The Danish wind energy company, Orsted, has made a significant commitment to construct New Jersey’s inaugural offshore wind farm. Orsted has put up a $100 million guarantee, which it stands to lose if the project is not operational by December 2025. This deadline comes a year after approval from state utility regulators. The Board of Public Utilities in New Jersey has recently approved an agreement with Orsted, stipulating that the company would forfeit the money if the project does not meet a series of earlier deadlines. These deadlines require the project to reach commercial operation in stages by May 1, September 1, and December 1, 2024. However, if the project is not functioning by December 2025, Orsted will lose the guarantee money.
The $100 million guarantee was a requirement under a law signed by Governor Phil Murphy in July. This law enabled Orsted to retain federal tax credits that would have otherwise been returned to New Jersey ratepayers. Governor Murphy, a Democrat, supports the development of the offshore wind industry in New Jersey and believes the tax break is necessary to overcome financial challenges facing the industry. However, the project faces significant political opposition, primarily from Republican legislators and their supporters.
Notably, on Thursday, New York regulators rejected a request from companies for larger subsidies to complete large-scale wind, solar, and offshore wind projects. The regulators emphasized that they expected the companies to adhere to the terms of their agreements with the state.
Orsted welcomed the approval from the New Jersey utilities board, stating that it is complying with the statutory requirements outlined in legislation signed by Governor Murphy. However, the company did not provide a specific timetable for completing the first of its two offshore wind projects off the New Jersey coast. In August, Orsted announced a delay in the project until 2026 due to supply chain issues, higher interest rates, and a lack of sufficient tax credits from the federal government. The company revealed during an earnings conference call that it might have to write off approximately $2.3 billion on U.S. projects that have depreciated in value. Despite these challenges, Orsted has decided to persist with the Ocean Wind I project off the southern New Jersey coast, although it did not clarify its timeline for completion.
In an affidavit submitted to the board, David Hardy, CEO of Orsted North America, affirmed the company’s commitment to carrying out the project once the guarantee was approved. Orsted has federal approval for the Ocean Wind I project and state approval for a second project, Ocean Wind II. As per the agreement, Orsted will receive its $100 million guarantee back if it obtains all necessary government approvals to proceed with the first project. If Orsted fails to meet these requirements, the money could potentially be returned to New Jersey utility ratepayers.
Overall, Orsted’s commitment to building New Jersey’s first offshore wind farm with a $100 million guarantee marks a significant step towards Governor Murphy’s vision of making New Jersey the East Coast hub of the burgeoning offshore wind industry. While facing opposition from Republican legislators and experiencing challenges in the wind energy sector, Orsted remains determined to complete the project and contribute to the state’s clean energy goals.
