Offshore wind company cancels project in N.J. Now what?

Danish global offshore wind developer Orsted’s abrupt announcement this week that it is abandoning both of its massive projects planned off the New Jersey coast is a stinging blow to Gov. Phil Murphy’s ambitious goal of addressing climate change that threatens the state’s coast.

The company’s announcement Tuesday night was akin to abruptly snatching away key pieces of the state’s renewable energy puzzle. As of Wednesday, it was unclear how leaders would fill that void.

However, one key piece does remain in place: Atlantic Shores, the largest single wind farm yet approved by the New Jersey Board of Public Utilities (BPU).

Orsted in its earnings statement cited economic headwinds as the reason.

“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments,” said David Hardy, group executive vice president and CEO Americas at Orsted. “As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2.”

Hardy said the company was disappointed and thanked Murphy and other state leaders who tried to kick-start the industry in the state, hoping to make it a hub for offshore wind in the Northeast.

» READ MORE: How pro-fossil fuel groups helped sway the public against offshore wind in New Jersey

Murphy, however, was having none of it. His administration took significant political heat in backing recent legislation allowing Orsted to take federal renewable energy credits that initially state law allowed to go only to ratepayers.

“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” the governor said in a statement. “As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project.”

Murphy said his administration is looking “to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”

State officials who backed offshore wind are “upset, frustrated, and disappointed,” said a senior administration official, who called Orsted’s decision a “setback” in the state’s aggressive goal of obtaining 100% clean energy by 2035. The official said the administration is proceeding with offshore wind because “it’s too important to our economic future. It’s too important for our environmental and energy needs.”

It could take time for the state to find, and approve, a new developer to replace the 2.2 gigawatts of energy that would have been generated by Orsted’s Ocean Wind 1 and 2 projects — enough to have powered about 1 million homes.

But plenty of people, especially along the coast, celebrated the news.

Len Desiderio, chair of the county Board of Commissioners and longtime mayor of Sea Isle City, called it a “very, very happy day in Cape May County.” He said it was “a great day for the Atlantic Ocean … and for all of us here in our beautiful county.” He and other Cape May County officials crowed about defeating a big wind company, mostly by filling lawsuits.

Others lamented Orsted’s decision. Atlantic City Mayor Marty Small Sr. called the news “devastating and disappointing,” noting that city residents had been participating in a training program in expectation of the jobs from the offshore wind farms. Orsted spent millions remediating a former oil company site and building a 16,000-square-foot building in the city’s Bungalow Park neighborhood to be used as an operational and maintenance hub.

» READ MORE: From 2021: With offshore wind, New Jersey could be launching its biggest job creator ‘since the casinos’

And Caren Fitzpatrick, a Democratic Atlantic County commissioner who is pro-wind energy and running against State Sen. Vince Polistina, a Republican, in the Nov. 7 legislative election, did not mince words.

“There is no doubt today’s news is the result of an ugly and deceitful public relations campaign by partisan Republican mouthpieces with ties to big oil,” she said in a statement, citing Polistina and the area’s anti-wind U.S. Rep. Jeff Van Drew, who, for his part, was calling the news a “massive win” for South Jersey.

The state still has the arrangement with Atlantic Shores Offshore Wind, which is a partnership between Shell New Energies and EDF Renewables North America. Atlantic Shores has been approved by the BPU to build the largest of three approved wind farms, including the two Orsted projects. Atlantic Shores Project 1 is expected to have the capacity to generate more than 1,510 megawatts of energy — enough to power 700,000 homes.

Despite Orsted’s abrupt withdrawal from its two approved projects, Ocean Wind 1 and 2, Atlantic Shores says that, as of now, it’s moving ahead.

“Atlantic Shores remains committed to delivering safe, reliable, renewable power and establishing a thriving domestic offshore wind industry anchored in New Jersey,” Joris Veldhoven, the company’s CEO said in an emailed statement to The Inquirer on Wednesday. “This means supporting New Jersey in meeting its clean energy goals and driving economic growth.”

Veldhoven said the project will create “nearly $2 billion of in-state economic activity and create thousands of good-paying jobs in New Jersey’s thriving clean energy economy.”

Veldhoven acknowledged that the company faces some of the same headwinds as Orsted, which said in an earnings statement Wednesday that it was taking a $4.02 billion impairment charge, or loss of value in assets, in the third quarter with the largest chunk, $2.8 billion, related to its Ocean Wind 1 New Jersey project.

“Despite the extraordinary challenges driven by supply chain constraints, the cumulative impacts of inflation, and higher financing charges associated with building critical infrastructure projects, we are actively engaging in conversations with the administration, regulators, and elected leaders across New Jersey to identify viable solutions that will not only preserve the progress made thus far, but also facilitate the successful execution of Atlantic Shores Project 1,” Veldhoven said.

Until recently, offshore wind seemed to be flying high with backing not only by Murphy, but the Biden administration. In early 2022, the U.S. Department of Interior brought in $4.37 billion in winning bids for an auction of offshore wind leases off the coast of New Jersey and New York. Combined, all the leases could potential generated 30 gigawatts of electricity by 2030.

The leases spanned 480,000 acres in the New York Bight, which, despite the name, falls mostly off the coast of New Jersey, spanning from Long Island, N.Y., to Cape May.

The U.S. government holds the lease areas because they are in federal waters. But states pick developers, create regulations, and figure out how the power is going to cross into their waters and onshore.

The state is developing a 200-acre New Jersey Wind Port in Salem County to foster the nascent offshore wind industry with marshaling operations — staging, assembling, and shipping — as well as manufacturing of giant turbines. It helped with a separate manufacturing area built by EEW-AOS at the Paulsboro Marine Terminal upriver in Gloucester County to build the 3 million-pound, 300-foot-long, all-steel foundations for turbines known as monopiles.

The state has committed about $600 million to offshore wind and has spent a few hundred million of that.

Orsted’s withdrawal poses a major blow to the New Jersey Wind Port. In July, the company had agreed to sublease 34 acres there, becoming the first tenant. Orsted expected to create 200 jobs at the site and 15,000 jobs overall over the 25-year life span if its two wind farms. The Murphy administration says the port was not built for Orsted, but for multiple developers. Atlantic Shores is another potential tenant.

EEW-AOS did not respond to a request for comment. It had a partnership with Orsted, and it’s unclear whether Orsted plans to walk away from contracts already in place.

Steve Sweeney, a former state Senate president and current union official, said Wednesday that he was undeterred and that “offshore wind development will continue off the New Jersey coast, boosting job growth and improving our environment.”

Sweeney, who is advisory board chair of Rowan University’s Sweeney Center for Public Policy, called Orsted’s decision “shortsighted” and noted the BPU is considering bids from other offshore wind developers for some of the leases — although Orsted retains the leases it successfully bid for. Orsted has not said what it plans to do with the leases but selling could be an option.

Sweeney also noted that legislation crafted to allow Orsted to take federal tax credits contained language that could lead to a $300 million penalty against the company if it does not build its projects.

“Orsted’s decision to keep its New Jersey offshore wind tracts indicated it is not giving up on developing Ocean Wind 1 and 2 in the future,” Sweeney said. “The governor should pursue all remedies to get Orsted to keep its original commitment.”

Staff writer Amy S. Rosenberg contributed to this article.