New Jersey’s offshore wind loss is New York’s burden to save Biden’s climate agenda

In the long-running sibling rivalry between New Jersey and New York, the Garden State finally thought it had the upper hand.

The state, led by Democratic Gov. Phil Murphy, decided it could become one of the greenest in the country with offshore wind as its main pillar. But Murphy’s ambitious plans to make New Jersey's power supply carbon-free by 2035 collapsed days ago when the developer Ørsted canceled two of the state’s three offshore wind projects.

Now, if President Joe Biden ever wants to meet his energy goals for the nation, New York and other Northeastern states are going to have to pick up New Jersey’s slack. And New York — the bigger sibling, the one with more money, more power and more attention — is poised to snatch away factories and jobs that New Jersey hoped for.

“We’re certainly the state with the greatest ambition at this point,” said Fred Zalcman, director of the New York Offshore Wind Alliance, which advocates for the industry.

New York has a lot riding on the success of offshore wind too. New efforts to save or replace at-risk projects the state has already approved are even more important after the New Jersey projects evaporated.

Offshore wind has long been seen as an essential power source for densely populated coastal states to meet ambitious climate targets. Wind farms don’t have to compete with people for land and send power to waterfront cities.

Approving new wind farms became a sometimes-competitive cause célèbre for Democratic leaders who wanted to expand maritime ports, open new factories and create union jobs. It also became something of a zero sum game, even though they share the same coastal waters.

Greenest governor

Murphy, who campaigned on promises to end the use of coal and natural gas in the state and was praised by state environmentalists as the nation’s greenest governor, wanted to jump ahead of the pack. No other governor was so ambitious — not his national rival for greenest governor, Gavin Newsom of California, not his neighbor to the north, New York’s Kathy Hochul.

In 2019, Murphy’s administration awarded Ørsted, a Danish developer, the largest offshore wind project in American history. At the time, the governor promised the deal would “revolutionize the offshore wind industry here in New Jersey and along the entire East Coast.”

In 2021, the state approved more projects — a second by Ørsted and a third project known as Atlantic Shores — a deal that was again the largest of its kind. Murphy again cheered that the state remained a “leader in the offshore wind industry in the United States.”

But, just two years later, the industry is faltering before fulfilling those big dreams, with canceled projects like New Jersey’s piling up and even more teetering on the edge of failure.

Earlier this year, Maryland, Virginia, Massachusetts, Rhode Island, Connecticut, New York and New Jersey had more than 17 gigawatts of offshore wind projects under contract — enough power for more than 5 million homes. Nearly two-thirds of that has now been canceled or is at risk.

For New Jersey, the collapse of the deal struck with Ørsted means Murphy’s ambitious goal of making New Jersey's grid carbon-free by 2035 is most likely out of reach, though the governor said he still wants the state to be a global leader in offshore wind. Ørsted had planned two 1,110 megawatt projects in the Garden State, enough to power a million homes.

For the region, the loss is also a big deal.

The demise of the New Jersey projects is “unfortunate,” said Rhode Island acting commissioner for the Office of Energy Resources, Chris Kearns.

“These projects and the components that go into them are of significant scale, so it requires a regional economic development kind of hub for this activity to occur,” he said. “So we need projects being built up and down the Northeast.”

States reset

Ørsted’s decision in New Jersey is largely due to factors facing many of the earliest offshore wind projects in the Northeast. The companies promised to build the projects for a price they can no longer meet because of inflation and supply chain issues they blame on the pandemic and war in Ukraine. But the projects have also lost political support because of loud and well-funded opposition from coastal homeowners.

Energy companies have been going up and down the coast asking states for more money.

In New York, where Ørsted also has projects, officials slammed the door in the company’s face and rejected requests to redo contracts from all renewable developers seeking higher prices.

The rejection at first seemed like a catastrophe for offshore wind, but Hochul immediately stepped in to reassure the industry and, within days, the state issued new contracts with other companies for enough new projects to power three million homes. New York’s energy authority also asked developers for input on a new round of bids for offshore wind that could be issued before the end of the year. This could save some of the at-risk projects — and help the state meet its clean energy goals.

In New Jersey, Ørsted got what it wanted after Murphy and Democratic lawmakers rushed through a bill meant to boost the company’s bottom line — but it still wasn't enough.

Unlike New York, New Jersey isn’t ready to immediately approve new projects. On top of that, legislative elections this month could erase Democratic majorities in both chambers, injecting even more uncertainty because Republicans generally oppose offshore wind.

There is a lot of pressure now on Atlantic Shores, the only approved wind farm left in New Jersey, and EEW, a German company that set up shop in South Jersey in part to supply Ørsted and other companies with major infrastructure for their wind farms.

Both companies are now in talks with state officials about their future.

Despite the setback in New Jersey, state officials there and in other East Coast states say they are confident in the future of the offshore wind industry. Several officials said offshore wind is the biggest clean energy source available to them.

States are also starting to work together in the face of the industry’s challenges. Last month, Connecticut, Massachusetts and Rhode Island announced plans to band together to support regional projects.

The aim is to get lower prices for each state from larger projects.

“We're navigating these challenges in the offshore wind industry very carefully to ensure that we can secure these clean energy resources at prices that are competitive and that are affordable for our ratepayers,” said Katie Dykes, the commissioner of Connecticut's Department of Energy & Environmental Protection.

Ørsted also delivered some positive news with a decision to build the Revolution Wind project, which will serve Rhode Island and Connecticut.

In New York, South Fork Wind is under construction for New York’s Long Island publicly-owned utility with components heading from a Connecticut port to be installed. Vineyard Wind I for Massachusetts is also moving forward.

Maryland is grappling with Ørsted’s financial woes. The company has asked the state’s utility regulator to let the company keep more of its federal tax incentives.

“We would like to avoid the interruptions witnessed in the Atlantic coastal states, but we also want to remain vigilant of any additional costs shouldered by rate-payers,” said Maryland Energy Administration Director Paul Pinsky.

For now, New York has the largest amount of offshore wind power under contract and major promises from General Electric companies to build factories for blades and nacelles, the inner guts of the turbine that transform the energy from the spinning blades into electricity. To make the factories viable, the state is putting in $300 million and energy companies have promised to buy parts from GE.

At one time, GE considered putting a facility at New Jersey’s much-heralded “wind port,” a flagship part of Murphy’s offshore wind plans. But that didn’t happen. New Jersey officials have spent hundreds of millions of dollars preparing ports for offshore wind. State Republicans are now calling for an examination of this spending.

States have been competing to secure the U.S. supply chain for the nascent industry, linking in-state investments to bid evaluations and offering subsidies for port and other projects.

But Zalcman, of New York’s wind alliance, said that should start to change after the New Jersey cancellations.

“It’s more of a clarion call for the region to work together and for states not to try and go it alone,” he said. “We’re all dependent on the supply chain maturing without disruption.”

Environmental advocates and other boosters of the industry are undaunted by rising costs and uncertainty. Offshore wind, once it’s up and running, would help insulate electricity prices from volatility in the oil and gas market, they say.

Ironically for Northeastern Democrats who have been competing for wind projects, the largest offshore wind project that is on track is in Virginia — a state with a Republican governor.