Danish company Ørsted announced Tuesday evening that it would “suspend” development of its planned first offshore wind farm in New Jersey, as well as plans for its second project.
It’s a blow to Gov. Phil Murphy’s ambitious clean energy goals and a stunning development for environmentalists who support the energy alternative once expected to be ready for use on the Jersey Shore between 2025 and 2026.
Murphy criticized the company’s decision in a statement, calling it “outrageous.”
The development comes four months after the Democratic-controlled state legislature passed a bill signed by Murphy, a Democrat, that would provide $1 billion in tax credits to Ørsted, the world’s largest offshore wind developer, to build Ocean Wind 1 -Keep the project alive.
“The current market situation with supply chain challenges, project delays and rising interest rates has posed challenges to our offshore projects in the US and in particular our Ocean Wind 1 offshore project, resulting in significant impairments in the third quarter of 2023,” said Mads Nipper Ørsted Group President and CEO said in a statement released Tuesday evening.
“Therefore, as part of our ongoing review of our U.S. offshore wind portfolio, we have decided to discontinue development of Ocean Wind 1,” Nipper added, referring to the company’s interim financial report for the first nine months of Ocean Wind 2.”
Spokespeople for Ørsted had no further comment Tuesday evening and the full interim report will not 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.”
“Just a few weeks ago,” Murphy said, “the company made public statements regarding the feasibility and progress of the Ocean Wind 1 project.”
“Recognizing the challenges posed by large and complex projects, my administration, working with legislative leadership, insisted on important protections that will ensure New Jersey receives $300 million to support the offshore wind sector if Ørsteds New Jersey projects will not be implemented,” the governor added, referring to the controversial law that was supposed to give Ørsted tax credits for the wind farm.
It’s unclear how much money state ratepayers will get back.
Murphy has dedicated part of his term to advancing clean energy goals in the state to combat climate change, including through the Ocean Wind projects. He said on Tuesday that he had instructed his government to “explore all legal rights and remedies and take all necessary steps to ensure” that Ørsted “fulfills its obligations fully and expeditiously.”
Tim Sullivan, chief executive of the New Jersey Economic Development Authority, said Tuesday night that the tax credits provided in the law signed in July would only support Ocean Wind 1 if Ørsted built the project.
“Now they don’t get anything from this bill, period,” Sullivan said said in a statement.
New Jersey has faced many hurdles on the long and arduous road to developing offshore wind farms on its coasts. The latest election took place a week before all 120 seats in the Democratic-controlled state parliament are up for election. The canceled projects not only cast doubt on the state’s upcoming offshore wind development, but also have a negative impact on President Joe Biden’s administration’s larger plans to establish offshore wind on the U.S. coast and on the industry of clean energy as a whole.
In the Garden State, long considered a leader in wind energy, Murphy has repeatedly said in recent months that he is optimistic the project will still be a success 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, spoke out Excitement about the latest development Tuesday.
Some comments were consistent with objections to offshore wind plans that have been ongoing for a year – particularly over hasty project claims or unfounded claims that noise and sonar mapping for turbines would lead to an increase in marine mammal strandings.
Still, some Democratic leaders have also expressed concerns.
The lack of evidence linking a spate of whale and dolphin deaths to offshore winds hasn’t stopped the issue from striking a nerve with some New Jersey voters as Republicans seek to seize 20 years of Democratic control in Trenton to further shorten. Companies with fossil fuel interests have also been linked to funding local opposition to offshore wind energy.
Claims ranged from turbine blades potentially disrupting ocean views to endangering the local Jersey Shore economy and destroying the habitats the regional fishing industry relies on.
Although proposed 20 years ago, there are currently no offshore wind turbines operating on the New Jersey coast.
Murphy’s government previously approved three offshore wind projects – including two by Ørsted, a Danish wind developer – and included about 300 wind turbines that would deliver 3,700 megawatts of power. The state called for more projects after the governor increased his initial goal of 7,500 megawatts of offshore wind power generation by 2035 to 11,000 megawatts by 2040.
