In a significant development tied to President Donald Trump’s initial actions against offshore wind power, oil and gas powerhouse Shell has decided to withdraw from a major project situated off the coast of New Jersey. The company announced this decision, citing increased competition, regulatory delays, and a shifting market landscape.
Shell co-owns the Atlantic Shores offshore wind project, which possesses most of the necessary permits and could potentially deliver electricity to 1 million homes once both of its phases are completed. This output would account for one-third of all households in New Jersey. However, the present status of the project remains uncertain; while Shell is stepping back, partner EDF-RE Offshore Development has indicated its continued commitment to the Atlantic Shores initiative.
On his first day as president, Trump enacted an executive order that specifically targeted offshore wind energy, imposing a temporary suspension on all federal water lease sales and halting approvals, permits, and loans related to such projects. This directive also tasked administration officials with reviewing existing offshore wind energy leases for possible termination based on legal grounds, an aspect that likely alarms Shell and other stakeholders.
In Europe and Asia, large offshore wind farms have been operational for several decades and are recognized by experts as crucial components in combating climate change, particularly when paired with battery storage solutions. New Jersey aims to source 100% of its energy from clean sources by 2035, which underscores the significance of these offshore projects.
In October, the Biden administration granted approval for the Atlantic Shores project, planned in two phases, although construction has yet to commence. As Oliver Metcalfe, a specialist in wind research at BloombergNEF, pointed out, the project’s partners now face considerable uncertainty regarding their lease, and attention is focused keenly on the outcome of this venture. He described the current situation as "uncertain territory."
Opponents of offshore wind, especially vocal and organized in New Jersey, welcomed Shell's departure. New Jersey Republican Representative Jeff Van Drew, who played a role in drafting Trump’s executive order, hailed this decision as a "big win" for the state’s coastline and economy but cautioned that the battle against offshore wind development is not finished. Furthermore, Robin Shaffer, president of Protect Our Coast NJ, remarked that without Shell’s financial support, the project appears "dead in the water."
Shell's decision means it is writing off nearly $1 billion of its investment. This announcement came at a time when the company reported a 16% decline in full-year earnings, dropping from $28.3 billion to $23.7 billion. The majority of Shell’s operations remain focused on oil and gas production.
Additionally, Danish wind developer Orsted had been on the verge of starting two offshore wind farms in New Jersey but decided to abandon the project in October 2023 due to economic concerns. While clean energy has become more affordable, it’s important to note that offshore wind remains one of the more expensive options. This financial aspect makes such projects less enticing to investors, particularly in the absence of robust policy support.
Coco Zhang, vice president for environmental, social, and governance research at ING, highlighted that the uncertainty introduced by the executive order looms large over the market, a concern that cannot be overlooked. The Biden administration has been actively promoting offshore wind as a remedy for climate change, setting forth national targets for the expansion of offshore wind energy and facilitating lease sales along with the approval of nearly a dozen commercial-scale offshore wind projects.
