A green energy company on Tuesday pulled the plug on two wind projects off the coast of New Jersey which were approved for an estimated $1 billion in taxpayer-funded subsidies by Democratic Gov. Phil Murphy and state lawmakers.
The Danish outfit Orsted cited high inflation, rising interest rates and supply chain issues as their reasons for scrapping its Ocean Wind 1 and 2 projects – both of which were buoyed by tax incentives included in President Biden’s so-called Inflation Reduction Act.
“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,” Orsted Americas CEO David Hardy said in a statement.
“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 US and global hub for offshore wind energy.”
Murphy, a strong proponent of the project, fumed over Orsted’s announcement, calling the pullout “outrageous” amid the unprecedented accommodations granted by the Garden State to the foreign company.
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said in a statement. “As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project.”
Murphy he would explore legal options regarding the abandoned Orsted project after the state worked hard to secure the funding.
“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 Orsted’s New Jersey projects fail to proceed,” he added.
“I have directed my Administration to review all legal rights and remedies and to take all necessary steps to ensure that Orsted fully and immediately honors its obligations.”
The failed development, which would have provided the state with its first offshore wind farm just 13 miles off the South Jersey coast, was expected to generate enough energy to power half a million homes.
In July, New Jersey legislators approved tax breaks for Orsted valued as high as $1 billion to keep the project moving forward — a move Republicans, commercial fishermen and activists slammed as a generous subsidy for a potentially harmful environmental project.
In exchange for the handout, which allowed Orsted to pocket federal tax breaks it was initially required to give back to New Jersey ratepayers, the company was required to place a $200 million guarantee into state coffers, which will ostensibly be returned to ratepayers now that the company has scrapped the project.
State Sen. Ed Durr (R-Gloucester) criticized the subsidy at the time, arguing that when Orsted first received approval to build the wind farms it “agreed to apply for and return to ratepayers any federal tax incentives that might become available to offset the higher costs that ratepayers are paying today for the development of wind energy.”
“Despite the deal they signed, Orsted is realizing that wind farm projects don’t make economic sense without major government subsidies, so now they’re looking for a huge handout at the expense of New Jersey utility customers,” he added.
Under the Inflation Reduction Act, renewable developers stand to receive tax credits of up to 30% for qualifying investments that use union labor, and more credits if the project meets additional criteria.
Orsted officials were reportedly seeking a 40 percent tax credit to move forward with the project.
The New England Fishermen’s Stewardship Association, which argued sustainable fisheries and other maritime activities off the New Jersey coast were being threatened by the project, welcomed Orsted’s decision and said it was a sign that the future offshore wind projects would be doomed to fail.
“Billion-dollar cost overruns incurred in spite of generous giveaways from the Biden administration and the state of New Jersey will dominate accounts of the demise of these projects,” the group said in a statement.
“These fiscal and logistical pitfalls are instructive for all states considering a transition to offshore wind energy. But these challenges should not eclipse consideration of the urgent threat offshore wind farms pose to the fisheries, maritime communities, and the marine environment.”
Rep. Chris Smith (R-NJ), another critic of the project, called Orsted’s announcement “a victory for local residents.”
“Governor Murphy abandoned the people of New Jersey by throwing taxpayer dollars at unsound and improperly vetted offshore wind projects even when his own Division of Rate Counsel noted that ratepayers would have to pay higher costs and Orsted would earn more money as a result of the billion-dollar bailout he signed into law in July,” Smith told The Post.
“While Orsted’s withdrawal is a victory for local residents, environmentalists, and New Jersey commercial and recreational fishermen who have been subjected to the coercive power of the Biden and Murphy Administrations, we are not out of the woods yet. We must continue this critical fight to protect the Jersey Shore from their ocean industrialization plans that would eviscerate our marine ecosystem, put recreational and commercial fisherman out of business, seriously impair radar navigation, and jeopardize our national security,” the congressman added.
The company said it would be moving forward with its Revolution Wind project in Connecticut and Rhode Island and its South Fork Wind project in New York despite the cancellation of Ocean Wind 1 and 2.
White House spokesperson Michael Kikukawa said in a statement that “momentum remains on the side of an expanding US offshore wind industry,” despite the collapse of the Ocean Wind project.
“While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry — creating good-paying union jobs in manufacturing, shipbuilding, and construction; strengthening the power grid; and providing new clean energy resources for American families and businesses,” Kikukawa said.
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