Wind energy developer Orsted will pay New Jersey $125 million for canceled projects

New Jersey Gov. Phil Murphy’s office announced Tuesday that global renewable energy giant Orsted will pay the state $125 million for scrapping two offshore wind projects off the coast last year, upending a key part of the state’s clean energy program.

The Murphy administration has said it plans to use the money to further support offshore wind projects through investments in manufacturing facilities and other clean energy programs. It also announced plans for a fifth offshore wind project.

The settlement amounts to less than half of the $300 million that Orsted originally guaranteed if it failed to build the first wind farms off the state’s coast.

Administration officials could not immediately be reached for comment.

Orsted said the settlement, along with other wind energy developments in the state, “underscores New Jersey’s commitment to offshore wind and the industry’s bright future in the Garden State.”

Doug O’Malley, director of the nonprofit Environment New Jersey, said that while the settlement did not match the amount owed to Orsted, “it is a good down payment on the expansion of the offshore wind supply chain.”

In October 2023, Denmark’s Orsted announced it had discontinued its long-awaited Ocean Wind 1 and 2 projects, which would have had the capacity to produce 2.2 gigawatts of renewable energy. Ocean Wind 1 would be the first of many offshore wind projects to meet Murphy’s goal of 11 gigawatts of renewable energy by 2040 – enough to power millions of homes. Both projects would be located off the coast of Atlantic City.

As part of the deal, Orsted signed an agreement to complete the wind farms. The $125 million settlement is a settlement of the state’s claim against the company for breach of contract. At the time, Orsted cited “macroeconomic factors” including high inflation, rising interest rates and supply chain bottlenecks that forced it to halt projects.

Coastal resident groups have long opposed offshore wind energy, saying the turbines would obstruct ocean views. Some also claim that ocean floor exploration for projects is responsible for the deaths of the whales, which most scientists deny.

Atlantic Shores Offshore Wind, a Shell New Energies and EDF-RE Offshore Development company, is implementing offshore wind projects closest to the start of construction. The installation of foundations for the turbines is scheduled to begin in 2026.

Two partnership projects located in New Jersey will be built between Atlantic City and Barnegat Light. Together they would power over a million homes. Last week, the federal Office of Ocean Energy Management released its final environmental impact statements for the Atlantic Shores 1 and 2 projects, a major hurdle.

However, the Atlantic Shores projects have been met with resistance from Shore area residents who say the turbines will spoil their views. Some groups claim that offshore wind activities, such as ocean floor exploration, are causing whale deaths, although most scientists deny this.

The wind turbine areas cover 102,000 acres, and the nearest area is approximately 15 miles from the New Jersey shoreline. There may be up to 200 wind turbines there, reaching a height of almost 300 meters.

In January, the state Public Utilities Board approved two more offshore wind projects: the 1.3-gigawatt Attentive Energy Two project located about 70 km off the Sea Girt coast and the 2.4-gigawatt Leading Light Wind project located about 60 km off shore of Long Beach Island.

On Tuesday, the Murphy administration announced it was seeking a fifth offshore wind project capable of generating 1.2 to 4 gigawatts of power. He says offshore wind will support thousands of jobs in construction, maintenance, supply chain and manufacturing. Officials did not disclose the proposed location.