Energy Musings - February 6, 2025
One of the bluest and environmentally obsessed states, New Jersey, just ended its offshore wind efforts. Gov, Phil Murphy (D) will leave office with no offshore wind victories.
WOW! New Jersey KO’s Offshore Wind!
Monday, New Jersey’s Board of Public Utilities announced it would not proceed with its fourth offshore wind solicitation. It had been scheduled for December, but the uncertainty about potential offshore wind regulatory changes, once Donald Trump was inaugurated, caused the Board to delay its plan to approve additional power purchase agreements with offshore wind developers.
Not only did President Trump act to withdraw all areas of the outer continental shelf from offshore wind leasing on day one in office, but he also paused federal onshore and offshore wind project leasing and permitting. These actions did not impact projects possessing federal approvals; however, they could be subject to review for compliance with all legal and regulatory requirements.
The Executive Order pause affected “new or renewed approvals, rights of way, permits, leases, or loans for onshore or offshore wind projects pending the completion of a comprehensive assessment and review of Federal wind leasing and permitting practices.” The Order noted, “The assessment shall consider the environmental impact of onshore and offshore wind projects upon wildlife, including, but not limited to, birds and marine mammals. The assessment shall also consider the economic costs associated with the intermittent generation of electricity and the effect of subsidies on the viability of the wind industry.”
Such an assessment will not be a small undertaking. Therefore, the report may take many months or years to finish. In other words, Trump completely derailed the Biden administration’s plan to create an offshore wind industry.
In a news release, New Jersey Board of Public Utilities President Christine Guhl-Sadovy said, "There were three initial bidders in the fourth solicitation. However, two bidders withdrew and only Atlantic Shores submitted a best and final offer."
The complicating factor that delivered the death knell to the solicitation effort was the prior week’s announcement that Shell plc, a 50-50 joint venture partner with French-owned EDP Renewables, was withdrawing from the Atlantic Shores project. The move forced Shell to take a $1 billion earnings charge to recognize the decline in value of its investment in the project.
Shell’s Chief Financial Officer, Sinead Gorman, explained the company’s decision. “We just don’t see that (the offshore wind project) fits both our capabilities nor the returns that we would like,” she told investment analysts. She added, “We took the decision to effectively write that off and pause our involvement.”
Shell is out, or is it? Shell’s status was unclear following developments during an Egg Harbor Township Zoning Board meeting on Monday. Linda Bonvie attended the meeting and wrote about the controversy in her Substack, Badditives. She observed “stacks of paperwork, folders, and other official-looking items” and “a ring of lawyers and corporate types” well-attired, and aided by project manager/engineer Richard Hall. However, the zoning board immediately determined that the variance Atlantic Shores requested was “incomplete.”
Bonvie wrote, “If it seems odd to you that these seeming professionals somehow managed to screw up what should have been a simple variance request, not even moving beyond the site plan checklist, it is indeed.” Then, a more curious development happened.
An Egg Harbor (New Jersey) Zoning Board member asked about Shell’s leaving the project. She wanted to know what Atlantic Shores ownership would be going forward. The Atlantic Shores lead attorney stated, “Shell has not pulled out of Project One.” He said Shell is “still committed to Project One.”
After the meeting, Bonvie questioned the attorney, who stated, “I made a public statement and I stand by that.” She followed up with Shell and received an emailed response. “We are still 50% owners…with our partner EDF renewables.”
Without seeing the partnership agreement, we suspect Shell must remain for the project to continue. Atlantic Shores has federal permits, so it has the potential to advance when New Jersey is prepared to act since the Trump pause does not affect projects with federal permits. Thus, the project has potential value. We suspect Shell’s impairment was not 100% of its investment.
The problem with advancing the project is that the power purchase agreement was negotiated in 2021, leaving the power price woefully below the levels needed to support the project’s financial viability. If New Jersey grants Atlantic Shores a power price sufficient for it to be profitable, Shell may become interested again, especially given its reduced investment. EDF and Shell likely hope to find another investor to assume Shell’s position or maybe take a substantial portion, leaving Shell with a small interest.
The Atlantic Shores situation closes the offshore wind chapter of New Jersey’s governor, Phil Murphy (Dem). He had made offshore wind the centerpiece of his environmental agenda for the state. During his tenure, five offshore wind farms had been approved. Murphy got the state legislature to pass a bill allowing Danish offshore wind developer Ørsted to keep upwards of $1 billion in tax credits for its two projects. The tax credits would otherwise have gone to ratepayers. When the Ocean Winds 1 and 2 projects were cancelled, there was a highly contentious battle between the state and Ørsted over the tax credit money and various deposits made in anticipation of the projects moving forward.
On Monday, Murphy called the offshore wind industry a “once-in-a-generation opportunity to create tens of thousands of jobs, drive an entirely new manufacturing supply chain, and secure energy independence.” However, he acknowledged the problems the industry faces. He said the “offshore wind industry is currently facing significant challenges, and now is the time for patience and prudence.”
Murphy leaves office with two of the five approved offshore wind projects cancelled. One, Atlantic Shores, is in limbo. The remaining projects are early development; thus, they are subject to Trump delays. It appears Murphy will leave office with no offshore wind victories to celebrate.