing to walk away from projects if we do not see value creation that meets our criteria,” Mads Nipper, Orsted’s CEO, said on a call with analysts Wednesday, according to an unofficial transcript obtained by the Times.
The company also warned costs could balloon in the U.S. with rising interest rates. Plus, since renewable energy projects require billions in investment upfront, Orsted also said it might not be able to achieve tax credits from the United States as large as it had anticipated.
The impairments amount to about half of the $4 billion that Orsted said it had invested in its offshore portfolio in the United States but are only a fraction of the estimated overall cost of these projects, which is more than $10 billion.
The Times reported Orsted also said it would reconfigure plans for two other projects to avoid similar problems.
On Aug. 22, the Revolution Wind project received a Record of Decision from the U.S. Department of the Interior’s Bureau of Ocean Energy Management, calling the approval “a major milestone in the federal environmental review process.”
When completed, the 704-megawatt project will deliver 400 megawatts of wind power to customers in Rhode Island and 304 megawatts to Connecticut, powering more than 350,000 homes in total. Orsted projects the farm to go operational in 2025, with construction projected to “ramp up” next year.
On July 18, Rhode Island Energy said it would not enter into a power-purchase agreement for Revolution Wind 2: a joint proposal from Orsted A/S and Eversource Energy LLC to add 600 to 1,000 megawatts of new offshore wind power off the state’s coast.
Rhode Island Energy said in a statement that the proposal did not meet all the requirements as detailed in the Affordable Clean Energy Security Act. The company said it made the decision after a four-month evaluation of the bid, which was completed in consultation with the R.I. Office of Energy Resources and the Division of Public Utilities and Carriers.
