On Friday, the Biden administration revealed its proposal to extend a tax credit aimed at bolstering offshore wind energy projects, as reported by Politico. The tax credit initiative is designed to offset the impact of rising interest rates and elevated steel prices, which have contributed to the increased costs of offshore wind energy projects, according to Politico.
The Treasury Department clarified that undersea cables connecting wind farms to the power grid would be eligible for tax credits under the Inflation Reduction Act, as reported by E&E News. The proposed plan by the Treasury Department includes making projects eligible for a 6% base credit, with additional credits available for companies meeting specific criteria such as paying “prevailing wages,” locating projects in designated communities, and utilizing domestic materials, E&E News outlined.
In response to challenging economic conditions, Orsted, a Danish offshore wind energy company, announced the termination of two wind farms off the coast of New Jersey on October 31. Orsted Americas CEO David Hardy cited significant changes in macroeconomic factors, including high inflation, rising interest rates, and supply chain bottlenecks impacting long-term capital investments as reasons for halting the Ocean Wind 1 and Ocean Wind 2 projects.
Major players in offshore wind production, including Siemens and General Electric, have either projected losses or sought emergency funding amid the shifting economic landscape.
Since the signing of the Inflation Reduction Act into law by President Joe Biden in August 2022, over $7 billion has been invested in offshore wind projects, according to the White House, which aims to decarbonize the U.S. economy by 2050.
In addition to the economic considerations, the Biden administration is investigating reports from the National Oceanic and Atmospheric Administration (NOAA) regarding unusual death rates among humpback and right whales attributed to offshore wind farms. An offshore wind lease sale in the Gulf of Mexico on August 29 experienced limited success, drawing bids for only one of the three areas. The resulting sale is expected to generate electricity for approximately 450,000 homes, falling short of the Biden administration’s earlier projections for all three areas.
