Public Service Enterprise Group plans to buy a 25% stake in New Jersey’s first offshore-wind project, signaling an interest in becoming a significant player in the emerging industry along the Eastern Seaboard.
PSEG’s investment in Ørsted’s Ocean Wind project, a 1,100-megawatt facility 15 miles off Atlantic City, aligns the company’s strategic initiative to transition to a primarily regulated and contracted business with a zero-carbon generation platform. Terms of the deal, which was announced Friday, were not disclosed.
In July, PSEG announced it was looking to sell or divest its fleet of fossil-fuel plants while retaining its carbon-free nuclear units. Also in June the Murphy administration unveiled plans to develop the first port in the nation intended solely for the offshore-wind sector. The port is located on Artificial Island, the site of PSEG’s three nuclear plants.
Scheduling Ocean Wind
Ocean Wind, approved by the state in 2018, could provide power to customers in late 2024, although that timeframe is jeopardized by permitting delays that have arisen with the federal Bureau of Ocean Energy Management.
“As New Jersey’s first offshore-wind project, Ocean Wind will lead the way for a productive first step in this forward-leaning industry, bringing with it new skills, jobs and carbon-free energy,’’ said Ralph Izzo, president, CEO and chairman of PSEG. “Further, this forward-looking investment in offshore wind energy is well-aligned with our company’s long-term clean energy strategy.’’
The $1.6 billion project is expected to power up to a half million New Jersey homes; it cements a partnership between the state’s largest utility and Ørsted, a global leader in developing offshore wind. Ørsted operates 26 wind farms around the world, including the U.S.’s first offshore-wind farm, the Block Island Wind Farm in Rhode Island.
Wind projects along Eastern Seaboard
Ørsted also has been awarded commitments to build more than 2,900 megawatts of capacity in five other offshore-wind projects along the Eastern Seaboard.
“PSEG and Ørsted have natural synergies, matching Ørsted’s global construction expertise with PSEG’s deep local history positions us well to deliver a successful project for New Jersey,’’ said PSEG Vice President of Offshore Wind Development Lathrop Craig. “As more states look to decarbonize their energy supply, we look forward to this and future opportunities throughout New Jersey and the mid-Atlantic.’’
The investment in offshore wind drew praise from Jeff Tittel, director of the New Jersey Sierra Club, and an advocate of offshore wind.
“It’s a good synergy,’’ Tittel said. “It just shows PSEG is betting on offshore wind as its future and it will help make offshore wind a reality in New Jersey.’’
Paul Patterson, an analyst for Glenrock Associates who follows PSEG, said the investment builds on the growth of offshore-wind projects being proposed in the region. “Regardless of the cost, it seems to be the investment de jour of blue states from Maine to Virginia.”
The electricity produced by the Ocean Wind project is expected to cost $98.10 per megawatt hour with a 2% annual escalator over 20 years, much more than what customers pay for nuclear and other more conventional power plants, Patterson noted.
New Jersey has established an ambitious target to add 7,500 megawatts of offshore-wind capacity by 2035. By midcentury, the Murphy administration hopes to achieve a goal of 100% clean energy. By then, offshore wind will account for 23% of the electricity used by customers, according to the state’s Energy Master Plan. Another 19% of power will come from out-of-state wind farms.
Completion of the acquisition is anticipated in the first half of 2021, subject to approval of the New Jersey Board of Public Utilities and other customary closing conditions. Later next year, the BPU intends to hold a second solicitation for offshore-wind farms.