A green energy company on Tuesday pulled the plug on two wind projects off the coast of New Jersey which were approved for an estimated $1 billion in taxpayer-funded subsidies by Democratic Gov. Phil Murphy and state lawmakers.
The Danish outfit Orsted cited high inflation, rising interest rates and supply chain issues as their reasons for scrapping its Ocean Wind 1 and 2 projects – both of which were buoyed by tax incentives included in President Biden’s so-called Inflation Reduction Act.
“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,” Orsted Americas CEO David Hardy said in a statement.
“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 US and global hub for offshore wind energy.”
Murphy, a strong proponent of the project, fumed over Orsted’s announcement, calling the pullout “outrageous” amid the unprecedented accommodations granted by the Garden State to the foreign company.
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” Murphy said in a statement. “As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project.”
Murphy he would explore legal options regarding the abandoned Orsted project after the state worked hard to secure the funding.
“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,” he added.
“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.”
The failed development, which would have provided the state with its first offshore wind farm just 13 miles off the South Jersey coast, was expected to generate enough energy to power half a million homes.
In July, New Jersey legislators approved tax breaks for Orsted valued as high as $1 billion to keep the project moving forward — a move Republicans, commercial fishermen and activists slammed as a generous subsidy for a potentially harmful environmental project.
In exchange for the handout, which allowed Orsted to pocket federal tax breaks it was initially required to give back to New Jersey ratepayers, the company was required to place a $200 million guarantee into state coffers, which will ostensibly be returned to ratepayers now that the company has scrapped the project.
State Sen. Ed Durr (R-Gloucester) criticized the subsidy at the time, arguing that when Orsted first received approval to build the wind farms it “agreed to apply for and return to ratepayers any federal tax incentives that might become available to offset the higher costs that ratepayers are paying today for the development of wind energy.”
“Despite the deal they signed, Orsted is realizing that wind farm projects don’t make economic sense without major government subsidies, so now they’re looking for a huge handout at the expense of New Jersey utility customers,” he added.