It’s a blow to Gov. Phil Murphy’s ambitious clean energy goals and a stunning development for environmentalists supporting the energy alternative, once thought to be operational at the Jersey Shore between 2025 and 2026.
Murphy blasted the company’s decision in a statement, calling it “outrageous.”
The development arrives four months after the Democratic-controlled state Legislature passed a bill that Murphy, a Democrat, signed into law allowing Ørsted, the largest offshore wind developer in the world, $1 billion in tax credits to help keep the Ocean Wind 1 project afloat.
“The current market situation with supply chain challenges, project delays, and rising interest rates has challenged our offshore projects in the U.S., and in particular our offshore project Ocean Wind 1, which has led to significant impairments in Q3 2023,” Mads Nipper, group president and CEO of Ørsted, said in a statement released Tuesday night.
“Therefore, as part of our ongoing review of our U.S. offshore wind portfolio,” Nipper added in reference to the company’s interim financial report for the first nine months of the year, “we’ve decided to cease the development of Ocean Wind 1 and Ocean Wind 2.”
Spokespeople for Ørsted did not provide additional comment Tuesday night and the entire interim report won’t be released until Wednesday, according to the company’s website.
Murphy said in his statement that Ørsted’s decision to “abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence.”
“As recently as several weeks ago,” Murphy said, “the company made public statements regarding the viability and progress of the Ocean Wind 1 project.”
“In recognition of the challenges inherent in large and complex projects, my administration in partnership with legislative leadership insisted upon important protections that ensure New Jersey will receive $300 million to support the offshore wind sector should Ørsted’s New Jersey projects fail to proceed,” the governor added in reference to the controversial law that had been set to give Ørsted tax credits for the wind farm.
It’s unclear how much of the money state ratepayers will get back.
Murphy has long pinned part of his tenure on advancing clean energy goals in the state to combat climate change — in part through the Ocean Wind projects. He said Tuesday he has directed his administration to review “all legal rights and remedies and to take all necessary steps to ensure” that Ørsted fully and swiftly “honors its obligations.”
Tim Sullivan, chief executive officer of the New Jersey Economic Development Authority, said Tuesday night tax credits provided in the law signed in July were set to aid Ocean Wind 1 only if Ørsted built the project.
“Now they get nothing from that bill, period,” Sullivan said in a statement.
New Jersey has seen many hurdles in a long and arduous road toward developing offshore wind farms on its shores. The latest came one week before all 120 seats in the Democratic-controlled state Legislature are up for election. Besides casting some doubt on the state’s upcoming offshore wind development, the canceled projects also have negative implications for President Joe Biden’s larger plans for gaining a foothold with offshore wind across the U.S. coast and the clean energy industry as a whole.
In the Garden State, long seen as a leader on wind energy, Murphy has repeatedly in recent months said he was optimistic the project would still come to fruition despite cost concerns.
What does the future hold?
Republicans, including U.S. Rep. Jeff Van Drew, R-2nd Dist., and Senate Minority Leader Anthony Bucco, R-Morris, expressed elation at the latest development Tuesday.
Some comments were in line with a year’s worth of objecting toward offshore wind plans — namely over claims projects were being rushed or over unfounded allegations noise and sonar mapping for turbines was leading to an increase in marine mammal strandings.
Still, some Democratic leaders have raised concerns, as well.
The lack of evidence linking a spate of whale and dolphin deaths to offshore wind has not stopped the topic from hitting a nerve for some New Jersey voters as Republicans strive to further cut into 20 years of Democratic control in Trenton. Companies with fossil fuel interests have also been linked with funding local opposition to offshore wind.
Claims have ranged from turbine blades potentially marring ocean views to putting local Jersey Shore economies at risk and destroying the habitats regional fishing industries rely upon.
Despite being proposed as far back as 20 years ago, no offshore wind turbines currently operate along the New Jersey coast.
Murphy’s administration previously approved three offshore wind projects — including two from Ørsted, a Danish wind developer — and involving about 300 wind turbines that would provide 3,700 megawatts of power. The state solicited more projects after the governor increased his initial goal from 7,500 megawatts of offshore wind electricity generation by 2035 to 11,000 by 2040.
