Wind company pulls out of power deal with Maryland, but plans to keep developing its Ocean City farm

Offshore wind company Orsted withdrew Thursday from an arrangement with Maryland regulators governing how much it can charge for the power it would generate at its planned Skipjack wind farms.

The company said in its notice to Maryland regulators that it is not ceasing development on its the wind farm, which is planned off the coast of northern Ocean City.

But the company is saying to Maryland regulators and policymakers that the current pricing limit on wind energy is not commercially viable, and it will need to be changed going forward.

Orsted’s decision comes amid widespread financial challenges in the offshore wind industry, fueled by inflation, high interest rates and supply chain pressures.

In October, Orsted abandoned projects off the coast of New Jersey, casting a shadow on the fledgling industry. At the time, Orsted signaled that it may need an adjustment from Maryland regulators in how much it can charge utilities for offshore wind energy credits, called ORECs. Those prices were set several years ago, before economic conditions changed.

“As we explore the best path forward for Skipjack Wind, we anticipate several opportunities and will evaluate each as it becomes available,” said David Hardy, group executive vice president and CEO Americas at Orsted, in a statement. “We will continue to advance Skipjack Wind’s development milestones.”

That includes submitting an updated construction plan to the federal Bureau of Ocean Energy Management, Hardy said. Construction has not begun on either of the two projects planned for the Maryland coast.

The path forward could be complex.

That’s because Maryland law sets a cap on the amount that ratepayers’ bills can increase as a result of wind energy purchases.

With the current arrangement, there isn’t much wiggle room left, according to officials at the Maryland Public Service Commission, which regulates utilities in Maryland.

Some state lawmakers have expressed reluctance to alter that cap. Last year, state legislators passed a bill allowing Maryland to purchase wind energy, thereby using taxpayer dollars rather than ratepayer dollars.

To some legislators, that is seen as a preferred option, since taxes are scaled based on income, whereas power bills are not.

Regardless, Maryland is relying on offshore wind development to meet its ambitious climate goals.

Gov. Wes Moore, a Democrat, has put forward a goal of reaching 100% clean energy statewide by 2035. Moore has embraced a goal of bringing on 8.5 gigawatts of wind power for the state. The two projects planned for off Maryland’s coast so far only account for about 2 gigawatts.

In a statement Thursday, a Moore spokesman said the governor was “disappointed by the news of Orsted’s repositioning of the Skipjack Wind project, an effort that has the capacity to impact the lives of so many Marylanders.”

“However, he will continue to work with legislators, Maryland’s federal partners, offshore wind developers, and advocates that see Maryland’s potential,” Moore said.

The other offshore wind company currently planning a Maryland project, U.S. Wind, is a bit further along. It has received a crucial environmental review from the federal government.

In November, U.S. Wind CEO Jeff Grybowski told The Baltimore Sun that he was expecting to receive final approval for construction in 2024, and to begin building in 2025.

Grybowski said his company was “looking at ways to improve the way the project pencils out,” and that could include an adjustment on the price it can charge for wind energy. But he said at the time that he felt “very confident we’re going to build Maryland’s first offshore wind farm.”

U.S. Wind did not respond immediately to a request for comment Thursday evening.

In a statement, Frederick H. Hoover, the chair of the Maryland Public Service Commission, called Orsted’s decision “disappointing,” but highlighted the U.S. Wind project.

“The Commission remains optimistic about the future of the offshore wind industry in Maryland, and would note that the US Wind project continues to move through the federal approval process,” Hoover said.

Unlike Orsted, U.S. Wind has not made a filing to the PSC requesting similar changes, said Tori Leonard, a spokeswoman for the commission.