Despite Ørsted pulling out, wind power plans still on
No changes have been made to easements
After Ørsted, a Danish energy company, announced in October that it would pull out of the billion-dollar project to build wind turbines off the New Jersey coast, there was discussion about what would come next for clean energy development in the Garden State.
Gov. Phil Murphy announced that the state's Board of Public Utilities would seek another wind energy company in early 2024 and engage in contracts in early 2025.
But what about the steps already taken to accommodate Ørsted?
The company acquired easement rights for an area in Ocean City to implement underground utility lines for an onshore connection station from the New Jersey Board of Public Utilities in September 2022.
The half-acre area was part of the Green Acres land conservation program and Cape May County tried to prevent the company's easement efforts. Ørsted has until September 2025 to pay for the easement.
The company also has a 24-year lease for an underground utility cable at Island Beach State Park, for which it paid about $5.988 million in October 2023.
That payment also covers a two-year right of entry for additional workspace and a mitigation payment.
Ørsted started staging activities on Oct. 15, 2023 and gave the New Jersey Department of Environmental Protection a summary of the work it had done so far on Nov. 7, 2023. As of that date, the company had not requested termination of the lease.
A state DEP spokesperson said that Ocean Wind has not asked NJDEP or NJBPU to make any changes to the easement or lease, and the state has not taken any action at this time to address Ocean Wind's easement rights.
A spokesperson for the Murphy administration deferred to DEP while an Ørsted spokesperson said the company is “assessing each scope of work connected to Ocean Wind 1 and 2 as part of the recent decision to cease development of the projects as awarded by the NJ Board of Public Utilities. This includes evaluating ways to preserve the value of supply chain investments, key assets and contracts tied to Ocean Wind 1 and Ocean Wind 2 that may be repurposed.”
State Sen. Michael Testa, a Republican who represents parts of Atlantic and Cumberland counties as well as all of Cape May County, said that he thinks the fact that there has been no effort to break the lease “means that they're going to try to resurrect this project.”
“As I've said from early on, for those who are opponents, that they should not be doing a dance in the end zone just yet," Testa said. "That this is merely the first chapter. The first battle in what I believe is a continuing process."
Why did Ørsted drop its New Jersey projects?
The company ended development of the Ocean Wind 1 and 2 projects, which were supposed to be built off the coast of Atlantic City. These offshore wind projects have been a cornerstone of Gov. Phil Murphy's energy plan, but they have come under scrutiny as Republicans have launched attacks over the company's request for more state aid and promoted unfounded claims that projects like this are causing whale deaths.
The decision was “part of an ongoing review of Ørsted's U.S. offshore wind portfolio," an Oct. 31, 2023 press release said.
The news was announced just weeks after Ørsted put up a $100 million guarantee to build the state's first offshore wind farm.
In a statement at the time, Murphy called the Ørsted decision "outrageous" and questioned the company's "credibility and competence."
"In recognition of the challenges inherent in large and complex projects, my administration in partnership with legislative leadership insisted upon important protections that ensure New Jersey will receive $300 million to support the offshore wind sector should Ørsted's New Jersey projects fail to proceed," Murphy said at the time. "I have directed my administration to review all legal rights and remedies and to take all necessary steps to ensure that Ørsted fully and immediately honors its obligations."
Ørsted, headquartered in Fredericia, Denmark, was contracted to build two 1,100-megawatt wind farms off New Jersey's southeastern coast.
The decision to stop development in New Jersey is a “consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay,” the company's release said.
The company also said it “updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits” and that “increases to long-dated U.S. interest rates have further deteriorated the business case.”
Work was originally slated to start in 2025 but was already delayed to 2026.
The company previously received tax incentives in a bill signed by Murphy this summer.
They were expected to garner hundreds of millions of dollars that would have otherwise been passed on to ratepayers. In return, Ørsted was required to hold $200 million in escrow for investments in wind facilities at the Salem Offshore Wind Terminal and the Paulsboro Marine Terminal.
The turbines have been under considerable scrutiny all year even though no actual work has been done.
The offshore wind surveying has been blamed by some for a series of whale deaths and strandings, making it an easy target for Republicans during the election season. Many demanded that the offshore wind development be called off.
Two other projects — one by Avangrid and another by SouthCoast, a joint venture of Shell and Ocean Winds North America — were also canceled last year in Massachusetts, forcing the companies to pay penalties of $48 million and $60 million, respectively. Wind project developers in other states, including New York, are also seeking rate increases above an agreed-upon contractual rate.