Orsted halts offshore wind farm projects. Losses run into billions, shares tumble

The offshore wind industry has been going through a rough time in recent months, as wind farm developers have had to contend with rising costs. This has also affected their willingness—or rather, unwillingness—to carry out projects originally planned that are no longer economically viable. This week, two more major projects were halted, this time by Danish company Orsted.

Building offshore wind farms is seen as a promising alternative to traditional onshore turbines, primarily because of lower public opposition. In recent years, more and more countries, including the United States, which lags significantly behind Europe in this respect, had begun to rely on more intensive wind power development.

In recent months, however, construction and financing costs have been rising not only in Europe but also in the United States. According to BloombergNEF, the cost of building offshore wind farms in the United States has risen by as much as 50 % compared with 2021. Some offshore wind farm developers have recently tried to renegotiate contracts originally signed for their projects, while others are suspending projects outright.

Danish company Orsted, one of the leading wind farm project developers, has now joined the latter group. The company announced yesterday that it was suspending two offshore wind farm projects in US waters. The Ocean Wind 1 and 2 wind farms, with a combined installed capacity of 2248 MW, were due to be built off the coast of New Jersey.

Company shares have fallen to less than half their value since the summer

Orsted said, according to Reuters, that suspending the projects would result in a loss of more than 5 billion dollars, immediately affecting the company's share price. Shares fell by more than a fifth yesterday alone. However, the company's shares have been steadily declining since this summer, when it announced possible losses due to rising costs. They are now worth around 40 % of their value in the last quarter of last year and the first quarter of this year.

The company also said it had invested significant funds in the first phase of the Ocean Wind 1 project.

"This has undoubtedly proved to be the wrong decision. I want to make absolutely clear that we will learn from this as we develop future projects and plan our capital commitments," Orsted CEO Mads Nipper told reporters, according to Reuters.

Projects are also being halted in Europe

Although cancellations of offshore wind farm projects have been most evident in the United States, several projects in Europe have also met an unfortunate fate. In the case of the project at Stora Middelgrund, the Swedish government intervened, citing nature conservation, while the planned Norfolk Boreas offshore wind farm in British waters was halted by Vattenfall itself because of rising costs, which made the project unprofitable.