Danish wind farm developer Orsted has agreed to pay $125 million to the state of New Jersey in order to resolve claims related to the cancellation of two offshore wind farms in 2020. This settlement amount represents a significant reduction from the original sum that the company was obligated to pay.
The New Jersey Board of Public Utilities announced on Tuesday that a settlement has been reached between the state and Orsted. The settlement resolves claims that arose after Orsted decided to cancel two wind farms along New Jersey’s southern coast in October of last year.
The state plans to utilize the $125 million it receives to support various clean energy programs, including investments in wind energy facilities and component manufacturing facilities.
Before abandoning the projects, Orsted had offered a $100 million guarantee to ensure the completion of Ocean Wind I by the end of 2025. Furthermore, the company had committed to investing an additional $200 million to support the development of the offshore wind industry in New Jersey.
Orsted announced last fall that it was discontinuing the projects and is now seeking to withdraw from the $300 million worth of guarantees, citing its decision to no longer pursue the projects.
In a statement to The Associated Press, Orsted expressed satisfaction with the settlement, stating that it encompasses the company’s complete financial responsibility to the state.
New Jersey’s commitment to offshore wind and the promising future of the industry in the Garden State are highlighted by the agreement, as well as other measures announced on Tuesday.
The statement expressed the anticipation of maintaining valuable partnerships with stakeholders in New Jersey as they continue to progress clean energy projects in the region.
The company has not disclosed whether it intends to propose future projects in New Jersey.
Jeff Tittel, a prominent environmentalist and former president of the New Jersey Sierra Club, strongly criticized the settlement with Orsted, labeling it as a betrayal of environmental values.
According to him, the governor claimed that they would bear full responsibility for the outstanding $300 million owed to the state due to their unsuccessful project. He expressed dissatisfaction with the fact that they are being let off the hook and only paying less than half of the amount, resulting in New Jersey losing $175 million. In his opinion, this arrangement is unfavorable for the state of New Jersey.
In a series of announcements made on Tuesday, the administration of Democratic Gov. Phil Murphy revealed several settlements concerning offshore wind.
New Jersey has announced that it will accelerate the timeline for the next solicitation of additional offshore wind projects. Originally scheduled for the third quarter of 2026, the state has now moved it up to the second quarter of 2025. The current round of solicitations in New Jersey will conclude on July 10.
The state has announced that it will temporarily halt its efforts to collaborate with PJM Interconnection, the regional grid operator, in coordinating power transmission planning for offshore wind projects. This decision has been made in response to a new rule introduced by federal energy regulators, which has the potential to impact both the planning and costs associated with these projects.
In a statement, Murphy emphasized that offshore wind development presents a rare opportunity for significant economic and environmental advantages in New Jersey. With the industry reaching a crucial turning point, both in the state and nationwide, it is crucial to maintain our dedication to delivering on the promise of creating thousands of sustainable jobs for families while also ensuring cleaner air for future generations.
Orsted incurred a significant write-off of $4 billion last autumn, primarily attributed to the expenses incurred from the termination of its two New Jersey projects. The company attributed this setback to challenges in the supply chain, inflationary pressures, and a failure to secure sufficient government tax credits.
New Jersey currently has three offshore wind projects that have received preliminary approval.
Many groups in the state strongly oppose offshore wind projects, arguing that they are both expensive and pose potential risks to the marine environment.
According to Protect Our Coast NJ, the decision to speed up offshore wind contracts demonstrates the changing political environment in Washington and New Jersey. They criticized Governor Murphy’s clean energy objectives, referring to them as “arbitrary and unrealistic.”
Advocates argue that these initiatives play a crucial role in shifting away from the utilization of fossil fuels, which greatly contributes to the adverse effects of climate change.
