KIYC: Changing financial landscape has some worried about the fight to combat climate change
A Danish company could wind up taking a loss approaching $6 billion to get out of its deal to build a pair of wind farms off the Jersey Shore. Environmentalists tell Kane In Your Corner that it’s a sign of how dramatically the landscape for renewable energy has changed since the pandemic, and they worry about what that could mean for efforts to fight climate change.
Orsted, the company behind the turbine project, says it is taking a $4 billion write-off on the project this year and could write off another $1.6 billion next year. That includes up to $300 million in penalties to the state of New Jersey for backing out of the deal.
The company says soaring inflation and dramatically higher interest rates since the project was bid on have made finishing it unworkable. The news has Republicans, long critical of the project, saying “I told you so.”
“We've been saying this for months and months now that this is an unsustainable model,” says Senate Minority Leader Anthony Bucco (R – Boonton). “There were red flags all over the place that showed it was unsustainable.”
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At an event at the Meadowlands, Gov. Phil Murphy refused to answer reporters’ questions about the failed project. He issued a scathing statement Tuesday night, saying the “decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence.”
Orsted is not the only wind energy company struggling in the high-inflation, high-interest-rate environment. Three other wind projects were canceled earlier this week in New York, also reportedly due to rising costs.
“I think this is an environmental and political disaster for New Jersey,” says Jeff Tittel, a well-known environmentalist and former director of the state chapter of the Sierra Club. “We were counting on offshore wind to help us meet our clean energy goals.”
Murphy says that Orsted did not receive any ratepayer or taxpayer dollars. In fact, we’re bringing Orsted to the table to ensure the company fully honors its financial commitments,” he added. The administration says New Jersey could collect up to $300 million from Orsted.
Wind energy is far from dead. There are still other projects still in the works, and the governor says the state is still receiving bids for future projects. However, because of the changing financial conditions, many developers are now demanding more protection from inflation. That could potentially mean consumers might have to pay higher utility costs in exchange for cleaner energy.