Following a decision by its Board of Directors, Danish energy developer Orsted has canceled its Ocean Wind I and II offshore wind projects in New Jersey. The company reported that supply chain issues and rising interest rates were large factors in its decision.
“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,” said David Hardy, Group EVP and CEO Americas at Orsted. “As a result, we have no choice but to cease development of Ocean Wind 1 and Ocean Wind 2."
Ocean Wind I and II were set for construction off the coast of southern New Jersey and, if completed, would have delivered over 2,200 MW of offshore wind to the state, the equivalent of powering over one million homes.
Orsted announced they plan to take a $4 billion impairment, or a permanent reduction in the value of its assets to reflect a decrease in the company’s market value. Orsted has also set aside an additional $1.55 billion for “potential contract cancellation fees not already covered by the impairments.” In total, the company is facing up to $5.55 billion in write-offs.
The project cancelation has also caused backlash from the surrounding communities, which would have experienced a number of benefits from Orsted’s operations. For example, according to Orsted, Ocean Wind II alone was set to “generate over $4.8 billion in net economic benefits for New Jersey.”
“Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” said New Jersey Governor Phil Murphy. “As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind I project.”
Despite this development, Orsted still plans to move forward with its $4 billion Revolution Wind project, which is expected to be completed in 2025. Once operational, the project will deliver 400 MW of clean energy to Rhode Island and 304 MW to Connecticut, the equivalent of powering more than 350,000 homes.