Recently, Ørsteds Ocean Wind 1 – originally intended to power around 500,000 homes – received approval from the Bureau of Ocean Energy Management to begin construction on land. However, the company was waiting for further federal approvals before offshore construction could begin.
Clean energy infrastructure speed bumps abounded.
Ørsted executives first signaled to investors in August that issues such as a difficult supply chain, rising interest rates and the lack of new tax credits could cause the company to write off more than $2.2 billion in losses and that planned project on the east coast could be canceled. The company also cited supply chain and interest rates for a two-year delay in project work.
Ørsted issued a $100 million guarantee in early October to build New Jersey’s first offshore wind farm, noting that if project work is not operational by December 2025, the money would be lost and thus returned to taxpayers would be.
“I have always been extremely concerned about what this project means for our precious marine life, for our commercial fishing industry, for our recreational fishing industry and also for our tourism industry,” said Sen. Michael Testa, R-Cumberland. said Tuesday evening, who is running for re-election and has long opposed the Ørsted project. “I always wondered if this was a financially viable deal.”
New Jersey’s two top state lawmakers — Senate President Nick Scutari, D-Union, and Assembly Speaker Craig Coughlin, D-Middlesex — said in a joint statement Tuesday evening that Ørsted has “repeatedly failed in her commitments to achieve these goals.” and their failure has now hindered our clean energy efforts.”
“We will continue to move forward and create a strong green energy economy that is both manufactured and built with a union workforce,” they added. “However, these projects cannot be implemented without absolute protection for ratepayers. We will take advantage of all taxpayer protections contained in current law and make any necessary changes to the law to protect New Jersey residents going forward.”
Local tensions have increased with several ongoing lawsuits, including Cape May County’s first federal lawsuit against county officials and others accused of being lax in granting federal permits for project work in light of potential environmental impacts.
Federal agencies, including BOEM, the New Jersey Department of Environmental Protection and the National Oceanic and Atmospheric Administration, have claimed that several large whale strandings are linked in many cases to ship collisions, entanglement in fishing gear and climate change, warming waters and the management of the animals , related to traveling to new areas to track down prey and thus get closer to the heavy shipping traffic.
Plans for Ocean Wind 1 had been in the works since 2019 and called for up to 98 offshore wind turbines with a range of more than 850 feet, about 15 miles (24 kilometers) from the coasts of Cape May and Atlantic Counties. No project drafts have been released for Ocean Wind 2.
Ørsted said on Tuesday that it “intends to retain the seabed lease area and examine the best options as part of the ongoing portfolio review.”
In an emailed statement Tuesday evening, David Hardy, group EVP and CEO Americas at Ørsted, said: “The company remains committed to the U.S. renewable energy industry, including offshore wind and onshore technologies,” the board said “Today decided to make a (final investment decision) for 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 start” and blamed the cancellation on the company’s failure to listen to the public, local needs and concerns understood politics.
Murphy said Tuesday: “Although today is a setback, the future of offshore wind in New Jersey remains strong… I remain committed to ensuring New Jersey becomes a global leader in offshore wind power – beneficial to our economy, environment and… Environment is critical.” Clean energy future.”
Ed Potosnak, executive director of the New Jersey League of Conservation Voters, said Tuesday he was disappointed to hear the news of the canceled Ocean Wind projects.
But given the state’s continued commitment and additional companies bidding for offshore wind farms near New Jersey and development elsewhere in the U.S., he said he remains optimistic.
“We have some of the highest rates of asthma,” he said, pointing to the latest assessment from the American Lung Association. “And we can change that with offshore wind.”
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Steven Rodas can be reached at [email protected]. Follow him to X @stevenrodasnj.
Brent Johnson can be reached at [email protected]. Follow him to X @johnsb01.