Developer Leaves NJ Wind Farm Project

FRIDAY, NOVEMBER 3, 2023


Danish energy developer Ørsted has announced that it is pulling out of its billion-dollar project to build wind turbines off the coast of New Jersey just a few weeks after construction began.

According to a release from the company, it will end current operations on the Ocean Wind 1 and Ocean Wind 2 projects and take a final investment decision (FID) on the Revolution Wind project. 

Project Background

At the beginning of October, Orsted announced that onshore construction for what would have been New Jersey’s first offshore wind farm had begun, as workers installed copper and aluminum cables for the farm’s electric grid. 

According to a report from nj.com, the announcement marked the first-ever construction effort for the Ocean Wind 1 project and was expected to help bring the Jersey Shore closer to the planned offshore construction for the project.

The report stated that construction began in Lacey Township and moved to Island Beach State Park. Crews reportedly worked to connect the electric grid at two substations, located in former power plants in Ocean and Cape May Counties.

The company also reportedly began installing the cables at a parking lot near the state park. The cables were reportedly mostly buried except, for overhead lines to connect to the stations at both sites.

Ocean Wind 1 was expected to have up to 98 offshore wind turbines standing just over 850 feet tall, as well as three onshore substations. The offshore wind farm was expected to have a leasing area of about 15 miles from the coasts of Cape May and Atlantic Counties.

Advancements on Ocean Wind 1 reportedly came one week after a poll from Stockton University, in New Jersey, indicated that public support for offshore wind turbines in the state appeared to be dropping.

According to survey respondents, reasons for people's opposition included “the unfounded scientific link between wind development and marine mammal deaths,” fear that Jersey Shore opinions could be affected by turbine blades and hesitation since the project work is close to completed.

The project was reportedly a hot topic of discussion in politics, lawsuits and debate over economic viability. Local groups in the Jersey Shore area had also reportedly continued to try and convince developers to cancel the offshore wind work.

Additionally, Ørsted leadership told investors in August that problems in things like the supply chain may cause it to write off more than $2.2 billion in losses and could end in it leaving the Jersey Shore and East Coast development projects.

Spokespeople for Ørsted said that federal permit setbacks were made worse by other factors like supply chain hurdles and high interest rates.

However, Ørsted officials said in a statement that while delayed for about two years, Ocean Wind 1′s offshore turbines were still on track to be in commercial operation between 2025 and 2026.

Latest Development

The new decision to stop the construction of Ocean Wind 1 and Ocean Wind 2 is reportedly part of an ongoing review of Ørsted’s U.S. offshore wind portfolio with an update expected in its Q4 2023 results.

A report from USA Today states that the wind projects were a key point in New Jersey Governor Phil Murphy's energy plan. 

However, the turbines have reportedly been criticized over the company's request for more state aid and how projects like this could be harming marine life.

The update comes only a few weeks after Ørsted promised $100 million to build the state's first offshore wind farm and was given additional state aid this summer after receiving approval in a 21-14 vote in the state Senate and a 46-30 vote in the state Assembly.

"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," Murphy said in a press release.

"I have directed my Administration to review all legal rights and remedies and to take all necessary steps to ensure that Ørsted fully and immediately honors its obligations." 

According to the company's release the decision to stop development is due to “additional supplier delays,” which impacted the project schedule and led to a larger delay.

Additionally, the company says that it had “updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits” and that “increases to long-dated U.S. interest rates have further deteriorated the business case.”

“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2,” Group President and CEO of Ørsted, Mads Nipper said.

“We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition… however, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects.”

The company received tax incentives in a bill signed by Murphy this past summer, which was expected to bring in hundreds of millions of dollars that would have otherwise been passed on to ratepayers.

In return, Ørsted was reportedly required to hold $200 million in escrow for investments in wind facilities at the Salem Offshore Wind Terminal in Massachusetts and the Paulsboro Marine Terminal in New Jersey.

The offshore wind surveying was reportedly blamed for a number of whale deaths and strandings, causing many to begin demanding that the offshore wind development be called off.

Additionally, a poll released by Monmouth University in late August showed that 54% of New Jersey residents approved of placing wind farms off the coast, down from 76% in 2019 and between 80% and 84% in polls taken from 2008 to 2011.

“With our final investment decision, we’re solidifying our commitment to building our second commercial-scale offshore wind farm in the United States, helping to deliver more American energy and American jobs,” said David Hardy, Group EVP and CEO Americas at Ørsted.

“I want to thank our Ørsted employees who helped achieve FID for Revolution, as well as our team at South Fork Wind building New York’s first offshore wind farm, our New Jersey team that worked tirelessly to advance these projects, and our land-based team delivering across our portfolio. As we manage and deliver in a challenging market, our team of experts sets itself apart.”

   

Tagged categories: Bureau of Ocean Energy Management (BOEM); Energy efficiency; Environmental Control; Environmental Controls; Environmental Protection; Funding; Grants; Infrastructure; Infrastructure; Marine; Marine; NA; North America; Program/Project Management; Tower; Wind Farm; Wind Towers

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