US greenlights third offshore wind farm amid Orsted tax credits controversy

The US approved the offshore wind industry's third commercial-scale project with the issuance of the record of decision (ROD) for Orsted’s Ocean Wind 1 array to New Jersey.

The Bureau of Ocean Energy Management (BOEM), lead regulator of energy development in US waters, announced the ROD Wednesday greenlighting the 1.1GW project's construction and operations plan (COP).

The ROD permits Orsted to construct up to 98 wind turbines and as many as three offshore substations within its lease area some 13 nautical miles (24 km) southeast of Atlantic City, New Jersey.

“Since Day One, the Biden-Harris administration has worked to jump-start the offshore wind industry across the country – and today’s approval for the Ocean Wind 1 project is another milestone in our efforts to create good-paying union jobs while combatting climate change and powering our nation," said Interior Secretary Deb Haaland, which oversees BOEM.

The approval of Ocean Wind 1 follows 800MW Vineyard Wind 1 in May 2021 and 132MW South Fork in February 2022. Both projects have begun installing foundations and are expected to begin sending power to the grid later this year.

“Ocean Wind 1 represents another significant step forward for the offshore wind industry in the United States," said BOEM director Elizabeth Klein.

"The project's approval demonstrates the federal government's commitment to developing clean energy and fighting climate change and is a testament to the state of New Jersey's leadership."

The move comes shortly after New Jersey passed a controversial bill aimed at rescuing the project from financial distress.

Tax credit controversy

Ocean Wind 1 was procured in 2019 for offshore renewable energy credits (ORECs) of $117/MWh, more generous than in other states supporting the industry.

Both developers are attempting to cancel these projects, saying they are no longer financially viable.

Ocean Wind's generous ORECs came with obligations of significant supply chain and port infrastructure investment and surrender of any investment tax credits (ITC) in federal legislation back to the state.

The Inflation Reduction Act (IRA), the country’s landmark climate law, offers ITC of up to 40% or higher off the capex for offshore wind projects, assuming domestic content, union hiring, and other stipulations are met.

Josh Kaplowitz, offshore wind vice president for industry advocate American Clean Power Association (ACP), said the approval demonstrates “the administration’s and the industry’s shared commitment to building clean power in a responsible way”.

The New Jersey Board of Public Utilities sees the state's current offshore wind awards of 3.75GW already procured generating 10,000 jobs and $4.7bn in economic impact across the state.

Once completed at the end of 2025, Ocean Wind 1 will power nearly half a million homes per year, according to the project's COP.

Whales continue to strand on especially Mid-Atlantic and southern New England beaches, which critics blame on offshore wind survey and now construction activities.

BOEM notes that the project has incorporated multiple monitoring and mitigation measures for endangered species and has committed to three fisheries mitigation programmes for direct compensation for financial losses as well as lost fishing gear and for upgrades for navigational equipment.