ATLANTIC CITY, NJ – Danish wind farm developer 0rsted is facing more bad news after New York rejected its request to raise costs on its offshore windfarm in the Empire State.
The company, who is building a wind farm off the coast of New Jersey just put up a $100 million guarantee to have their systems online and operational by 2025, or they will lose that guarantee.
But 0rsted isn’t getting a good reputation for abiding by contracts, which is why New York rejected their offer to renegotiate. A move that could have cost billions of dollars.
In a unanimous decision, the New York Public Service Commission has rejected proposals for higher rates from major offshore wind developers such as Equinor ASA and Orsted A/S. The ruling, which came during a meeting on Thursday, means that companies aiming to construct over 4 gigawatts of wind power off Long Island will have to stick to their original contracts.
The regulatory action could add financial strain to an industry already grappling with challenges like inflation and supply chain disruptions.
The commission’s ruling is expected to have significant repercussions on the future of several offshore wind projects. Among those impacted is Orsted’s Sunrise Wind development.
“Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” stated David Hardy, Orsted’s CEO for the Americas, in an email communication. Hardy added that the company would “evaluate our next steps and communicate the status of the project as soon as possible.”
This decision comes at a time when the US offshore wind industry is already facing various headwinds.
Apart from inflation and supply-chain issues, the sector has now been dealt another blow that puts existing and future projects in jeopardy.
The New York Public Service Commission’s ruling could have broader implications for the development of renewable energy infrastructure in the United States. Developers had proposed rate hikes that could have escalated costs by as much as $12 billion, a figure that was met with disapproval by the regulatory body. The commission emphasized the necessity for developers to adhere to existing contractual obligations to deliver power at the agreed-upon rates.
As this development unfolds, both investors and community stakeholders will be keenly watching how offshore wind companies navigate these regulatory and financial challenges. For now, the industry is at a pivotal point, and the commission’s decision may well serve as a litmus test for the financial viability of large-scale renewable energy projects in the country.
Meanwhile, stocks in the company have tanked. Today, 0rsted shares tumbled to $15.15 per share, hitting rock bottom after a sharp drop since 2021 when shares sold for $74.60.