(Bloomberg) – The order to halt work at a wind farm off the coast of New York, caused the Trump administration a damaging blow to the offshore wind industry, putting a $28 billion investment at risk.
On Wednesday, Interior Secretary Doug Burgum posted to X, saying that he ordered a suspension off the coast of Long Island on the Equinor ASA’s Imperial Style Project. The project is already on track, with permits and supplies lined up, with $3 billion project finance agreeing and the construction phase has begun.
Trump has made it clear that early stage development will be slowed or hampered, but it is a shock for the industry to have the president shut down projects in earnest.
Just a few years ago, the US was considered one of the most attractive growth markets for European energy companies seeking to expand the technology developed in the North Sea. Now, combined with rising costs and political hostility, it makes the sector’s outlook miserable.
“Stoping the Empire’s wind permit is another unprecedented escalation step against offshore winds in the US, as they are ready for construction and components are already in full swing,” he said in the post of Linkedin, global lead of offshore winds at Consultant Tramball. “It’s destroying American employment and domestic energy production. Besides, I doubt that the US is a serious partner in business.”
This is a sharp turnaround from the Biden administration, which vowed to develop an offshore wind of about 30 gigawatts in the US by 2030. This is a policy that led to billions of dollars in investments in projects and the supply chain needed to provide them. The US East Coast states saw ocean wind farms as an important way to boost much needed power source growth and achieve climate goals.
Empire Wind is one of only a handful of projects currently being built in the United States. Analysis from Bloombergnef and the official statement shows that the project will require an investment of more than $28 billion in total.
Equiner said in a statement Thursday that it has halted the construction of the empire and is considering legal relief, including sueing the order. The company also said the total amount withdrawn under the project’s term loan is around $1.5 billion, and in a full stop scenario, the money will be repaid from the stock commitment to the project’s lender.
Presidential Order
On his first day in office, President Trump signed an executive order to halt the permits and leases of new offshore wind projects in the United States. The order also required review of projects that had already been approved. In his second post on X’s Wednesday, Chief Bargham said his department is playing its role in ensuring that reviews will be conducted.
That sharp reversal threatens to cool investment in the US for a long time since Trump resigned, according to Timothy Fox, managing director of the Clearview Energy Partners research firm. Project developers may be cautious about making key long-term investment decisions in sectors with strong election risk.
“Even if the next administration has the same enthusiasm as Biden, developers may be concerned,” Fox said in an interview. “This can have a long ripple effect.”
The decision to stop the development of the empire has likely created uncertainty in other energy sectors beyond the wind, causing uncertainty to bankers who fund large energy projects, Fox said.
“This could have an echo effect on other industries,” Fox said. “We will inject uncertainty not only in this administration, but in future administrations that may no longer support the currently advantageous resources.”
Other Wind Projects
Notices halting efforts by the Equinor’s Empire Wind Project could foresee conflicts at other offshore wind farms currently under construction. This includes the winds of a nearly finished vineyard, developed by the Avangrid Unit of Copenhagen, Ibadrora SA, and offshore winds along the Virginia coast, built by Dominion Energy. Orsted A/S in Denmark is building two projects scheduled to be completed off the coast of Rhode Island next year. A sunrise wind is scheduled to end near New York in 2027.
The Oslo and Copenhagen stock exchanges were closed on Thursday, so it is not yet clear whether there will be a market impact.
“This news is coming as a further setback for the US offshore wind industry, with negative readings about Orsted’s revolutionary wind and Sunrise-style projects currently under construction,” Citigroup analyst Jenny Ping said in a memo. “If the US government has made a decision earlier, we also see a high risk of a high equity risk premium for US assets.”
Ping added that given how well these wind farms are, they will be decorated almost the same way to build the project as they leave.
In 2023, Orsted decided to halt development of two major US projects as it became unfeasible due to rising costs. Orsted’s crisis has resulted in billions of dollars losses and a replacement of its senior management.
In an interview last week, Orsted CEO Rasmus Errboe said that while the company is “100% committed” to delivering two wind farms, the company will take a cautious approach to future developments in the US.
(Equinor Statement update, additional analyst comments starting from the 8th paragraph)
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