ARKANSAS, Nov 14 (Future Headlines)- Spanish company Siemens Gamesa has decided to cancel its plans to build blades for offshore wind turbines in coastal Virginia, marking a setback for the U.S. offshore wind industry. The proposed $200 million factory at the Port of Virginia in Portsmouth was expected to generate over 300 jobs and contribute to Virginia’s ambitions to become a hub for offshore wind projects.

Siemens Gamesa confirmed the cancellation, citing the inability to meet “development milestones.” The decision reflects broader challenges facing the U.S. offshore wind sector, including inflation, rising interest rates, and supply chain disruptions, impacting the profitability and viability of projects.

This development aligns with recent hurdles faced by other offshore wind projects in the U.S., including Danish energy developer Orsted abandoning two major offshore wind power projects off the coast of New Jersey due to supply chain issues and increasing interest rates. Additionally, the Park City Wind project off the coast of Massachusetts and the Avangrid project in Connecticut were canceled.

The Siemens Gamesa factory cancellation, however, will not impact Dominion Energy’s significant wind farm project off the coast of Virginia Beach. The turbines for this project will be sourced from Siemens Gamesa facilities in Europe, maintaining Dominion’s commitment to building the largest offshore wind farm under development in the U.S., consisting of 176 turbines.

The U.S. government, under President Joe Biden’s administration, has set an ambitious goal of building 30 gigawatts of offshore wind energy by 2030, aligning with the broader initiative to address climate change and transition to cleaner energy sources.

Siemens Gamesa’s decision underscores the current challenges in the offshore wind sector but does not necessarily represent a long-term setback. Economists, such as Robert McNab from Old Dominion University, suggest that projects currently facing cancellations might return and potentially expand once inflation and corresponding interest rates decline.

McNab emphasized that the changing landscape is not exclusive to offshore wind, affecting various infrastructure projects across industries, including natural gas and petroleum. He highlighted that while some may interpret these setbacks as a reason to question renewable energy, the declining costs of renewable sources, such as wind and solar, make them increasingly competitive. Despite the current headwinds, McNab anticipates that projects like Siemens Gamesa’s blade finishing facility may resurface and even expand as the costs of renewable energy generation continue to decline.

In 2021, Virginia Governor Ralph Northam announced Siemens Gamesa’s involvement in developing an offshore wind manufacturing hub at the Port of Virginia, emphasizing the company’s $200 million investment and the creation of 300 new jobs through the blade finishing facility. The cancellation of this facility is a notable development in the ongoing narrative of challenges and opportunities in the U.S. offshore wind industry.

Reporting by Kevin Wood; Editing by Sarah White