Ørsted pulls plug on two N.J. offshore wind projects

On August 29, Danish energy giant Ørsted warned that it might write off as much as $2.12 billion because of issues with its three U.S. East Coast offshore wind projects, Ocean Wind 1, Sunrise Wind, and Revolution Wind. The company cited adverse impacts relating to the supply chain, lack of favorable progress in Investment Tax Credit (ITC) guidance, and increased interest rates.

On October 31, the other shoe dropped. Ørsted said that, following a decision by its Board of Directors, Ørsted will cease development of the New Jersey offshore wind projects Ocean Wind 1 and Ocean Wind 2. However it has taken final investment decision (FID) that will see it go ahead on the Revolution Wind project, offshore Rhode Island.

MURPHY EYES NEW JERSEY’S OPTIONS

Ocean Wind 1 was set to become New Jersey’s first offshore wind farm. Back in July, New Jersey Gov. Phil Murphy signed into law a bill giving Ørsted a hefty tax break on the project.

He issued the following comment on Ørsted’s decision:

“Today’s decision by Ørsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence. As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project. 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. 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.

“Ultimately, as we have seen in other states recently, offshore wind projects awarded prior to 2020 have been impacted by a combination of interest rate escalation, supply chain cost increases, and inflation. And while today is a setback, the future of offshore wind in New Jersey remains strong. In recent weeks we’ve seen a historically high number of bids into New Jersey’s ongoing third offshore wind solicitation, and the Board of Public Utilities will shortly announce two additional solicitations related to our first-in-the-nation State Agreement Approach to build an offshore wind transmission infrastructure.

“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.”

ØRSTED’S REASONS

“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates, and supply chain bottlenecks impacting our long-term capital investments,” said David Hardy, Group EVP and CEO Americas at Ørsted. “As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2. We are extremely disappointed to have to take this decision, particularly because New Jersey is poised to be a U.S. and global hub for offshore wind energy. I want to thank Governor Murphy and N.J. state and local leaders who helped support these projects and continue to lead the region in developing American renewable energy and jobs.”

Ørsted noted that Ocean Wind 1 and 2 have experienced significant impacts from macroeconomic factors, including high inflation, rising interest rates and supply chain constraints, particularly a vessel delay on Ocean Wind 1 that considerably impacted project timing. However, the company intends to retain the seabed lease area and consider the best options as part of the ongoing portfolio review.

Ørsted says the decision to cease development of Ocean Wind 1 and Ocean Wind 2 is part of an ongoing review of its U.S. offshore wind portfolio with an update planned for its for its fourth quarter 2023 results announcement. The company says it remains committed to the U.S. renewable energy industry, including offshore wind and land-based technologies.

The board decided today to take FID on Revolution Wind, a 50/50 joint venture with Eversource.

“With our final investment decision, we’re solidifying our commitment to building our second commercial-scale offshore wind farm in the United States, helping to deliver more American energy and American jobs,” Hardy added. “I want to thank our Ørsted employees who helped achieve FID for Revolution, as well as our team at South Fork Wind building New York’s first offshore wind farm, our New Jersey team that worked tirelessly to advance these projects, and our land-based team delivering across our portfolio. As we manage and deliver in a challenging market, our team of experts sets itself apart.”