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Exploring how the way we live influences climate change and its impact across the Carolinas. You also can read additional national and international climate news.

What do recent offshore wind failures mean for NC?

Wind  turbines offshore
David Boraks
/
WFAE
Two wind turbines off Virginia Beach, Virginia, are a pilot for a 176-turbine wind farm that Dominion Energy plans to build. The project got a key federal approval last week.

This story appeared first in WFAE's weekly climate newsletter, which is out Thursdays. Sign up at WFAE.org/newsletters.

When the Danish wind developer Orsted last week announced it was canceling two New Jersey offshore wind projects, it set off a bit of a panic over the industry's fate. Headlines called it a threat to the Biden administration's energy agenda and a "moment of reckoning" for the U.S. offshore wind industry.

The news also brought cheers from the oil-industry-funded anti-wind movement, which among other things has spread misinformation linking wind farms to whale deaths (there’s no known scientific link, as also detailed here). The New Jersey group Protect Our Coast put it succinctly: “The more we fight, the more expensive it becomes and the less likely they will continue.”

But these declarations of doom oversimplify the picture. There are still plenty of signs of growth for the industry. The same day as Orsted's announcement, the Bureau of Ocean Energy Management (BOEM) approved Dominion Energy's Coastal Virginia Offshore Wind project after an environmental review. It’s expected to be the largest U.S. offshore wind farm when it's completed in 2026, and Dominion says it's on schedule.

And Orsted announced last week that the first turbine had been shipped for installation in its 12-turbine South Fork Wind project off Long Island. It's New York's first offshore wind farm.

Still, the wind industry is certainly feeling financial pains, such as rising supply chain costs and high interest rates, which Orsted cited. Other projects have stalled in New England for similar reasons. The root of those problems is that developers' contracts call for them to supply electricity at prices too low to recover their costs and make a profit.

The cancellation of the two New Jersey projects will make it harder to meet the Biden administration's goal of 30 gigawatts of offshore wind by 2030, or New Jersey Gov. Phil Murphy's state goal of 11 gigawatts.

But longer-term arguments for offshore wind haven't gone away. Offshore wind energy needs to be part of the nation's clean energy transformation, said Katharine Kollins, president of the Southeastern Wind Coalition, which advocates for wind energy.

"Offshore wind is an incredible asset to have on our grid. It produces electricity during winter storms. It produces electricity during winter mornings when the solar hasn't yet started producing. And also in summer afternoons, (when) we all crank our air conditioners – late summer afternoons, the sun goes down, we still need electricity," Kollins said in an interview.

Her comments were echoed by Jan Matthiessen, director of Offshore Wind at The Carbon Trust in the United Kingdom, which advises companies on reducing their carbon footprints.

"Offshore wind has been growing very fast, and it will continue to grow very fast. So these economic challenges that we are facing in the moment globally, will maybe slow us down, but it will certainly not stop us," Matthiessen said during a briefing Wednesday hosted by Turn Forward, a wind advocacy group.

Matthiessen said despite financial issues, demand for offshore wind has not changed. And over the longer term, wind-powered electricity prices have been coming down, which is good for customers.

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North Carolina impact

The picture is complicated, and not all offshore wind projects and energy systems are the same. So the business challenges facing the projects in the U.S. Northeast are not an immediate factor in the development of three wind areas off North Carolina, Kollins said.

For one thing, those failed projects were locked into contracts that set energy prices too low to make them work financially after inflation hit the wind supply chain.

"Those contracts were put in place when energy prices were still quite low. Those prices have risen significantly. And so there's no way for those companies to adequately supply electricity for the cost that they had predicted they could a few years ago," Kollins said.

But the situation is very different in North Carolina, she said.

"North Carolina hasn't contracted for any of this energy yet. So there are no established prices against which we are trying to determine if we can still meet those prices," Kollins said.

Another issue for Orsted is a delay in the construction of a ship to transport the giant pilings and turbines to offshore sites. A 1920 U.S. law called the Jones Act requires cargo traveling between U.S. ports to be carried by U.S.-built and registered ships, with U.S. crews. There's one vessel under construction that can transport the wind-farm parts, called Charybdis. It's not ready for the New Jersey projects, but Dominion Energy says it should be available for construction off Virginia.

"That vessel was going to be used for those New Jersey projects. So, it just makes everything a little bit more difficult with high-interest rates and financing. Those things compound, and we find ourselves in the situation we're in," Kollins said.

Virginia is years ahead of North Carolina, both on the wind project and in the development of the onshore infrastructure to build the turbines. Dominion plans 176 turbines in the Atlantic more than 20 miles off Virginia Beach. I visited the first two pilot turbines last year to hear about those plans and get a sense of what offshore wind in North Carolina might look like.

Duke Energy a roadblock?

For North Carolina, the biggest barrier to early development of offshore wind may be Charlotte-based Duke Energy, the state's main electric utility, Kollins said. Duke actually holds one of the three North Carolina offshore wind leases. And the company would have to agree to buy power from other leaseholders. But the company has not made offshore wind a priority in its most recent long-range plans.

"The situation in North Carolina right now relies entirely on the approval of the Carbon Plan, which is currently in the hands of the North Carolina Utilities Commission," Kollins said. "Ourselves and a number of other organizations are working diligently to ensure that offshore wind becomes a part of the approved Carbon Plan. We believe that North Carolina needs that carbon-free electricity on the grid to decarbonize in the way that the North Carolina Legislature and the governor anticipated that it would a few years ago when House Bill 951 was signed."

House Bill 951 is the bipartisan energy reform bill enacted in 2021 that made North Carolina one of only a few states to legislate carbon reduction targets. It put into law the governor's 2019 goals of reducing carbon emissions from energy plants by 70% from 2005 levels by 2030 and to net-zero carbon by 2050.

Of those three North Carolina wind areas currently under lease, one is further ahead than others. Avangrid, a subsidiary of Spanish utility giant Iberdrola, is seeking permits for a wind farm 27 miles off Kitty Hawk, on the Outer Banks. It's not likely to start construction before 2026, the company says on its website. The other two sites, leased by Duke Energy and France-based TotalEnergies Renewables, are still in the very early planning stages.

In an interview last week, Duke Energy Chief Financial Officer Brian Savoy did not comment directly on offshore wind's financial challenges, but he suggested it is not currently viable. While Duke considers offshore wind a future "option," he said Duke has no immediate plans to build off North Carolina.

"We see offshore wind as a really good option for our customers over the long term. In our resource plans (the Carbon Plan), we have it as an option, not as a resource we're going to build," Savoy said.

"There's a lot that has to be determined around offshore wind: the cost, the supply chain, the viability of it. So, you know, I would say we think it's an important resource. It's zero carbon, but we're not going to get ahead of our customers, or our regulators on offshore wind," he said.

Kollins disagreed with Savoy.

"Offshore wind is viable now. And what is going to be so important as we move forward with the Carbon Plan is to understand that there are some long-term resources that we have got to start building now," Kollins said.

She said just as Duke and North Carolina are planning now for small modular nuclear reactors and hydrogen-fired power plants, "we need to be not only planning, but truly developing, offshore wind if we are going to meet the carbon-reduction timelines established in (House Bill) 951."

"You need offshore wind. It is that simple. We cannot place the entire grid in the hands of gas, solar, storage — all of those are extremely important components," Kollins added.

David Boraks previously covered climate change and the environment for WFAE. See more at www.wfae.org/climate-news. He also has covered housing and homelessness, energy and the environment, transportation and business.