Notes from an Environmentalist.
Sale of Offshore wind leases off New Jersey.
New life for abandoned offshore wind leases?
JON HURDLE, CONTRIBUTING WRITER | SEPTEMBER 9, 2024 | ENERGY & ENVIRONMENT
Ocean leases dumped by Danish developer Ørsted will be snapped up soon, offshore wind boosters predict
File photo: The five turbines of America’s first offshore wind farm, owned by the Danish company, Ørsted, off the coast of Block Island, R.I.
When Ørsted abandoned its plans for a massive wind farm off the Jersey Shore, it was a major blow to the Murphy administration and its promise of more renewable energy serving the state by 2040.
But the energy developer’s exit does not represent a total loss, as it readies to sell its ocean leases amid signs of strong demand from developers.
According to industry analysts and others, the offshore wind industry is poised to buy up the ocean leases that could generate enough power for some 1 million New Jersey homes,
What happens to NJ’s plans for offshore wind after Ørsted?
One or more developer is now expected to acquire the leases that would have allowed Ørsted to create its Ocean Wind 1 and 2 projects about 15 miles off the coast of South Jersey in what would have been the state’s first commercial-scale offshore wind farms.
The Danish wind giant’s shocking withdrawal on Halloween last year was a major setback for the Murphy administration’s plan to install 11 gigawatts of carbon-emissions-free offshore wind power — enough to power more than 8 million homes — by 2040, prompting Gov. Phil Murphy to blast the decision as “outrageous.” It now seems unlikely that New Jersey will be able to meet that deadline given the long lead time and high cost of building wind farms.
‘Keen interest’
But wind industry sources predict that new developers will soon offer to buy the leases, drawn by slowing inflation, lower expected interest rates, and more attractive terms for offshore wind power now offered by New Jersey regulators.
“The economics for offshore wind have been changing for the past year or so,” said Kris Ohleth, executive director of the Special Initiative on Offshore Wind, a consultant to the industry. “If there’s an opportunity out there, developers are going to have a keen interest in getting into the market.”
Ørsted’s withdrawal was a major blow to offshore wind advocates, but the prospect of a lease sale is a chance to get the process back on track, Ohleth said.
If Donald Trump wins the White House, the value of offshore wind leases will ‘plummet’ amid his continuing denial of climate change and his promises of more oil and gas development, said Kris Ohleth, Special Initiative on Offshore Wind
“It’s a huge deal; it’s hard to overstate,” she said. “That’s why Ørsted pulling out at such a late date and so unceremoniously was so painful to the state. We all had been really counting on them to bring that clean energy online. For Murphy, a big part of his offshore wind legacy was Ocean Wind, so it was particularly biting for him.”
Ohleth said she didn’t know who the bidders might be for the Ørsted leases, but predicted there would be good demand for a sale directly from Ørsted because that’s likely to mean a lower cost than if the buyer acquired the lease from the federal Bureau of Ocean Energy Management, which issues the leases.
Why Ørsted dropped out
Ørsted, in a statement explaining its withdrawal last October, blamed “significant impacts” from high inflation, rising interest rates and supply-chain problems, and said it would decide what to do with the leases. The company said last week that it is continuing to “evaluate options” for the lease areas.
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To help insulate any buyer from inflation, Board of Public Utilities contracts for generating power from the lease areas now have a clause that allows the price to be raised or dropped by 15%, depending on market conditions when the final permits for the projects are approved by the federal government. Bidders are also offered federal tax breaks because of the Inflation Reduction Act, which provides incentives for the adoption of clean energy.
Developers will also be attracted by the proximity of the populous New Jersey market and the state’s aggressive program to switch from fossil fuels. There is also a dwindling number of ocean leases, as the Biden administration strives to reach a national goal of installing 30 gigawatts of offshore wind power by 2030, which will also incentivize developers.
Presidential election a factor
Still, any decision to buy Ørsted’s leases will likely wait until after the presidential election, experts said, which will determine whether offshore wind continues to get federal support or is downgraded in favor of more fossil fuel development.
If Donald Trump wins the White House, the value of offshore wind leases will “plummet” amid his continuing denial of climate change and his promises of more oil and gas development, Ohleth predicted.
Any lease sale may also have to wait until New Jersey elects a new governor to succeed Murphy, whose term ends in January 2025.
BOEM confirmed that Ørsted has a right to transfer a lease to another developer, but must seek the agency’s approval. “Ørsted may reach an agreement directly with another party to sell the leases, subject to BOEM’s approval of the assignment of the lease instrument,” the agency’s spokesperson said.
‘These are the first leases that were awarded for offshore wind in NJ, so let’s get them back in production.’ — Anthony Campisi, New Jersey Wind Works
The future of Ørsted’s New Jersey leases comes into focus after 12 Northeast developers whose contracts were awarded between 2016 and 2022 dropped out or ended their original contracts and are renegotiating them, according to Oceantic Network, an advocacy group previously named the Business Network for Offshore Wind.
But three other projects are under construction, and another five — including two off New Jersey — have been awarded since 2023, the group said. Another, the South Fork project off New York, is now operational.
A delay to the state’s adoption of offshore wind came in July when Leading Light Wind, which plans to start transmitting power by 2031 from a 2.4 GW wind farm about 35 miles off the coast, asked the BPU to pause the development because the company needs more time to obtain turbines.
Renewed interest
Yet in one recent sign of revived interest from offshore wind developers, the Bureau of Ocean Energy Management in mid-August auctioned two “wind energy areas” off Delaware, Maryland and Virginia to two companies among six that bid in the sale, which netted about $93 million.
In May, the BPU brought forward its planned fifth solicitation of bids on offshore wind contracts to the second quarter of 2025 from the third quarter of 2026. The fourth solicitation closed in July. The board formally canceled its contracts with Ørsted on Aug. 14.
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Wind energy advocates urged Ørsted to quickly sell the leases so that another developer can take Ørsted’s place.
“These are the first leases that were awarded for offshore wind in NJ, so let’s get them back in production,” said Anthony Campisi, a spokesman for New Jersey Wind Works, a 19-member group of environmental advocates. “There are plenty of developers in New Jersey and up and down the East Coast who are still interested in pursuing offshore wind.”
Any new offshore wind plan would take place alongside three current projects that have been approved by the BPU.
They are Atlantic Shores South, which would generate 2.8 GW from some 100,000 acres of ocean starting nine miles off Long Beach Island; Leading Light Wind, a joint venture between Invenergy and energyRE, which would generate 2.4 GW from a site about 35 miles off New Jersey; and Attentive Energy Two, a joint venture between TotalEnergies and Corio Generation, which would generate about 1.3 GW from a site about 42 miles east of Seaside Heights, starting in 2031.
[Editor’s note: This story has been updated with a statement from BOEM.]