Orsted wants out of $300M forfeiture for scrapped New Jersey offshore wind farms - NBC 10 Philadelphia
Orsted wants out of $300M forfeiture for scrapped New Jersey offshore wind farms - NBC10 Philadelphia
Offshore wind power company Orsted is trying to get out of a $300 million guarantee it agreed to pay New Jersey in the event it failed to build its first wind farm off the state's coast.
Last Tuesday, the Danish firm scrapped its Ocean Wind I and II projects in southern New Jersey, saying the projects were no longer financially feasible. The company cited supply chain issues, inflation and a failure to gain enough government tax credits.
The next day, Orsted wrote to the New Jersey Board of Public Utilities, saying it was withdrawing from an agreement it signed with the state under which it would forfeit the money if it did not build Ocean Wind I.
The company said it was doing so because the board had not taken final action to approve the agreement.
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“The Board has not issued a final approval of the Compliance Filing,” Orsted wrote in a letter to the utilities board, saying it was withdrawing from the agreement “due to changed circumstances.”
The company said it has transferred $200 million to an escrow account with the state thus far.
Neither Orsted nor the BPU immediately responded to requests for comment Monday.
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It was not immediately clear what will happen next. In the agreement, Orsted and the state agreed not to sue each other over any dispute unless they tried and failed to resolve it through negotiations.
On the evening that Orsted canceled its two large projects in New Jersey, Gov. Phil Murphy, a Democrat, reacted angrily. He said his administration would hold the company accountable to its cancellation obligations.
On Monday, a spokeswoman, Alexandra Altman, said Murphy's administration “is evaluating Orsted's recent statements and correspondence, and will take any and all actions necessary to ensure Orsted honors its commitment and responsibility to the state.”
The company agreed to put up a $100 million guarantee that it would have Ocean Wind I built by the end of 2025. It also was obligated to pay an additional $200 million toward the development of the offshore wind industry in New Jersey.
Orsted wrote off $4 billion last week, due largely to costs associated with the cancellation of its two New Jersey projects.
The cancellations added fresh uncertainty to an industry seen by supporters as a way to help end the burning of planet-warming fossil fuels, but derided by opponents as inherently unworkable without massive financial subsidies.
And it is another political headache for Murphy and Democrats a week before elections for the state Legislature in which opposition to offshore wind has become an important part of Republican campaigns.
New Jersey still has several other offshore wind projects in various stages of development, with four new proposals submitted in August alone. They join the one remaining project of the three originally approved by the state, Atlantic Shores. That is a project by Shell New Energies US and EDF Renewables North America.
Atlantic Shores said last week it remains committed to its project, though it hinted in a statement that it, too, is seeking additional help.
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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.