In a dramatic turn of events, Ørsted announced Tuesday evening it is ceasing development of the Ocean Wind 1 and Ocean Wind 2 offshore wind projects that were slated to be constructed off the New Jersey coast.

In a press release announcing the news, the energy company cited increasing economic strains facing project development, such as adverse impacts from supply chains, increased interest rates, inflation and more.

The development of offshore wind has becoming a lightning rod politically and culturally in towns along the Jersey Shore.

Local activist groups and many Republican politicians have fought the issue tooth-and-nail – especially in Ocean City and Long Beach Island, among other municipalities – blaming the sonar mapping part of the process for a slew of dead dolphins and whales washing ashore. Citing research, federal officials have maintained that there is no link between the mammal deaths and any offshore wind activities. Groups are also wary of local economic impacts, particularly in tourist spots, due to the potential sightlines and noise from the wind farms, which were set to be built about 13 miles off the coast in waters off of Atlantic City and Ocean City.

While those bitter fights have taken centerstage, rapidly rising costs and a challenging economic climate to develop a project of this scope were the fly-in-the-ointment.

After several months of the Ocean Wind 1 project garnering momentum in the spring and summer, which included a key federal approval in July, things shifted. Two polls showed a major drop in support for offshore wind, meanwhile Ørsted announced in late August that Ocean Wind 1 was being delayed until 2026 because of the aforementioned supply chain and interest rate issues, as well as the need for more federal tax credits.

While rumors have swirled about whether these projects were even still feasible for Ørsted – and the company conceded during an earnings call in August that it had considered walking away – officials said then they still felt the wind farms would be profitable and in recent weeks had continued to maintain that plans were progressing.

Then came the Oct. 31 bombshell announcement followed by the action by the company’s board of directors. Ørsted says the decisions are part of an ongoing review of the company’s U.S. offshore wind portfolio.

“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,” said David Hardy, group executive vice president and CEO Americas at Ørsted. “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,” Hardy continued. “I want to thank Gov. Murphy and N.J. state and local leaders who helped support these projects and continue to lead the region in developing American renewable energy and jobs.”

“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2. We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the U.S. renewables market and truly value the efforts by the U.S. government to support the build-up of the U.S. offshore wind industry,” said Mads Nipper, group president and CEO of Ørsted. “However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects.”

‘Outrageous’

The two projects, which had been slated for adjacent locations, were projected to create a combined capacity of 2,200 megawatts and power up to 1 million homes while creating thousands of jobs.

The state’s third approved project, Atlantic Shores Offshore Wind, which is slated to be about 10 miles to 20 miles off the coast between Atlantic City and Barnegat Light, currently remains on track and is touting the potential to bring power to more than 700,000 homes and generate $1.9 billion in economic activity while creating 18,000 jobs.

Ørsted said it intends to retain the seabed lease area and consider the best options as part of an ongoing portfolio review.

Gov. Phil Murphy put out a strongly worded statement late Tuesday night blasting Ørsted’s decision.

“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence. As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project,” said Murphy.

Today’s decision by @Orsted 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 Orsted fully honors its obligations. pic.twitter.com/X20xMcqmtO

— Governor Phil Murphy (@GovMurphy) November 1, 2023

The governor also defended controversial legislation he signed over the summer (Assembly Bill 5651/Senate Bill 4019) that would have enabled Ørsted to access federal tax credits, noting protections in the measure.

“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,” Murphy continued. “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.”

Murphy nodded to the challenges the burgeoning offshore wind sector is facing, especially for projects awarded prior to the pandemic.

“Ultimately, as we have seen in other states recently, offshore wind projects awarded prior to 2020 have been impacted by a combination of interest rate escalation, supply chain cost increases, and inflation,” said Murphy. “And while today is a setback, the future of offshore wind in New Jersey remains strong. 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.”

“@GovMurphy statement is exactly right – outrageous decision but offshore wind remains vital to our future,” New Jersey Economic Development Authority (NJEDA) Chief Executive Officer Tim Sullivan wrote on social media Tuesday night. “Note on the bill passed in June: it permitted federal credits to benefit Ocean Wind 1 *if and only if* they built the project. Now they get nothing from that bill, period.”

On the ballot

In a joint statement also put out late Tuesday night, Senate President Nick Scutari, D-22nd District, and Assembly Speaker Craig Coughlin, D-19th District, said that their top priority has been ensuring a safe environment for future generations while protecting ratepayers.

“Unfortunately, Orsted has repeatedly failed to live up to their commitments to meet those goals, and their failure has now impeded our clean energy efforts,” the legislative leaders said. “We will continue to move forward and create a strong green economy that is both manufactured and constructed with union labor. However, these projects cannot be realized without absolute ratepayer protection. We will utilize every taxpayer safeguard included in the prior law and make all necessary legislative changes to protect New Jersey residents moving forward. We will continue to stand up for ratepayers, the Shore tourism industry, our economy, and a clean environment.”

The timing could not have been worse for Democrats as they face a tough election battle next week to maintain control of the state Legislature with all 120 seats up for grabs — and the offshore wind issue front-and-center in many campaigns, especially in some of these shore areas.

Senate Republican Leader Anthony Bucco, R-25th District, put out a statement as well Tuesday night. He emphasized that Republicans have been saying for months that Orsted’s offshore wind project was unsustainable and would inevitably fail.

“Orsted’s decision today confirms that Republicans were right when we said this was too much, too fast, and too costly. Their financial challenges were glaringly obvious, yet Democrats ignored the warning signs to rush through Gov. Murphy’s extreme energy master plan without any due diligence,” said Bucco. “This is just another example of how Gov. Murphy’s outrageous energy master plan is coming back to hurt New Jersey taxpayers.”

Bucco credited the leadership of his Republican colleagues in the Legislature as well as representatives such as U.S. Rep. Jeff Van Drew, R-2nd District, an ardent opponent of offshore wind, for exposing what he describes as the negative environmental and economic effects of the governor’s “failed progressive offshore wind agenda.”

“The public deserves to know how much money has been wasted on this epic boondoggle,” Bucco added. “Republicans stand ready to meet this challenge and to ensure that New Jersey’s energy portfolio is strong, safe, transparent, diverse, and fair. It’s time for Republican leadership.”

“I am thrilled to see that Orsted has decided to pack up its offshore wind scam and leave South Jersey’s beautiful coasts alone,” Van Drew wrote in a post on social media site X. “A tremendous win for South Jersey residents, our fisherman, and the historic coastline of the Jersey Shore.”

Opponents of offshore wind in Ocean City and Cape May County, who recently filed a lawsuit challenging federal permits issued for the project, also welcomed Orsted’s decision.

“This is a great day for the people and businesses of Cape May County,” said Cape May County Commissioner Director Len Desiderio. “This is a great day for the Atlantic Ocean. This is a great day for the whales and dolphins. The massive, reckless experiment known as Ocean Wind 1 has been stopped and Ocean Wind 2 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. Well, I am happy that the County Board of Commissioners and so many in our business community and the grassroots groups that have been protesting did not listen to the naysayers. We are a small county down here at the southernmost point of New Jersey, but we knew all along that our economy, our environment, our very way of life was at stake. Orsted has walked away from Ocean Wind 1, 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.”

But Murphy closed out his statement by reiterating his commitment to his administration’s ambitious clean energy goals.

“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,” said Murphy.

This story is developing with more reaction and fallout still to come. Please stay with NJBIZ for the very latest.