NJ offshore wind: Ørsted stock tumbles, seeks additional tax breaks - Asbury Park Press
NJ offshore wind: Ørsted stock tumbles, seeks additional tax breaks
Ørsted announces heavy losses that could jeopardize timing of NJ wind farm project
Amanda Oglesby
A Denmark company building New Jersey's first offshore wind turbine project announced this week billions of dollars in losses in its American division due to supply shortages and high interest rates.
Wind turbine company Ørsted plans start onshore construction for Ocean Wind 1 — an 11,000-megawatt wind turbine project to be located about 15 miles offshore — this fall. However, supply chain instability and high interest rates are being blamed for pushing the project completion date back to 2026, according to NJ Spotlight News.
The company is seeking additional tax breaks to minimize losses on its American projects, include Ocean Wind 1 east of Cape May County, Sunrise Wind off New York and Revolution Wind off Connecticut.
Ocean Wind 1 is expected to power about 500,000 New Jersey homes, generate nearly $1.2 billion in economic benefits and create 15,000 jobs, according to the state Board of Public Utilities, which approved the project in 2019.
The supply chain problems, a lower-than-expected bundle of taxpayer subsidies, and high interest rates are creating $2.4 billion in losses for Ørsted on its American projects, according to Reuters.
In a statement released this week, the company said discussions with federal officials about additional tax breaks to offset the higher costs "are not progressing as we previously expected."
"Ørsted will continue to progress the U.S. near-term offshore wind projects including obtaining final federal and local permits, working with suppliers to mitigate delays and continuing our dialogue with stakeholders to try to qualify for at least 40% ITCs (investment tax credits) on all projects," the company said in its statement.
After Ørsted announced the losses, its stock price declined as much as 25%, according to Bloomberg.
In June, Trenton legislators approved extending federal tax credits to Ørsted after the company warned of serious impacts from supply chain problems and high interest rates.
On Thursday, State Senator Michael Testa Jr., a Republican who represents Cape May County and portions of Cumberland and Atlantic counties, urged Gov. Phil Murphy not to give additional tax breaks to the company, despite its announcement.
"It was a travesty when Governor Murphy bailed out Ørsted at the expense of New Jersey taxpayers the first time they threatened to walk away," Testa said in a statement. "I’m calling on the Murphy administration to state unequivocally that our residents will not be sold out for Ørsted a second time."
Twelve environmental and advocacy organizations — including the New Jersey Sierra Club, Environment New Jersey, NJ Work Environment Council and Jersey Renews — urged continued support for the state's burgeoning offshore wind market despite Ørsted's announcement.
"Industries remain globally impacted by supply chain challenges," the group said in a joint letter. "The offshore wind industry is not immune to the supply chain crisis. We stand united in our support for responsibly developed offshore wind to help New Jersey achieve 100% clean energy."
Ørsted said despite the financial challenges, the American projects will continue to move forward.
"The U.S. offshore wind market remains attractive in the long term," David Hardy, executive vice president and CEO of Region Americas at Ørsted, said in a statement. "We will continue to work with our stakeholders to explore all options to improve our near-term projects including continued dialogue about ITC (investment tax credits) qualification, OREC (offshore wind renewable energy certificates) adjustments, and other business case levers."
In addition to onshore construction about to begin, monopile supports are being manufactured at the Port of Paulsboro, a spokesperson for Ørsted told the Asbury Park Press. Completion of the company's Operations & Maintenance facility in Atlantic City is expected to be done around May of next year.
The first and second construction phases of Ocean Wind 1 are expected to be complete and operational in 2025, with the third phase online by 2026, according to the company's spokesperson.
The project is at least a year behind schedule from when it was approved by the Board of Public Utilities in 2019. At that time, company officials expected it would be operational by 2024.
Amanda Oglesby is an Ocean County native who covers education and the environment. She has worked for the Press for more than 15 years. Reach her at @OglesbyAPP, aoglesby@gannettnj.com or 732-557-5701.
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.