Trump's tariffs threaten new costs headache for US offshore wind
American industry remains dependent on European components and imported steel that could result in higher sector costs
Soaring costs from Donald Trump's trade tariffs emerged as a potential returning headache for a US offshore wind industry already facing mounting regulatory and litigation risk.
Last Wednesday, Trump announced a universal 10% tariff, and higher 11% to 50% rates for products from 60 nations, many of which are clean energy suppliers. The EU, which supplies virtually all components for the nascent US industry, was hit with a general 20% rate.
As US offshore wind depends almost entirely on European components, “the newly imposed tariffs will lead to increased costs for these essential parts, thereby raising the overall CAPEX of offshore wind projects,” said Laura Fecova, US lead for offshore wind intelligence firm Aegir Insights.
The latest round follows Trump’s across-the-board 25% rate for aluminum and steel. Most steel for offshore wind is imported as few American mills can meet industry standards.
“In the past, cost hikes resulted in project delays and cancellations of either projects or of the offtake contracts with the states,” Fecova noted.
The tariffs have already been cited as a potential problem by Danish giant Orsted.
“It wouldn’t be right for me to issue guarantees in relation to the development or impairment of our US projects,” Orsted CEO Rasmus Errboe said at Orsted's annual meeting with shareholders in Copenhagen last week.
Orsted has two US offshore projects in construction. Orsted's 704MW Revolution Wind split between Connecticut and Rhode Island is in offshore installation while 920MW Sunrise to New York has begun onshore construction.
Errboe took over for Mads Nipper last February. Under Nipper, Orsted lost more than $5.5bn in the past several years on its US projects.
Along with Orsted's Revolution, Dominion's 2.6GW Coastal Virginia Offshore Wind (CVOW) and Copenhagen Infrastructure Partners-Avangrid's 800MW Vineyard Wind 1 are also in at-sea installation.
Further, the Justice Department (DoJ) has signaled it may be selective in defending projects from litigation. Plaintiffs suing to vacate Revolution's permits claim the DoJ didn't support Orsted's motion to dismiss the case in federal court, which was allowed to proceed.
EDF’s Atlantic Shores to New Jersey was meanwhile stripped of a key permit in another lawsuit.
These mounting risks could sour the market for investors, warned Fecova.
“It is not unlikely that we will see the US offshore wind project pipeline shrinking even further,” she added.
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