New Jersey Governor Phil Murphy has attacked Orsted’s decision to cancel plans to develop the Ocean Wind 1 and 2 offshore wind farms in the US, saying the state could take legal action over the call.
Murphy said in a statement the decision by Orsted “to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence”.
He added: “As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project.
“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 US$300m to support the offshore wind sector should Orsted’s New Jersey projects fail to proceed.
“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.
“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.
“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.
“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.”
Orsted said it is considering its options for the lease area for its cancelled US Ocean Wind 1 and 2 projects, which could see it sell part or all of the acreage.
Orsted chief executive Mads Nipper stated as part of a third quarter earnings call: “Ocean Wind 1 is not only acreage, it’s a fully developed and consented site, so those development costs will likely have a value, so that clearly is a valuable asset for us or a potential sale.”
However, he added that: “It is not our plan or expectation that we can or will continue development (of Ocean Wind 1 and 2).”
Orsted ceased development of the 2248MW Ocean Wind 1 and 2 development as macroeconomic factors have changed “dramatically over a short period of time”, leading to the decision, which is part of a wider review of its stateside business.
The decision has resulted in Orsted taking an impairment on the development of €2.7bn (Dkr19.9bn).
The news caused the company’s share price to fall roughly 20% from €45.50 (Dkr339.8) at close on 31st October to €36.25 (Dkr270) at the beginning of 1st November.
“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,” said Orsted US boss David Hardy
“I want to thank Governor Murphy and New Jersey state and local leaders who helped support these projects and continue to lead the region in developing American renewable energy and jobs.”
Meanwhile, the Danish developer has taken a final investment decision on the 704MW Revolution Wind project, a joint venture with Eversource.
“With our final investment decision, we’re solidifying our commitment to building our second commercial-scale offshore wind farm in the United States, helping to deliver more American energy and American jobs,” Hardy added.
“I want to thank our Orsted employees who helped achieve FID for Revolution, as well as our team at South Fork Wind building New York’s first offshore wind farm, our New Jersey team that worked tirelessly to advance these projects, and our land-based team delivering across our portfolio.
“As we manage and deliver in a challenging market, our team of experts sets itself apart.”