Recently, Ørsted’s Ocean Wind 1 — initially set to power about 500,000 homes — received approval by the Bureau of Ocean Energy Management to start onshore construction but the company awaited additional federal permits before offshore construction could start.
Speed bumps for the clean energy infrastructure have been aplenty.
Ørsted leaders first signaled to investors in August that issues like a challenging supply chain, soaring interest rates and and a lack of new tax credits may cause it to write off more than $2.2 billion in losses and could mean canceling its planned East Coast development. The company also cited the supply chain and interest rates for a two-year delay in project work.
Ørsted earlier in October put up a $100 million guarantee that it would build New Jersey’s first offshore wind farm, noting it would lose that money — thus have it returned to ratepayers — if project work was not operational by December 2025.
“I was always extremely concerned about what this project meant to our precious marine life, to our commercial fishing industry, to our recreational fishing industry, and what it also meant to our tourism industry,” state Sen. Michael Testa, R-Cumberland, who is running for re-election and has long opposed the Ørsted project, said Tuesday night. “I also always questioned whether this was a financially feasible deal.”
New Jersey’s top two state lawmakers — state Senate President Nick Scutari, D-Union, and Assembly Speaker Craig Coughlin, D-Middlesex — said in a joint statement Tuesday night that Ørsted “repeatedly failed to live up to their commitments to meet those goals, and their failure has now impeded our clean energy efforts.”
“We will continue to move forward and create a strong green energy economy that is both manufactured and constructed with union labor,” they added. “However, these projects cannot be realized without absolute ratepayer protection. We will utilize every taxpayer safeguard included in the prior law and make all necessary legislative changes to protect New Jersey residents moving forward.”
Tensions have risen locally with multiple ongoing lawsuits, including Cape May County’s first federal lawsuit against agencies the county and others alleged were lax in their federal approvals for project work given potential impacts to the environment.
State and federal agencies, including BOEM, the New Jersey Department of Environmental Protection and the National Oceanic and Atmospheric Administration, have implored that several large whale strandings have in many instances been tied to vessel strikes, fishing gear entanglement and climate change warming waters and leading the animals to travel to new areas to track down prey and thus closer to heavy ship traffic.
Plans for Ocean Wind 1 had been in the works since 2019 and called for as many as 98 offshore wind turbines reaching more than 850 feet about 15 miles from the coasts of Cape May and Atlantic Counties. Project designs had not been released for Ocean Wind 2.
Ørsted said Tuesday it “intends to retain the seabed lease area and consider the best options as part of the ongoing portfolio review.”
In an emailed statement, David Hardy, Group EVP and CEO Americas at Ørsted, said Tuesday night: “The company remains committed to the U.S. renewable energy industry, including offshore wind and land-based technologies. The board decided today to take (final investment decision) on Revolution Wind, a 50/50 joint venture with Eversource.”
In addition to Revolution Wind which would benefit Rhode Island and Connecticut, the company also said construction would continue on the South Fork Wind 1 project in New York.
Jeff Tittel, an environmental activist and former director of the New Jersey Sierra Club, said the Ørsted projects were “mishandled from the beginning” and blamed the cancelation on the company not listening to the public nor understanding local needs and politics.
Murphy said Tuesday that “while today is a setback, the future of offshore wind in New Jersey remains strong … I remain committed to ensuring that New Jersey becomes a global leader in offshore wind — which is critical to our economic, environmental, and clean energy future.”
Ed Potosnak, executive director of the New Jersey League of Conservation Voters, said Tuesday he was disappointed upon hearing the news of the canceled Ocean Wind projects.
However, with the state’s ongoing commitment and additional companies bidding for offshore wind farms near New Jersey and development elsewhere in the U.S., he said he remained optimistic.
“We have some of the highest rates of asthma,” he said, while pointing to the latest American Lung Association assessment. “And we can change that with offshore wind.”
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Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.