TRENTON, NJ – Governor Phil Murphy’s ambitious agenda to have a green New Jersey free of gas-powered car sales powered by massive offshore wind farms is in jeopardy. That’s because of lackluster electric vehicle sales and the failing of the governor’s two largest offshore wind farm projects.
A year after the U.S. passed significant climate change legislation, the Inflation Reduction Act (IRA), aimed at fostering American clean energy development, several economic factors are impeding President Joe Biden’s national clean energy agenda. Increased financing and material costs, supply chain issues, delayed regulatory decisions, and sluggish permitting processes are hindering the progress.
Murphy insists the show will go on, but economic indicators and actions within the industry suggest otherwise.
Notable impacts include the cancellation of offshore wind projects by Orsted in the U.S. Northeast and scaled-back electric vehicle manufacturing plans by Tesla, Ford, and GM. This downturn in clean energy industries poses a challenge to Murphy and Biden’s commitment to achieving a net-zero economy by 2050.
Despite the IRA’s billions in tax credits, the U.S. faces significant hurdles in meeting its decarbonization goals. According to John Hensley of the American Clean Power Association, the current growth rate is insufficient to meet these targets. The global situation is no better, with no major nation on track to meet the emissions reduction goals of the United Nations’ Paris accord.
However, there are signs of progress, such as the expanding EV market and Dominion Energy Inc’s advancements in establishing the nation’s largest offshore wind farm off the coast of Virginia. Ali Zaidi, White House National Climate Advisor, remains optimistic about achieving U.S. climate goals despite these challenges.
Since late 2021, more than 56 gigawatts of clean power projects, enough to power nearly 10 million homes, have been delayed, primarily due to U.S. import restrictions and local opposition to project siting. The IRA, while supporting investment in clean energy, cannot directly address issues like permitting and infrastructure development.
The renewable sector also faces increased contract prices, potentially leading to higher consumer costs. Solar contract prices, for example, rose 4% in the third quarter.
While the IRA encourages domestic production of clean energy equipment, new Asian manufacturing capacities threaten the viability of many planned American factories. The U.S. offshore wind industry faces its own turmoil, with developers struggling with cost overruns and the unlikelihood of meeting the Biden administration’s target of 30 gigawatts by 2030.
Corporations are also awaiting the Treasury Department’s rules on the utilization of IRA’s tax credits, delaying further investment decisions. Despite these challenges, experts like Dan Reicher of Stanford University believe the U.S. is making progress compared to the previous administration’s stance on climate policies. The current situation reflects the normal fluctuations in clean energy development and deployment.