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Danish firm pays New Jersey $125M over wind farm withdrawal

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Danish firm pays New Jersey $125M over wind farm withdrawal

May 28, 2024 | 3:07 pm ET
By Nikita Biryukov
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Danish firm pays New Jersey $125M over wind farm withdrawal
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New Jersey reached a settlement with Ørsted months after it pulled plans for two 1,100 megawatt wind farms, citing financial conditions. (Photo by Scott Eisen/Getty Images)

New Jersey will receive $125 million as part of a settlement over Ørsted’s withdrawal from two offshore wind farms last year, Gov. Phil Murphy announced Tuesday, an amount that is less than half of what Murphy once said the company was required to pay the state.

The settlement funds paid by the Danish wind giant over its pullout from Ocean Wind 1 and 2, two 1,100 megawatt wind farms off New Jersey’s Coast, will be used to fund wind development and other renewable energy programs, the governor’s office said. But at least one Democratic lawmaker said the money should be sent back to New Jersey ratepayers as a matter of policy.

“The [Board of Public Utilities] ought to be looking for New Jersey ratepayers first, and these moneys should be reserved to reduce ratepayers’ bills when these projects come on board, and it should be a BPU policy,” said Sen. Joe Cryan (D-Union)

Last July, Gov. Phil Murphy signed a bill that would have allowed Ørsted to retain federal tax credits that would otherwise go to offset consumers’ power bills by roughly $2.40 per ratepayer per year. In return for those subsidies, the wind firm was required to post a $100 million performance security and place $200 million for wind project investments into an escrow account.

Ørsted withdrew from the projects months after the bill was signed into law, citing inflation, rising interest rates, and supply chain disruptions. It later sought to argue it was not responsible for those payments because, it claimed, state regulators gave final approval to related compliance paperwork.

“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,” an Ørsted spokesperson said. “While we advance clean energy projects throughout the region, we look forward to continuing valuable partnerships with New Jersey stakeholders.”

Separately, Murphy announced the state would solicit bids for a fifth round of offshore wind projects more than a year ahead of expectations. Those bids are now set to go out in the second quarter of 2025 instead of the third quarter of 2026, when Murphy will be out of office.

“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,” the governor said in a statement.

The state Board of Public Utilities opened bidding for the fourth round of offshore wind solicitation in late April and will accept applications to build between 1.2 and 4 gigawatts of offshore wind capacity until July 10.

“By accelerating New Jersey’s offshore wind development schedule, we underscore our commitment to realizing the industry’s full potential for the benefit of all New Jerseyans,” said Christine Guhl-Sadovy, the board’s president.

The board also paused talks with PJM Interconnection on grid upgrades that are needed to transmit electricity generated by offshore wind turbines into homes and businesses, citing a new federal order that requires grid operators to plan for transmission needs 20 years in the future, among numerous other things.