Ørsted Agrees to Pay $125M Settlement to Cancel New Jersey Wind Farms
Seven months after announcing it was walking away from two large offshore wind farms planned for New Jersey, Ørsted and the New Jersey Board of Public Utilities agreed to settle their claims for a fraction of the total guarantees the company issued the state. The company will pay $125 million to settle all claims with the state and to release claims made against each other after Ocean Wind 1 and Ocean Wind 2 were canceled in what has become known as a Halloween surprise on October 31, 2023.
Ørsted was moving forward with the development plans for what were going to be the first two offshore wind farms in New Jersey. Ocean Wind 1, which was to have been located near Atlantic City, was the most advanced of the projects. It called for 98 turbines with a total capacity of 1.1 GW to power about 500,000 homes. The second phase, Ocean Wind 2, was a similar project with a projected capacity of 1.15 GW. Ørsted cited increased costs due to inflation and supply chain problems announcing would write off the projects as part of an anticipated total impairment of approximately $5.5 billion to restructure its offshore wind portfolio.
Ørsted had entered into a $100 million guarantee and total commitment of $300 million with New Jersey assuring the state that the projects would be completed on time. Under the terms of the agreement, the company would forfeit the guarantees by not proceeding with the projects, but days later it said it wanted the $200 million portion returned.
New Jersey Government Phil Murphy angrily said they would move to ensure the company honored its obligations in full. He called the company’s decision to abandon its commitments “outrageous.”
The Board of Public Utilities said today the $125 million settlement with the company will be used to support investments in qualified wind energy facilities, investments in offshore wind component manufacturing facilities, and other clean energy programs.
At the same time, New Jersey highlighted its efforts to accelerate its programs for renewable wind energy. The state currently has a fourth solicitation underway due to close July 10 seeking 1.2 to 4 GW. They also announced plans to accelerate the fifth solicitation which had been scheduled for Q3 2026. New Jersey plans to hold that round in Q2 2025.
“Offshore wind development remains a once-in-a-generation opportunity that will result in significant economic and environmental benefits throughout the Garden State,” said Governor Murphy in a statement issued today. “At this pivotal inflection point for the industry both in New Jersey and across the nation, it’s critical that we remain committed to delivering on the promise of thousands of family-sustaining, union jobs, and cleaner air for generations to come.”
The Bureau of Ocean Energy Management announced last week that it has completed the final environmental review for New Jersey Atlantic Shores wind farms. It is a key step to move those projects forward with approval of the construction and operation plan still required. Atlantic Shores would initially provide 1.5 GW and possibly a total of 2.8 GW but it is not likely to start commercial operations until 2027 and 2028.
BOEM Releases Final Environmental Statement on First NJ Offshore Wind Farms
The Bureau of Ocean Energy Management (BOEM) is continuing its efforts to push forward with the review and approval of U.S. offshore wind projects. In the latest step, they are releasing the final Environmental Impact Statement (EIS) for two New Jersey projects which are critical to the state’s efforts to jump-start its renewable wind energy efforts.
Atlantic Shores Offshore Wind, a joint venture partnership between Shell New Energies US and EDF-RE Offshore Development, submitted a combined Construction and Operations Plan for two wind energy facilities and associated export cables on the Outer Continental Shelf offshore New Jersey. If approved, the two projects could generate about 2,800 megawatts of electricity, enough to power almost one million homes.
“We are encouraged to see forward progress and getting another step closer to delivering New Jersey’s first offshore wind projects,” said Joris Veldhoven, chief executive officer of Atlantic Shores Offshore Wind.
The original lease auction was in 2015 and completed in 2016 although later assigned in 2018. The New Jersey Board of Public Utilities (NJBPU) awarded Atlantic Shores Project 1 an Offshore Renewable Energy Credit (OREC) in 2021, to deliver 1,510 MW of renewable power to the State of New Jersey.
New Jersey established the goal to achieve 100 percent clean energy by 2035 but has had delays and a major setback in 2023 when Ørsted abandoned two planned projects citing the changing economics. Governor Phil Murphy called it a “bump in the road” promising to launch a new solicitation in the summer of 2024.
Atlantic Shores remains the most advanced of New Jersey’s projects but it is not likely to be online till 2027 and 2028. The next step will be the approval of the construction and operation plan by BOEM as the project continues through the approval process.
The joint venture partnership has a total of three lease areas (Atlantic Shores)
The combined proposal for the first two projects includes up to 200 total wind turbines and up to ten offshore substations with subsea transmission cables potentially making landfall in Atlantic City and Sea Girt. The lease area covers approximately 102,124 acres and is approximately 8.7 miles offshore of New Jersey at its closest point. The FEIS for Atlantic Shores Project 1 and 2 will be published in the Federal Register in the coming days.
The company has a total of three lease areas under development with a third lease awarded in 2021 located in an area of the Atlantic Ocean known as the New York Bight. BOEM has just begun the environmental review process for that proposal.
The Department of the Interior highlights that it has approved the nation's first eight commercial-scale offshore wind projects with a combined capacity of more than 10 gigawatts of clean energy as part of the Biden administration's goal to deploy 30 gigawatts of offshore wind energy capacity by 2030. Since January 2021, the Department has held four offshore wind lease auctions and recently released a new five-year offshore wind lease schedule, which includes up to 12 potential offshore wind energy lease sales in the Atlantic, Gulf of Mexico, Pacific, and the waters offshore of the U.S. territories over the next five years.
While the approvals continue to move forward the industry is continuing to struggle to complete its first large projects. South Fork Wind, developed by Ørsted and Eversource, was completed in March 2024, but Vineyard Wind, being developed by Avangrid and Copenhagen Infrastructure Partners, is reported to be behind schedule. A report in a local newspaper, the Commonwealth Beacon, said as of mid-May only 16 of the planned 62 turbines are installed but the companies hope to accelerate installations with better weather in the summer months.
In May, two more large projects, Revolution Wind which will power Connecticut and Rhode Island, and Dominion Energy’s project off Virginia Beach both began installing foundations. Revolution Wind does not expect first power till 2025 while Dominion expects its project in late 2026.
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