Ørsted’s decision to halt the development of its U.S. Offshore Projects, Ocean Wind 1 and Ocean Wind 2, has sparked controversy and debate. Governor Phil Murphy of New Jersey expressed his outrage and questioned the credibility and competence of Ørsted. The company cited adverse impacts such as supply chain delays, increased interest rates, and the lack of an OREC adjustment on Sunrise Wind as reasons for its decision. The impairment losses incurred by Ørsted amount to DKK 28.4 billion, with the majority of that relating to Ocean Wind 1. This has led to a net profit of DKK -19.9 billion and a return on capital employed (ROCE) of -14%. Ørsted’s previously guided EBITDA for 2023 remains unchanged, excluding a provision of approximately DKK 8-11 billion related to potential cancellation fees. In light of these challenges, Ørsted has decided to cease the development of Ocean Wind 1 and Ocean Wind 2, while progressing with the 704 MW Revolution Wind project.
Congressman Jeff Van Drew applauded Ørsted’s decision, describing it as a victory for South Jersey residents, fishermen, and the historic coastline of the Jersey shore. However, Governor Murphy condemned Ørsted’s abandonment of its commitments, calling it outrageous. He emphasized the importance of offshore wind projects for New Jersey’s economic, environmental, and clean energy future. Despite this setback, Governor Murphy remains optimistic about the future of offshore wind in the state, highlighting the high number of bids received in recent weeks and upcoming solicitations for offshore wind transmission infrastructure.
Senate Minority Leader Anthony M. Bucco, a Republican, seized the opportunity to criticize Governor Murphy’s energy master plan and the Democratic Party’s handling of the offshore wind project. Bucco claimed that Republicans had warned about Ørsted’s financial challenges and the unsustainability of the project. He accused Democrats of rushing through the energy master plan without due diligence and expressed concern about the negative environmental and economic effects. Bucco called for transparency and accountability regarding the funds expended on the project.
The decision by Ørsted to withdraw from New Jersey’s offshore wind project confirms the warnings issued by Senate Republicans. The company’s interim financial report for the first nine months of 2023 revealed an operating profit (EBITDA) of DKK 19.4 billion. However, impairment losses of DKK 28.4 billion were recognized due to supply chain delays, increased interest rates, and the lack of an OREC adjustment. Ørsted’s CEO, Mads Nipper, acknowledged the challenges posed by the current market situation and the decision to cease the development of Ocean Wind 1 and Ocean Wind 2. Despite these setbacks, Ørsted remains committed to its offshore wind portfolio, as evidenced by the final investment decision on the Revolution Wind project.
The future of offshore wind in New Jersey hangs in the balance as stakeholders grapple with the fallout from Ørsted’s decision. The controversy surrounding this development underscores the complex nature of large-scale renewable energy projects and the need for careful planning and execution. As the state evaluates its options and seeks alternative solutions, the debate over offshore wind will continue to shape New Jersey’s energy landscape.