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Ocean Wind Project in New Jersey Delayed Due to Economic Uncertainty

Orsted, the Danish energy company responsible for nearly half of the ongoing offshore wind farm construction in the US, has announced a delay in its Ocean Wind 1 project off the coast of New Jersey until 2026. The company cited issues with the supply chain, inflation, rising interest rates, and other factors as reasons for the delay. This news has raised concerns about the feasibility of large-scale projects in the renewable energy sector and has energized opponents of offshore wind, who are calling for the project to be canceled entirely.

Ocean Wind 1 is intended to be the first offshore wind farm in New Jersey and is part of Governor Phil Murphy’s plan to make the state a leader in green energy. The goal is to have offshore wind farms producing 11,000 megawatts of power in New Jersey by 2040. The state has already approved three offshore wind farms and plans to add more.

However, Orsted is facing financial trouble with the Ocean Wind 1 project. Moody’s downgraded the company’s outlook from stable to negative after Orsted revealed that it may have to write off over $2.2 billion in losses on the project. This led to a record 25% drop in Orsted’s shares, equating to an $8 billion loss in market value. The company expressed concerns about the uncertainty of receiving government tax credits in the US, as the upfront costs for offshore wind projects remain high and income generation is delayed for several years. Orsted’s CEO, Mads Nipper, stated that unless there is more support from the White House and improved financial conditions, the company is considering walking away from its investments in the US.

The subsidies given to foreign companies, like Orsted, have drawn criticism from Republicans who view them as unwise giveaways. In New Jersey, a bill was passed to allow Orsted to keep federal tax credits that would have otherwise been passed on to utility ratepayers. Republicans argue that this is a billion-dollar subsidy to a foreign wind farm developer at the expense of New Jersey residents.

US Representative Jeff Van Drew, a vocal opponent of Orsted and the Ocean Wind 1 project, sees the delay as an opportunity for opponents to further push their agenda. Van Drew believes that offshore wind farms will harm the Jersey shore economy, environment, and cause energy prices to rise significantly. He argues that the projects will damage oceans, compromise national security, and devastate the fishing industry. Van Drew believes that offshore wind allows foreign countries to control the US’s domestic energy supply and warns that utility bills will double or triple for everyone, regardless of their location.

Orsted’s CEO, Mads Nipper, acknowledged that consumer energy prices will inevitably increase as offshore wind farms are developed in the US. He stated that without price increases, neither Orsted nor other developers will build more offshore wind projects. Other major offshore wind developers, such as Equinor from Norway and BP from the UK, have requested a 54% increase in the price of electricity generated from their planned offshore wind farms.

The commitment to offshore wind goals by the Biden administration and many states may give developers like Orsted a strong negotiating position to obtain more economic support from the government. Opposition to the Ocean Wind 1 project remains strong, with plans for congressional hearings and calls for evaluation from the General Accounting Office.

In conclusion, Orsted’s Ocean Wind 1 project off the coast of New Jersey has been delayed until 2026 due to various factors, raising concerns about the viability of large-scale offshore wind projects. Financial issues, including potential write-offs and uncertainties surrounding government tax credits, have contributed to the delay. Opponents of offshore wind continue to fight against the project, arguing that it will harm the economy, environment, and lead to significant increases in energy prices.

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