'Outrageous' | Orsted’s tossing of controversial New Jersey projects ignites rage and glee

Offshore wind advocate New Jersey governor Phil Murphy didn’t temper his criticism of Danish developer Orsted’s decision to scrap 2.25GW of capacity contracted by the state.

“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” he said in a statement.

Murphy fired back that only weeks prior, the developer had “made public statements regarding the viability and progress of the Ocean Wind 1 project” and even pledged $300m in guarantees it would move forward.

“I have directed my administration to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honours its obligations,” the governor vowed.

New Jersey is a leader in offshore wind, with 3.75GW of capacity contracted in two rounds and a third solicitation underway for another 4GW. The governor set a target of 11GW by 2040 and the state has pumped millions into port and supply chain infrastructure to support the sector, including the $637m New Jersey Wind Port.

Ocean Wind 1 was awarded in the state’s first solicitation in 2019 at $116.8/MWh, while Ocean Wind 2 gained its contract in round 2 in 2021 at only $42.3/MWh, reflecting the view that the industry’s levelised cost of energy (LCOE) was in steady and steep decline.

Instead, inflation began surging in 2022, sparking the Federal Reserve to aggressively respond with interest rates at their highest levels in 22 years. The rate hikes now make projects unviable even with investment tax credits (ITC) of some 30% of capex value or more offered by the Inflation Reduction Act (IRA).

The US industry is being buffeted more than other global sectors from high inflation and interest rates and supply chain turmoil, however, for a number of reasons, including a slow permitting process that has left projects bid in a low inflation environment no longer profitable.

President Joe Biden’s administration reiterated its support the sector.

“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding US offshore wind industry,” White House spokesperson Michael Kikukawa.

Ocean Wind 1 had already received its record of decision (ROD) from federal offshore energy regulator Bureau of Ocean Energy Management (BOEM) and had begun onshore construction.

“While the industry is facing a variety of challenges, BOEM and its federal partners remain committed to supporting the build out of this new industry in a way that will benefit communities, strengthen our nation’s energy security, and address the climate challenge,” BOEM director Liz Klein said.

Yet the project had been met by widespread public opposition in New Jersey’s southernmost Cape May County, where it was considered an existential threat to coastal communities and environment.

“We are exploring options for expanded solar energy installations on city buildings, and we will advocate for any other effective and economical clean energy project,” Gillian said.

Despite this setback, Murphy said: “I remain committed to ensuring that New Jersey becomes a global leader in offshore wind – which is critical to our economic, environmental, and clean energy future.”