By Mark Jaffe, EUCI energy writer
The Trump administration executive order targeting offshore wind development is creating uncertainty and turmoil in the sector and has already led to one investor bailing from a project, according to financial and legal analyses.
“The executive order is a significant setback for the industry, which has already been suffering from high project development costs associated with construction and financing,” the credit rating agency Morningstar DBRS said in a commentary.
The order “dampens developer (and) investor confidence and creates uncertainty regarding the growth of offshore wind power in the U.S. in the near to medium term,” Morningstar said.
On Jan. 20, President Trump issued the order withdrawing all federal waters from leasing for offshore wind projects and imposing a hiatus on permitting, approvals and loans for offshore wind project pending a review led by Interior Secretary Doug Burgum.
The order cited “various alleged legal deficiencies underlying the Federal Government’s leasing and permitting of onshore and offshore wind projects, the consequences of which may lead to grave harm.”
Among the concerns are potential negative impacts on navigational safety, transportation, national security, commercial interests and marine mammals, the order said.
“Critically, the Wind Energy EO [executive order] does not provide any deadlines for completing the analysis of offshore impacts,” a note from the law firm Holland & Knight said.
“Lessees with outstanding federal permits will remain in a holding pattern and likely be unable to move forward with project development at least until there is more clear guidance as to the scope of the permit moratorium, or until the DOI [Department of Interior] review is complete,” the law firm said.
The action by the Trump White House comes after former President Joe Biden had vigorously supported offshore wind development with a target of 30 gigawatts of offshore wind capacity by 2030.
American Clean Power, the trade group representing wind developers, in response to the executive order said, “for too long, we have witnessed careening policy restrictions on the development of energy resources on our nation’s vast federal lands. … No nation can achieve energy dominance absent consistent policy that moves beyond the idea that energy systems have partisan character.”
On Jan. 30, Shell plc announced it was withdrawing from the Atlantic Shores Offshore Wind project, on the New Jersey coast, and writing off its $1 billion investment, even though the project had its construction and operations plan approvals from the U.S. Bureau of Ocean Energy Management (BOEM).
Shell told the Associated Press that it is writing off the project because of increased competition, delays, and a changing market.
Morningstar, however, said that “President Trump’s executive order likely played a role in this decision, strongly suggesting a less-friendly regulatory environment for U.S. offshore wind over the next four years.”
The U.S. has two operating offshore wind farms: the 30-megawatt Block Island Wind Farm and 132-megawatt South Fork Wind project. Three offshore projects are under construction in coastal Massachusetts, Rhode Island, and Virgina with about 4,100 megawatts of capacity.
“The wording of the executive order could result in existing leases being canceled, creating additional uncertainty for project developers,” Morningstar said. “We think projects already under construction would likely not be directly affected by this executive order, because the order did not require work to stop on any of these projects.”
“But there is some uncertainty regarding whether this order could affect U.S. projects that may be in early stages of development or in the permitting process, especially with Shell backing out,” the rating agency said.
If BOEM moves forward with lease cancellations and terminations or if the permit moratorium “indefinitely continues,” Holland & Knight said it could lead to lawsuits by developers, as well as seeking remedies, including financial compensation.
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