Orsted Wins New Jersey Contract as Offshore Wind Poised to Boom

offshore wind turbine
By Teun van den Dries / Shutterstock

By Christopher Martin (Bloomberg) — New Jersey awarded a contract to Denmark-based Orsted A/S to provide power from a wind farm it’s planning in the Atlantic Ocean as Northeast states push to jump-start an industry that’s languished in the U.S.

Orsted, the world’s biggest offshore wind developer, plans to build the project 15 miles (24 kilometers) off Atlantic City as part of a string of developments proposed from North Carolina to Massachusetts. Orsted’s 1.1-gigawatt bid, approved unanimously by New Jersey’s Board of Public Utilities, is enough to power about 500,000 homes.

The massive projects planned in the Atlantic will mark a dramatic shift in how the U.S. generates electricity and sow seeds for what analysts say could become a $70 billion industry. While it’s boomed in Europe, offshore wind is almost nonexistent in the U.S. That’s changing now as states see it as a way to bring clean power to crowded coastal regions.

“This is historic,” Joseph Fiordaliso, president of New Jersey’s Board of Public Utilities, said before the vote.

In the first year, Orsted’s contract will be for $98.10 per megawatt-hour, according to the Board of Public Utilities. That’s roughly triple the average wholesale power cost in the region. New Jersey regulators estimate residential customers will see their monthly bill increase by an average of $1.46.

The U.S. Bureau of Ocean Energy Management has already awarded more than a dozen leases for offshore wind sites along the East Coast. Under Governor Phil Murphy, New Jersey has set a goal to get 3.5 gigawatts of power from offshore wind by 2030. New York is pushing for 9 gigawatts by 2035, enough to power as many as 6 million homes.

Offshore Wind Grab

For the first contract in New Jersey, the state sought bids for as many as 1.1 gigawatts. That dwarfs the only existing offshore wind farm in the U.S., a 30-megawatt installation off Rhode Island that began operations in 2016. It also trumps the biggest contract to date: an 800-megawatt deal Massachusetts awarded to Avangrid Inc. and Copenhagen Infrastructure Partners for a project south of Martha’s Vineyard.

Thomas Brostrom, president of Orsted’s North American unit, said in an interview that New Jersey will “reap the rewards of being an early player in the offshore wind industry as it grows in the U.S.”

The contract requires utilities to buy power from the wind farm and is key to getting the industry off the ground. Erecting and operating wind turbines in the ocean remains an expensive way to generate electricity. But costs are falling, and states along the East Coast see the technology as crucial for reducing greenhouse emissions.

New Jersey’s contract is higher than the $65 per megawatt-hour that Massachusetts agreed to pay for its first offshore wind agreement. That’s in part because Orsted’s project expects to get a federal tax credit of 12%, compared with 18% for the Vineyard Wind project off Massachusetts, said Kelly Mooij, deputy director of New Jersey’s clean energy program.

New York is expected to award its own contract, or contracts, for 800 megawatts of offshore wind within days.

–With assistance from Dave Merrill.

© 2019 Bloomberg L.P