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Could NJ’s 1st wind projects be salvaged? It’s not up to Gov. Murphy.
By
Nancy Solomon
Published Dec 7, 2023
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Photo by Rachel Wisniewski/For the Washington Post
By
Nancy Solomon
Published Dec 7, 2023
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When the world’s largest wind developer backed out of two projects it planned off the New Jersey shore, it dealt a potentially catastrophic blow to Gov. Phil Murphy’s ambitious plans for all-clean energy sales by 2035.
There’s only one other wind project yet approved in New Jersey, and it’s years behind the “Ocean Wind 1” and “Ocean Wind 2” projects that Danish developer Orsted scrapped in late October, citing economic pressures. But there’s one way New Jersey could potentially salvage the projects: if Orsted sold its rights to develop them to another company.
So far, the wind company isn’t saying whether it plans to do so. And Murphy’s office declined to comment on any prospects for getting Ocean Wind 1 and Ocean Wind 2 back on track. But state Sen. Bob Smith, a Democrat from Piscataway who has been leading the charge on wind power, thinks a sale of the projects is likely.
“One thing clearly motivates them, and that's capitalism,” he said. “To sit on the leases is to get no return on them."
Ultimately, the decision whether to sell the project rights sits entirely with Orsted, not the Murphy administration or Legislature. The company has contracted directly with the U.S. Bureau of Ocean Energy Management to lease areas off the Jersey coast and build wind farms there, and state officials say they have no authority to intervene in that contract.
Stephanie Francoeur, a company spokesperson, said the company “retains sole ownership of the lease areas” and “will consider value-creating options as part of its ongoing portfolio review,” but wouldn’t say what those “value-creating options” might include.
Orsted’s projects would have produced about 2,300 megawatts of electricity, or enough to power roughly 1 million homes. How the Murphy administration responds to the collapse of those projects will determine whether the state can successfully achieve its ambitious clean-energy goals.
Late last month, the Murphy administration directed the state to put other offshore sites out to bid as quickly as possible. But that means starting from scratch on any new approvals.
Orsted was the first to acquire lease areas, and was expected to begin producing electricity by 2025. Ocean Wind 1, the first project, was ready to begin construction after having received all of its federal and state permits — a lengthy process that can take five years or more. Ocean Wind 2, a second project meant to be developed by Orsted, was close to receiving its final permits as well. That makes the rights to the projects valuable assets for the company, even after it scuttled its own plans to move forward.
A third large wind farm off the Jersey Shore, in a lease area owned by another company, is not scheduled to be complete until 2028. For now, that’s the soonest New Jersey residents can expect wind power to be available to them.
Orsted pulled up stakes in New Jersey, the company said, because it was facing rising costs and difficulty finding the vessels it needed to build the projects. But the Oct. 31 announcement — in which Orsted said it would also take a $4 billion write-down as it abandoned the projects — was especially surprising because the New Jersey state Legislature passed a bill in June that would allow the company to keep its federal tax breaks and not pass the savings on to ratepayers.
In exchange for the tax arrangement, it agreed to pay the state $100 million if its project was not built on time. It also agreed to contribute another $200 million to the construction of a wind port in South Jersey.
Now, Orsted says it does not have to pay the $300 million because it did not complete the deal and is no longer pursuing the tax incentives.
Immediately following the Orsted announcement in October, Murphy took an aggressive stance: “Today’s decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence,” he said in a written statement.
We in the Legislature will do everything we can to help this industry move ahead to save our lives. You know, if you don't believe in climate change at this point, you're a numbskull.
State Sen. Bob Smith
In the aftermath of Orsted’s withdraw, Murphy said he’d “fight like hell” to get the $300 million. But so far, the state hasn’t filed any legal action. And officials with the governor’s office wouldn’t comment in response to questions about pursuing the $300 million.
In an emailed statement, they acknowledged the economic difficulties contributing to problems in developing offshore wind.
“Gov. Murphy recognizes the significant supply chain and inflation challenges experienced by offshore wind developers not just in New Jersey, but across the nation,” spokesperson Bailey Lawrence said. “Despite these challenges, as a burgeoning offshore wind supply chain and infrastructure hub, New Jersey remains an ideal location for the world’s leading developers to plant their flags.”
Supporters of wind energy say it’s a start-up industry that will have its share of failures.
“There are going to be some stumbles, but the industry alone is bigger than any single project,” said Ed Potasnak, director of the New Jersey League of Conservation Voters. “And we need to keep fighting as we move forward for responsibly developed offshore wind for all the benefits it has for our communities, like cleaner air and good local jobs.”
Smith, the state senator, said Orsted's decision surprised him, but added that the state will move forward.
“We're doubling down,” Smith said. “We in the Legislature will do everything we can to help this industry move ahead to save our lives. You know, if you don't believe in climate change at this point, you're a numbskull.”
Wind energy projects are difficult to get off the ground due to a convoluted permitting process and huge upfront costs that must be invested before a single watt of electricity is generated, according to Kris Ohleth, director of Special Initiative on Offshore Wind, a nonprofit that advocates for and provides strategic guidance around wind policy. She has worked in the industry for more than 20 years and her organization conducts research and consults on public policy.
“I think we're asking the offshore wind industry to create a large variety of public sector benefits all on a private sector balance sheet,” Ohleth said. “You wouldn't ask other other types of large infrastructure projects to be responsible for building all their infrastructure as well.”
For example, Ohleth points to Rhode Island, where the state is creating a corridor to bring electric cables to shore instead of leaving it to the wind company to obtain the land. She also recommends the appointment of a federal wind czar who could wrangle what she said are 27 federal and state agencies that are required to sign off on the projects.
“Right now, we don't have regulations that require that climate change be considered when federal policymakers are making decisions about different projects,” Ohleth said.
The Orsted projects’ demise — at least for now — also opens the door to the considerable skepticism that many Republicans have about wind energy.
“We cannot replace all fossil fuels today with solar and wind, as much as we'd like to,” said Mike DuHaime, CEO of consulting firm MAD Global Strategy Group and a Republican campaign consultant. “I think Republicans are taking a pragmatic approach to basically say the reason we are lowering emissions in this country and we've lowered emissions in this state is because natural gas has replaced coal in terms of electric generation — not solar, not wind.”
DuHaime and many Republican legislators in New Jersey oppose Murphy’s plan to transform energy consumption away from fossil fuels, which the governor accelerated earlier this year. In addition to requiring all clean energy sales by 2035, the administration wants to convert hundreds of thousands of homes to electricity or other renewable sources instead of oil and gas for heating by 2030. It also wants all cars sold in New Jersey to be electric by 2035.
“We can't click our heels and wish away every form of energy right now and replace it with renewables,” DuHaime said. “Renewables don't have the capacity right now. We would like to get there, but we can't.”
Smith, the state senator, says the state can get to 100% renewable energy sales by 2035. The Legislature has passed a law that bars local towns from preventing wind projects from coming ashore, and the state has invested in the South Jersey wind port. He supports the move by Murphy to rush new offshore leases to be put up for bidding.
In the meantime, Smith says, there’s plenty of work to be done.
“We have to get our grid up and modernize,” he said. “You can have amazing sources of renewable energy, but if you can't get it to the places where it's needed, you've got a problem.”
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environment
new jersey
Politics
Nancy Solomon
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