Public Service Enterprise Group is looking to get back into offshore wind, and will enter into exclusive negotiations with Ørsted to acquire a one-quarter interest in its yet to be built 1,100-megawatt wind farm off Atlantic City.
The $1.6 billion Ocean Wind project is the first offshore wind farm approved in New Jersey. Located 15 miles off Atlantic City, it is projected to supply more than a half million homes with power. The wind farm is expected to be commissioned in 2024, subject to permitting and other factors.
The two companies’ announcement late in the day was a bit of a surprise, considering PSEG and Ørsted had previously disclosed the former had an option to buy an equity interest in the wind farm project this spring.
In a joint press release, the companies appeared to indicate the process of negotiations might be far along, although an Ørsted spokesman declined to confirm that this was the case.
“Given PSEG’s track record for success and history providing energy solutions for communities across the Mid-Atlantic region, we are thrilled at the prospect of having them join the Ocean Wind project,’’ said Thomas Brostrøm, president of Ørsted North America and CEO of Ørsted U.S. Offshore Wind.
Ørsted has emerged as the biggest force in the nascent offshore wind market in the United States, operating the first offshore wind facility in the country off Block Island in Rhode Island. It also has been awarded commitments to build more than 2,900 MW of capacity in six other projects along the Eastern Seaboard.
“We are pleased about the opportunity to explore a partnership with Ørsted, a world leader in offshore wind development, and help New Jersey achieve its goal of carbon free generation by 2050,’’ said Ralph LaRossa, president and chief operating officer of PSEG Power, a subsidiary of PSEG.
Offshore wind is a key, if not most crucial component of Gov. Phil Murphy’s goal of converting to a clean energy economy. By 2030, the administration wants to build 3,500 MW of offshore wind off the Jersey coast.
PSEG changes tack
At one time, PSEG appeared poised to be a big player in the offshore wind sector, cementing a partnership more than a decade ago with developer Deepwater Wind, which Ørsted acquired a year ago. When former Gov. Chris Christie’s administration backed away from promoting offshore wind, PSEG seemed to steer away from the sector.
After the Deepwater acquisition, it was disclosed that PSEG had agreed to provide Ørsted with energy management services, which included allowing the Danish developer to lease land for use in its project development. The lease is expected to provide land around PSEG’s three nuclear units in Salem County to assemble the huge turbines for the wind farms.
In a quarterly earnings call this spring, PSEG CEO Ralph Izzo talked more about the company’s interest in building transmission for offshore wind, instead of developing the wind farms offshore. Nevertheless, PSEG, more than any other power company in the state, has embraced the Murphy administration’s goal of transitioning to 100% clean energy by 2050 and has the financial resources to commit to that target.
The announcement also came on a day when Ørsted shares dropped 8% after the company announced long-term production values from its offshore wind farms may have miscalculated how much power they could produce.
“Today’s announcement is unrelated to our announcement updating our long-term financial targets,’’ said Cam Stoker, a spokesman for Ørsted.
PSEG did not respond to calls for comment.
Clean energy advocates were not surprised by the announcement. “This is the epitome of ‘if you can’t beat them, join them,’’’ said Doug O’Malley, director of Environment New Jersey. “This is a sign that offshore wind is no longer a niche market.’’
Paul Patterson, an energy analyst with Glenrock Associates who follows PSEG, however, cautioned PSEG will likely be very conservative in its investment in offshore wind. “It is a lot different kettle of fish than building on land for wind energy,’’ he said.