Biden's green law could be double-edged sword for offshore wind: ACP
President-elect Trump has vowed to terminate both the IRA and offshore wind, but study results suggest leaving the law alone might also be effective in diminishing the sector
A major new study on the impact of President Joe Biden’s key legislative achievement the Inflation Reduction Act (IRA) that spurs renewables development with lavish incentives finds that it may paradoxically curtail offshore wind by diverting investment to rival clean energy technologies.
The conclusions of the ACP report indicate that he might be better off leaving the law alone if he wants to whither offshore wind, however.
According to the report, “IRA has small incremental impact on offshore wind generation, as offshore wind development under IRA is similar to development in the no-IRA baseline,” the report said.
Moreover, the law may actually lead to job losses in the Northeast – the centre of sector development, “due to reduced offshore wind and battery storage development under IRA,” as “IRA incentives shift incremental production to solar photovoltaics (PV) and onshore wind.”
The IRA includes 30% investment tax credits (ITC) assuming wage and apprenticeship conditions are met.
Challenged financing
“If you haven't got the tax credits, then, the returns on these projects look almost impossible. Financing them is very challenging,” said Eamon Nolan, partner at global law firm Vinson & Elkins at its New York City branch.
Nolan worked on several major sector deals including the $1.1bn Orsted-Global Infrastructure Partners' South Fork acquisition.
Orsted later scrapped the project and its larger Ocean Wind 2 as even with ITC retention, it couldn’t make the economics work amid skyrocketing costs.
The IRA includes ITC adders of 10% each for domestic content and Capex in impoverished “energy communities” – districts afflicted with the legacy of fossil fuel production and/or generation.