N.J. will get $125M of the $300M set aside for offshore wind project cancellations 

After previusly saying he would “fight like hell”, Governor Phil Murphy is pleased, moves up new bidding.

New Jersey will receive $125 million from Ørsted – as opposed to the $300 million it was originally slated to get – after settling with the Danish developer that backed out on its plans for two offshore wind farms.

State officials paired the agreement announcement Tuesday afternoon with news it would accelerate the window for more developers to bid for offshore wind projects to come into fruition off the state’s coast and a transmission planning update.

“Governor Phil Murphy is pleased that this matter has been resolved without litigation and that the state will receive $125 million from Ørsted,” Natalie Hamilton, a spokesperson for the governor, said Tuesday afternoon in an email. “He is grateful to his partners in the legislature who included protections in the legislation that allowed for a recovery of this magnitude, even though Ørsted did not avail itself of the federal tax credits because of the cancellation of the New Jersey projects.”

“The advancement of the fifth solicitation timeline demonstrates that in spite of this,” she added, “New Jersey remains on track to become a national leader in the burgeoning offshore wind industry.”

A copy of the settlement agreement was not immediately provided.

Murphy, a Democrat, previously said the state would “fight like hell” to keep all $300 million it was owed.

Ørsted canceled two offshore wind farms last October, hurling the state’s nascent clean energy ambitions into some confusion.

Besides what the cancelation meant for the Garden State economically and for Murphy politically, the large pot of money also entered a kind of limbo.

As part of a $1 billion tax incentive law, Ørsted put $200 million in escrow for supply chain and manufacturing investments and established a $100 million dollar parent company guaranty (or money given as a security) as part of ensuring that Ocean Wind 1 would happen.

If it did not, the law stipulated, the money would go to New Jersey, a spokesperson for the governor previously confirmed.

That law was crafted to redirect federal tax credits – ordinarily sent to ratepayers – to Ørsted instead, but only if what would have been New Jersey’s first offshore wind farm was operational by December 2025.

Parsing out the money was done to help the developer and others like it face unforeseen challenges – as wind plans were launched before the COVID-19 pandemic and rising inflation made projects much more difficult to finalize.

In a statement, an Ørsted spokesperson said the company was pleased with Tuesday’s announcement.

“Our joint settlement, as well as the announcement that the fifth offshore wind solicitation will have a new accelerated timeline, underscores New Jersey’s commitment to offshore wind and the industry’s bright future in the Garden State,” the company spokesperson said. “While we advance clean energy projects throughout the region, we look forward to continuing valuable partnerships with New Jersey stakeholders.”

Asked about the settlement Tuesday afternoon during his latest call-in television show on News 12 New Jersey, Murphy said the goal with Ørsted was to “make them pay” for pulling out of the project.

“And we have succeeded in that,” he said. “I’m pleased with the amount. They got nothing out of this.”

Money from the settlement will go towards the state’s wind facilities and other clean energy programs, the BPU and Murphy’s office said Tuesday.

Reacting to the settlement on social media, state Sen. Joe Cryan, D-Union, said the $125 million should be used to offset ratepayer cost increases expected from offshore wind energy projects.

“The clawback settlement of $125 million from Ørsted – while not near the amount they owed to New Jersey – is a good downpayment on expanding the offshore wind supply chain,” Doug O’Malley, director of Environment New Jersey, told NJ Advance Media in a statement. “Ørsted owed more, but it is unclear if they could have been forced to pay the full bill.”

Jeff Tittel, a long time environmental activist in the state, was more critical, saying the settlement seems “more of a sellout than a good deal for the people of New Jersey.”

“The governor said they would be held responsible for the entire $300 million they owe the state for their failed project,” Tittel said. “They are being let off the hook once again paying less than half with New Jersey losing $175 million.”

State Senate Minority Leader Anthony Bucco, R-Morris, said it’s “troubling” that the state didn’t recoup the entire $300 million.

“Why we settled for $125 million is a question that needs an answer. I get it: Litigation is costly and unknown,” Bucco told NJ Advance Media. “But this administration continued to invest in the Ørsted project even after we learned they were in trouble.”

Still, former state Senate President Stephen Sweeney, a Democrat who helped promote wind development and is now running to succeed Murphy as governor next year, said it was “not realistic” to expect the full money back.

“I think they did a great job on the settlement,” Sweeney told NJ Advance Media. “There was no guarantee of a win. To get (money back) and advance the next round of offshore wind I think is critically important to keep the momentum going. We’re gonna get there.”

Tittel said on the phone he is also mindful of the “turmoil” faced by the offshore wind industry more broadly and what last year’s withdrawal meant in financial losses for the Salem County and Paulsboro wind ports.

In a recent positive development though, the latest offshore wind approvals also included an agreement to provide $164 million for the Paulsboro monopile port and a commitment to use the Salem County facility as well.
Massive offshore wind monopiles in Paulsboro

The wind port in Paulsboro N.J. where massive monopiles for wind turbines sit on site on March 11, 2024. Before the port fully opens, Ørsted needs to fully vacate from it, local officials said.Phil McAuliffe
A gust of news

Besides the settlement, the state also announced it will once again move up the timeline for developers to propose additional offshore wind projects.

Anjuli Ramos-Busot, the state director of the Sierra Club, said Tuesday it was “critical that we continue to move forward in the responsible and equitable build-out of offshore wind to ensure a future of energy independence, family-sustaining jobs, continued investments in workforce development, and improved public health.”

Wind farms have been criticized by various local Jersey Shore groups, some with ties to fossil fuel interests, over the unproven link between survey work and large whale deaths. Projects meant to harness the power of the wind have also been championed by environmentalists.

The fifth offshore wind solicitation window, originally scheduled to start in the third quarter of 2026, will now happen from April to June 2025.

The fourth window is currently open through July 10.

“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,” Murphy said in a statement Tuesday.

Currently, three offshore wind projects have gotten state approvals ahead of additional permitting required for construction.

The project that is furthest along is owned by Atlantic Shores, which last week received a final environmental impact statement from the Bureau of Ocean Energy Management. Atlantic Shores’ wind turbines may not start delivering power until 2028.

The state BPU also said Tuesday it will pause on advancing the “Second State Agreement Approach” (SAA) for coordinated offshore wind transmission planning with regional grid operator, PJM Interconnection.

“The decision to pause follows the Federal Energy Regulatory Commission’s release of Order 1920 which addresses long term regional transmission planning and PJM’s ongoing interconnection queue reform process, each of which impacts planning and costs,” the state said in a summary.

The BPU said the pause will help commissioners and staff to evaluate next steps.

O’Malley also wondered Tuesday about the fate of Ørsted’s wind energy leasing area off of Atlantic City.

“The potential for offshore wind is still as strong as the day Ørsted cancelled their project last fall, and the risks from sea level rise are still as stark,” he said. “Ørsted should move to sell their lease as quickly as possible – there is clear interest from other developers in the area that can power hundreds of thousands of homes with clean energy.”

Ørsted officials have not stated their intentions for the leasing areas.