Orsted cancels wind power project in US, resulting in a £4.6bn loss

Two projects in the United States were scrapped by the world’s largest offshore wind developer, resulting in a £4.6bn loss. This is a major setback for America’s renewable energy sector.

Orsted, a Danish energy company that operates a large part of the North Sea wind industry, lost billions of pounds in value as a result of this decision.

The cancellation of the Ocean Wind 1 & 2 projects off New Jersey’s coast was attributed to rising costs and delays. David Hardy said that the group “had no choice but to stop development”, and suffered a higher impairment than expected of DKr28.4billion (£3.3billion). Another DKr 8 billion to DKr 11 billion have been set aside as potential cancellation fees.

Hardy stated that the company is “extremely dissatisfied” with this decision. The company was “taking steps to support its capital structures”, which were “significantly challenged by adverse developments”.

Orsted’s stock price fell by a quarter, to Dkr252.50 – its lowest level in six years. This is a further decline in its value that has reduced it by almost 60% in the last six months.

The announcement was made a day after BP revealed a $540-million writedown of its US offshore wind project after New York regulators rejected a request for higher prices in order to offset inflation.

Anja-Isabel Dotzenrath is BP’s director of low-carbon and gas. She told a conference “offshore winds in the US are fundamentally broken.” Anja-Isabel Dotzenrath, BP’s head of gas and low-carbon, told a conference that “offshore wind in the US is fundamentally broken.” She said that there is a way forward but it’s difficult.

Both BP (BP) and Orsted (Orsted) have faced long delays in gaining permits for offshore projects due to opposition from politicians and local residents. This is despite the fact that inflation in this sector is around 25 percent.

Orsted’s decision comes at a time when the future of Hornsea 3 off the coast of England is also in doubt. Orsted anticipates reaching a final decision on the project by December.

The wind developers said the electricity prices offered at auctions were too low for them to start new projects.

Mads Nipper is the chief executive officer of Orsted. He said that the offshore industry has been hit by a “perfect hurricane” which “depends on the need for a reset in what offshore power costs right now”. He stated that the pressure is “the same everywhere but nowhere near as intense as in the US market”.

Orsted has confirmed that it will still pursue a third American project called Revolution Wind. It expects the project to be completed by 2025. Orsted, formerly known as Dong Energy and its origins date back to 1972 when it was responsible for managing Danish offshore oilfields. It has since shifted its focus to clean energy.

Deepa Venkateswaran is an analyst with Bernstein. She said: “There are concerns that the situation could worsen and spread to different parts of the portfolio.”