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Ørsted Settles with New Jersey for $125 Million After Offshore Wind Project Scrapped: What’s Next?

In a surprising turn of events, Ørsted, the Danish wind energy giant, has settled with the state of New Jersey for a hefty $125 million after halting its ambitious offshore wind projects, Ocean Wind 1 and 2, which were planned off the coast of Atlantic City. This settlement, announced by Governor Phil Murphy’s office, will be funneled into investments in qualified wind energy facilities and offshore wind component manufacturing, as well as other clean energy programs aligning with the state’s energy goals.

This development marks a significant shift from Ørsted’s initial role in Murphy’s clean energy and climate agenda. The Ocean Wind projects were once heralded as pivotal to New Jersey’s energy transformation.

Ørsted’s decision to abandon the projects was described as part of an “ongoing review of Ørsted’s U.S. offshore wind portfolio.” This decision came mere weeks after the company committed a $100 million guarantee to develop New Jersey’s first offshore wind farm. Governor Murphy expressed strong disapproval at the time.

In response to the project’s cancellation, Murphy emphasized the importance of safeguards in the original legislation, which ensured that New Jersey would receive substantial financial compensation if Ørsted failed to proceed. These protections have now resulted in the $125 million settlement, a recovery bolstered by legislative foresight despite Ørsted’s inability to utilize federal tax credits due to the project’s cancellation.

“Offshore wind development remains a once-in-a-generation opportunity that will result in significant economic and environmental benefits throughout the Garden State. [We] must remain committed to delivering on the promise of thousands of family-sustaining, union jobs and cleaner air for generations to come,” said Governor Murphy.

Initially, Ørsted’s plans included the construction of two 1,100-megawatt wind farms off New Jersey’s southeastern coast. However, delays in the supply chain and further project schedule disruptions, compounded by rising long-term U.S. interest rates and challenges in tax credit monetization and construction permits, led to the project’s termination. Work that was supposed to commence in 2025 had already been postponed to 2026 before the eventual cancellation.

As New Jersey navigates the aftermath of this significant development, the focus shifts to leveraging the $125 million settlement to bolster its clean energy infrastructure. The state remains poised to pursue its renewable energy ambitions, despite the setback, aiming to maintain its trajectory towards sustainable energy solutions.

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