Subscribe to SeafoodSource News
Share
Offshore wind developer Ørsted said it is pulling out of its Ocean Wind 1 and Ocean Wind 2 projects off the coast of the U.S. state of New Jersey.
Ørsted Group Executive Vice President and CEO Americas David Hardy cited escalated financial difficulties and supply chain issues for the move, after the Danish company’s board of directors announced the decision at the start of an earnings call.
“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,” Hardy said. “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.”
The decision is a major blow to U.S. renewable energy ambitions. It came shortly after the administration of U.S. President Joe Biden announced final approval of the Coastal Virginia Offshore Wind project, touting it as the country’s next big offshore wind development.
Ørsted’s New Jersey withdrawal could have implications for how the U.S. industry invests in its port hubs – Virginia state officials see the CVOW as opening the Hampton Roads region as a development hub, while New Jersey invested heavily in its Delaware Bay and river shores as a logistics center.
New Jersey Governor Murphy criticized Ørsted in a statement posted on social media.
“Today’s decision by Ørsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence. I have directed my administration to take all necessary steps to ensure that Ørsted fully honors its obligations,” Murphy said.
Local governments and anti-wind power activist groups have been fighting against granting Ørsted permits and approvals for Ocean Wind 1, and they hailed the company’s withdrawal as good news for their communities.
“This is a great day for the people and businesses of Cape May County,” Cape May County Board of Commissioners Director Len Desiderio said. “The massive, reckless experiment known as Ocean Wind One has been stopped and Ocean Wind Two abandoned. There were many who consistently told us that we were wasting our time, that there was nothing we could do about the project being built. Ørsted has walked away from Ocean Wind One, but we are not walking away from this fight. We intend to redouble our efforts to ensure that our horizon remains free of massive offshore industrialization.”
Ørsted said its decision came amid an ongoing review of its U.S. offshore wind portfolio. Among those steps was the company board’s decision to take a financial investment decision on Revolution Wind, a 50-50 joint venture with Eversource planned for a plot of ocean off the coast of southern New England. It said onshore construction has already begun on the project, which is expected to be completed by 2025, producing more than 700 megawatts of clean energy.
“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 said.
Ørsted also said its South Fork Wind project off the shore of New York’s Long Island “continues its construction to progress toward operations,” with 12 turbines to be installed by the end of 2023 or early 2024. But it said pricing for its Sunrise development in Maryland has also expanded beyond original estimates and that the company “continues to reconfigure this project and expects to have more clarity on its path forward in the coming months.”
“We remain committed to the U.S. renewable energy market, building clean power that will create jobs across technologies and states from the Northeast to Texas,” Hardy said. “Offshore wind energy remains an integral solution to helping the U.S. meet its clean energy ambitions, including job creation, a domestic supply chain and a reinvigorated maritime industry.”
In an earnings call Wednesday, 1 November, Ørsted CEO Mads Nipper explained the rationale for pulling out of a flagship project for U.S. waters.
“These are obviously some very tough decisions,” said Nipper, whose company earlier shook the industry in August with its warning of a USD 2.3 billion (EUR 2.1 million) write-down in diminished value. With its decision to axe the 1,100-megawatt Ocean Wind 1 project and its follow-on phase, that write-off has swollen to USD 5.6 billion (EUR 5.2 billion).
The business case for continuing to pursue the projects “was worse than we had on our books,” Nipper said.
In terms of damage control, Ocean Wind was “75 percent of the impairment we were looking at,” said Nipper. The project was facing “further significant delays” in getting equipment, and vessels for installation, which would lead to a “multi-year delay” forcing Ørsted to re-negotiate with suppliers, he said.
The surprise announcement on 31 October triggered an uproar among New Jersey politicians. Democratic lawmakers allied with Governor Murphy had hastily pushed through a budget package 30 June to allot more federal renewable energy tax credits – estimated to be worth as much as USD 1 billion (EUR 930 million) – to Ørsted in hopes of heading off such a crisis.
Murphy said state officials will extract all penalties they can against Ørsted now that it has nixed the project.
“As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project,” Murphy said. “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 USD 300 million [EUR 280 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.”
Murphy said New Jersey will press on with its renewable energy ambitions.
“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,” he said. “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.”
Anjuli Ramos-Busot, director of the Sierra Club’s New Jersey chapter, which supported the project, called the cancelation a “setback” for the country’s clean energy goals.
“Let’s be clear: clean energy advocates are not defeated by this outcome, as it has nothing to do with the local, astroturfing opposition groups in New Jersey or the fossil fuel industry. This setback is financial,” Ramos-Busot said. “We are eager for the third round of solicitations and see this just as a setback in our timeline, not an end to our goals of cleaner air, family-sustaining jobs, and transitioning away from fossil fuels.”
The critical trigger for opposition was a study of the potential visual impact of wind turbines from Cape May beach resorts, that estimated the county’s big tourism industry could see a fall-off of 15 percent in visitors, said Len Desiderio, director of the county Board of Commissioners in a Wednesday morning press conference.
Alongside a study finding tourism would be harmed by the visual impact of the turbines, the project’s prospects were harmed by concern for the region’s commercial fishing industry. One estimate by Rutgers University researchers found that 25 percent of annual surf clam landings in Atlantic City could be lost and county officials saw “thousands of acres of our ocean floor that would be destroyed,” said Michael J. Donahue, the county special counsel for offshore wind.
“That’s why we said we won’t be part of this reckless experiment,” Donahue said.
But county officials noted that Ørsted’s wind energy leases from BOEM could be transferable to another developer.
“From a very basic position, the leases are still there,” Donahue said.
During Ørsted’s earnings call, Nipper said power export cables and other existing equipment could be recovered and sold as part of the project “breakaway costs.” Offshore wind advocates clearly hope that other developers will step in with New Jersey’s next solicitation round.
“New Jersey remains a market leader and will continue emerging as a hub of manufacturing, logistics, and development for the industry,” said Sam Salustro, vice president of strategic communication at Oceantic Network, the recently rebranded name of the Business Network for Offshore Wind. “We are encouraged by the governor’s resolute commitment to building a robust industry and look forward to the results of the state’s third solicitation round.”
Reporting by Kirk Moore
Photo courtesy of Ørsted
Advertise | Media Kit
[email protected]
Seafood Expo North America
Seafood Expo Global
Seafood Expo Asia
Want seafood news sent directly to your inbox?