1 year ago
Orsted, the company that Democrats up and down the Eastern Seaboard have been counting on to build offshore wind farms, is pulling the plug on two of its largest projects, a setback for President Joe Biden’s clean energy goal.
The Danish energy company said Tuesday night that it was killing plans to build a pair of wind farms in New Jersey.
The decision dents Biden’s climate change plans and also dashes New Jersey Gov. Phil Murphy’s hopes of his state being a clean energy leader before he leaves office in 2026. It also comes a week before legislative elections in New Jersey, where Democrats are trying to hold their majorities in the face of Republican attacks over wind power.
For months, Orsted has been teasing financial problems for its two New Jersey projects, Ocean Wind 1 and Ocean Wind 2. Now both are being scrapped. David Hardy, the head of the company’s American operations, blamed macroeconomic factors, like inflation and supply chain issues.
“We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy,” Hardy said in a statement.
Ocean Wind 1 would have been New Jersey’s first offshore wind farm — a project 15 miles off the South Jersey coast big enough to generate power for a half-million homes. It was expected to help launch a multipart supply chain in the state and provide hundreds of new jobs.
But now New Jersey has gone from the aspirational epicenter for offshore wind to a graveyard of Orsted projects.
There was good news for other states. Orsted is all in on Revolution Wind, a project off the coast of Connecticut and Rhode Island, and is continuing construction of South Fork Wind in New York. Other projects in New York and Maryland have an uncertain future but remain alive.
In New Jersey, Orsted’s announcement leaves Murphy and state Democrats holding a doggy bag of political headaches.
One of the Murphy administration's top legislative priorities this year was a law meant to save Ocean Wind 1 from financial ruin by allowing the company to keep federal tax incentives that would have otherwise been used to lower ratepayer bills.
The Legislature narrowly approved the bill amid intense opposition from Republicans and coastal voters before recessing this summer ahead of the election, in which all 120 legislative seats are on the ballot.
Now, a week before that election, Republicans will be able to point to the unpopular vote being all for naught.
Murphy administration officials on Tuesday night began pushing back against criticism they expect of the law. They argued that the law, called a bailout by some, has not resulted in any money going to Orsted because the project wasn’t built. They argue instead that the company had put $300 million on the table that the state gets to keep thanks to the law — though $100 million of that will almost certainly be subject of a dispute between the company and state.
Still, the administration is pointing to Orsted’s move as a betrayal that calls into question the company’s credibility as a partner. In recent weeks, even as Ocean Wind 2 was facing major uncertainty, it seemed like Ocean Wind 1 was a sure thing. Until it wasn’t.
New Jersey utility regulators have approved three wind farms already. Only one is left following Orsted’s exit — Atlantic Shores, a company that is considered to be a more straightforward and accommodating partner. Though that project also may need more money to be viable, and now it’s unclear if there is any political support to help the company.
The administration is also currently entertaining bids from four energy companies to build more wind farms. The administration also hopes that other states will use products by EEW, a manufacturer that has set up shop in South Jersey.
Broadly speaking, the offshore wind industry has been struggling to fulfill its early promise, and a whole generation of projects that were approved before or during the pandemic have been asking for money to deal with inflation and other rising costs.
Those requests have become complicated by opposition from coastal residents who don’t like the sight of wind farms and by critics of Murphy’s clean energy agenda who argued it was too costly.
“This is the sad but always inevitable conclusion to the story — the underlying math never added up, and no amount of state or federal bailout money could change that fact,” said Michael Makarski, of Affordable Energy for New Jersey, a business and labor group critical of offshore wind.
Support for the industry was also ruined by the unfounded claim that projects were contributing to a spate of dead whales washing ashore.
State Sen. Michael Testa (R-Cumberland) posted an image on social media Tuesday night that said #SavedTheWhales and, in another post, said, “The people of NJ have officially sunk the wind out of Ørsted & @GovMurphy’s sails.”
At one point, support for the industry was bipartisan and included labor unions, environmental groups and industry advocates. In New Jersey, a law to encourage the industry was signed by then-Gov. Chris Christie.
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