Orsted’s gigascale Ocean Wind 1 offshore wind project is under threat from a lawsuit filed by opponents in the US state of New Jersey who claim the proposal has benefited from an “unconstitutional $1bn giveaway”.
Legal counsel for opposition groups Protect Our Coast NJ and Defend Brigantine Beach said they filed the suit in the state’s Superior Court last week.
The action follows a decision by New Jersey’s state legislature to approve a bill allowing the global offshore wind giant to retain the full value of tax credit incentives for the 1.1GW Ocean Winds 1.
Orsted had said that the extra incentives under the investment tax credit (ITC) scheme – which were originally supposed to be returned to state coffers – were needed to help plug an economic viability gap at Ocean Wind 1 due to inflation, supply chain and finance costs that have rocketed since a deal was signed with the state in 2019.
The activist groups, however, claim that the benefit to Orsted – which it puts at almost $1bn in value – is illegal.
“The Legislature’s giveaway of federal tax credits to Orsted benefits a single company in violation of the New Jersey Constitution,” said Bruce Afran, counsel for Protect Our Coast NJ and Defend Brigantine Beach.
“In New Jersey, laws that favor a single private party are generally unconstitutional.”
The lawyer added: “Basically, the Legislature caved to the Danish engineering company, giving away a billion dollars in tax credits to relieve Orsted from its commitment to build Ocean Wind 1 from its own money.”
The US Inflation Reduction Act (IRA) offers ITC worth 30% off capex costs assuming projects satisfy labour standards.
Add-on of 10% can be earned through development in so-called ‘energy communities’– struggling industrial and coal-sector brownfield districts – as well as use of domestic content.
Under the terms of the bill Orsted will have to place a $200m guarantee with the state and prepare new reports on the scheduling, viability and timeline of Ocean Wind 1.
New Jersey governor Phil Murphy is a big supporter of offshore wind and the state has an 11GW goal for 2040 that's among the most ambitious in the US.
The case is expected to be heard by a judge at the Superior Court later in the autumn, said the activist groups.
Orsted said in a statement sent to Recharge: “We do not comment on pending litigation. Ocean Wind 1 remains committed to collaboration with local communities and will continue working to support New Jersey’s clean energy targets and economic development goals by bringing good-paying jobs and local investment to the Garden State.”
The legal action adds to a growing array of obstacles facing the fledgling offshore wind sector on the US northeast coast, which range from concerns over whale deaths to opposition from fisheries groups.
Note: Update adds Orsted statement
