Wind

Orsted New Jersey offshore wind array gets environmental OK but offtake concerns linger

Publication of impact statement for 1.1GW Ocean Wind 1 sets up full approval as soon as July amid developer's effort to keep tax credits

Aerial panorama of Atlantic City, New Jersey, along the boardwalk at dusk.
Aerial panorama of Atlantic City, New Jersey, along the boardwalk at dusk.Foto: Shutterstock
  • Tim Ferry

US federal regulators approved the environmental review for New Jersey’s first offshore wind farm, Orsted's 1.1GW Ocean Wind 1, but questions still linger over the project’s economic viability.

The Bureau of Ocean Energy Management (BOEM), lead regulator of energy development in US waters, said the final environmental impact statement (EIS) will be published in the Federal Review, the nation’s journal of record, on 26 May, bringing the years-long process to a close.

“BOEM continues to make progress towards a once-in-a-generation opportunity to build a new clean energy industry in the United States,” said the agency's director Elizabeth Klein. “Offshore wind is a critical component of the Biden-Harris administration’s strategy to tackle the climate crisis, while creating good-paying jobs and ensuring economic opportunities are accessible to all communities.”

It is the largest offshore wind array to receive EIS approval and launches the state towards its goal of 11GW of capacity by 2040.

The EIS is done under the auspices of the National Environmental Policy Act (NEPA), the nation’s foundational environmental law, and analyses the projects potential impacts on coastal ecologies and communities. It forms the basis for other reporting agencies to grant approvals, including the marine mammal ‘take’ authorisations issued by the National Oceanic and Atmospheric Administration (NOAA)’s fisheries service.

A take authorisation allows for the incidental harassment of whales, dolphins, and other marine mammals during the construction and operations of an offshore wind farm.

The EIS “is the result of rigorous review and extensive public input from key stakeholders, demonstrating BOEM’s commitment to building clean power in a way that protects the environment and incorporates community feedback – a commitment that the industry shares,” said Josh Kaplowitz, vice president for offshore wind at industry advocate American Clean Power Association.

BOEM expects to publish its record of decision (ROD) for the project located 15 miles (24 km) off the coast of Atlantic City in July, after all assessments have been completed by sister agencies, including NOAA-Fisheries, the US Army Corps of Engineers, and the Environmental Protection Agency, and others.

Ocean Wind 1 would be only the third project to receive its ROD, which would allow it to enter construction. The project anticipates commercial operations in late 2024 or early 2025.

Liz Burdock, CEO of trade group the Business Network for Offshore Wind, noted that Ocean Wind 1 is the first in a pipeline of eight more projects totalling more than 15GW of power generation to receive a final EIS.

“Consistently working through this this pipeline is key to creating the strong supply chain required to build and sustain our industry,” she said.

Tax credit quandary

Despite progress in the federal permitting regime, Ocean Wind 1 remains mired in talks with the state over its offtake contract.

The project was awarded in the state’s first round tender in 2019 by utility regulatory New Jersey Board of Public Utilities (NJBPU). The Department of Energy estimates Ocean Wind 1's offshore renewable energy credits (ORECs) will average some $117/MWh over the project’s lifetime.
This is far higher than other projects known to be struggling, including Iberdrola-controlled Avangrid’s 1.2GW Commonwealth Wind farm, which signed power purchase agreements (PPAs) with Massachusetts utilities for $72/MWh that it now says are uneconomical. Avangrid is attempting to withdraw the project.

News reports indicate that Orsted is in ongoing talks with NJBPU over potential application of investment tax credits (ITC) in the nation’s landmark climate law.

The Inflation Reduction Act (IRA) of 2022 offers ITC totalling as much as 40% of project capex, but in contrast to most other states, New Jersey requires developers to apply the credits to reducing ratepayer impact. The project is anticipated to raise monthly residential power bills by $1.46.

Federal tax credits “would provide much needed support to the Ocean Wind 1 project, though it would not entirely cover the unanticipated cost increases the project has experienced due to high inflation, increased supply chain costs, and interest rate hikes,” Ryan Ferguson, communications adviser for Orsted Americas region, told Recharge.

Whale strandings

Offshore wind development in New Jersey has recently come under fire from a range of coastal landowners, environmentalists, and fisheries advocates over its purported role in a rash of whale and dolphin beachings.

Nearly 40 marine mammals are known to have stranded on Atlantic beaches since last year according to NOAA, over two dozen in New Jersey and New York, galvanising opposition by sector critics who contend that acoustic seabed surveys are causing the animals to become disoriented, leading to vessel strikes and death.

Scientists with NOAA and BOEM say that there is no link between the ongoing mortality event and offshore wind.

The state opened its round 3 tender in March to add up to 4GW of capacity to the 3.75GW already under contract. Along with Ocean Wind 1, Orsted is also developing its 1.15GW Ocean Wind 2, while a joint venture of Shell and Ocean Winds is advancing its 1.5GW Atlantic Shores project.
Story updated with comments from Orsted, American Clean Power Association, and the Business Network for Offshore Wind
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Published 22 May 2023, 16:58Updated 23 May 2023, 20:32
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