The economic struggles facing Joe Biden’s administration are jeopardizing his efforts to achieve his climate objectives.
The choice of a Danish developer to abandon two large wind projects in New Jersey is a recent indication that increased expenses caused by mounting interest rates and ongoing supply chain difficulties are creating unexpected challenges for clean energy initiatives, which are crucial to President Biden’s legacy, despite the pledge of $369 billion in federal support from his landmark climate legislation.
Ford delayed the previously scheduled days.production plans for a massive electric vehicle battery plant in Kentucky
As demand from customers decreased, both General Motors and the other company reported financial losses and decided to decrease the number of EVs they will produce in the next year.
The government-owned utility in Puerto Rico had to pay an extra $700 million, in addition to the initial $4.6 billion, to guarantee the progress of 11 solar projects.
2009 stimulus package
According to industry officials and state energy leaders, the majority of clean energy projects funded by federal aid are still expected to continue, with advocacy groups predicting that they will result in hundreds of thousands of long-term or indirect employment opportunities. However, the current economic challenges are tempering the initial optimism that arose after the 2009 stimulus package was passed.Inflation Reduction Act
This presents challenges for Biden’s campaign for re-election and for his objective of reducing the country’s greenhouse gas emissions.
The ongoing conflicts like the Ukrainian war and the Covid-19 crisis have exacerbated these issues, leading to a surge in prices for energy-related supplies such as inverters, electrical cables, and solar panels. Additionally, experts attribute the rising costs to the growing worldwide demand for solar and wind energy, partially fueled by the significant federal incentives provided by the IRA.
Programmers have mentioned that the Federal Reserve’s increases in interest rates are contributing to the increased cost of funding projects. Additionally, the high interest rates on automobile loans are one of several reasons that are decreasing the attractiveness of electric cars for customers.
The Democratic legislators recognized the difficulties, but urged people to keep them in proportion.
In July, it was determined that proceeding with a large offshore wind turbine installation would not be feasible due to increasing costs that would burden its customers.
Developers also canceled projects
In order to supply wind energy to Massachusetts and Connecticut, they have agreed to pay a fine of $124 million. They have also promised to submit new bids for contracts in order to improve the financial stability of the projects, which could result in a significant delay in the progress of the work.
The cancellation of two offshore wind projects by Orsted in New Jersey has left only one of the three approved by the state’s utility regulators still viable. The remaining project, Atlantic Shores, has reported a 30 percent increase in costs since its approval in 2021. However, it is uncertain if there is enough political backing to provide additional financial assistance to Atlantic Shores after Orsted’s withdrawal.
Several offshore wind projects in New York have been put at risk due to inflation. Last month, the developers of four projects requested higher payments to cover their increased costs, but their requests were denied by regulators.
The company has revised its agreement with a utility, resulting in a 28% increase in the electricity price from their initial agreement. The project will now begin two years after the originally planned start date.
The federal board in charge of Puerto Rico’s financial affairs reluctantly approved revised contracts for 11 large-scale solar projects, resulting in a cost increase from $4.6 billion to $5.3 billion.
Robert Mujica, the head of the Financial Oversight and Management Board for the territory, informed POLITICO that while the board did not intend to establish a new standard for renegotiating contracts, the fact remains that none of these projects would have been completed otherwise.
The board approved the revised agreements because “there is a lot at stake,” according to him. He was referring to Puerto Rico’s legally required goals for renewable energy, which state that the territory must obtain all of its electricity from renewable sources by 2050.
Puerto Rico has not yet reached its interim and long-term goals for renewable energy production, as it remains at a low single-digit percentage.
According to Mujica, a former budget director for New York Govs. Andrew Cuomo and Kathy Hochul, the increasing expenses of renewable energy are not specific to Puerto Rico but rather a concern for the entire nation.
This report was contributed to by James Bikales.