Biden Administration Green-Lights Third U.S. Offshore Wind Farm

The Biden Administration has given the green light for development of the Ocean Wind 1 offshore wind farm, marking the third project approval of its kind in U.S. waters. 

Ocean Wind 1 is a large offshore wind farm proposal located about 13 nautical miles off the coast of Middle Township, New Jersey, towards the state's southernmost tip. At full buildout it will have a capacity of 2.2 GW, making it the largest offshore wind farm in the United States and the largest producer of wind power (onshore or off) in New Jersey. It was a joint venture between Orsted and New Jersey utility company PSEG until January, when PSEG sold its 25 percent stake and the development became solely owned by Orsted. PSEG cited the need for an "optimized tax structure" for the project's partners.

The Bureau of Ocean Energy Management (BOEM) has approved Ocean Wind's construction and operations plan (COP), the final permitting hurdle before buildout. 

“Ocean Wind 1 represents another significant step forward for the offshore wind industry in the United States," said BOEM Director Elizabeth Klein. "The project's approval demonstrates the federal government's commitment to developing clean energy and fighting climate change and is a testament to the State of New Jersey's leadership."

Orsted may have been confident in receiving federal approval, because the first steel monopile foundation for Ocean Wind 1 was constructed before the White House announcement. Turbine structure builder EEW delivered the first of 98 monopiles for Ocean Wind at its Paulsboro, New Jersey factory on July 3, two days before the White House formally authorized the project. 

Ocean Wind 1 is the third project of its kind fully approved for development in federal waters. The first two, Vineyard Wind and South Fork Wind, are already under construction. These projects are a small start towards the administration's midterm goal of 30 GW of offshore wind capacity by 2030. However, in a changing market environment, the assumptions underlying that goal are coming into question. Wind developers on both sides of the Atlantic are grappling with cost hikes in the supply chain, which are weighing on the outlook for development plans made before the pandemic. 

In recent months, developers of some of the largest U.S. offshore wind projects have called for renegotiation or termination of their power purchase agreements (PPAs), the state-regulated contracts that govern the sale price of their electricity output. These PPAs were negotiated in a different era and do not provide a profit margin under current conditions, the developers argue. The Shell / Engie / EDP joint venture SouthCoast Wind has filed a request with the state of Rhode Island to renegotiate its PPA, saying that the current terms are "not economic, in light of significant inflation, supply chain and financing cost increases." The BP / Equinor joint venture Empire Wind, located on the approaches to New York Harbor, has filed a similar request to renegotiate, pointing to "rampant inflation, global supply chain disruptions and soaring interest rates."