ATLANTIC CITY, New Jersey (WPVI) -- Danish energy developer Orsted said Tuesday night it is scrapping two large offshore wind power projects off the coast of New Jersey, adding uncertainty to a nascent industry the Biden administration and many state governments are counting on to help transition away from the burning of planet-warming fossil fuels.
The projects had been controversial but the company leading them said they would help New Jersey by creating hundreds of jobs and investing millions of dollars in clean energy in the state.
However, the company said it is canceling its Ocean Wind I and II projects in southern New Jersey, citing supply chain issues and rising interest rates. The offshore wind farms were going to be located off the coast of Atlantic and Cape May counties.
Orsted CEO Mads Nipper said in a statement the company was disappointed to be halting the projects because it believes the United States needs wind power to reduce carbon emissions.
"However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision," Nipper said.
Orsted stands to lose a $100 million guarantee it posted with New Jersey earlier this month that it would build Ocean Wind I by the end of 2025. That money could be returned to ratepayers.
The company said it would move forward with its Revolution Wind project in Connecticut and Rhode Island.
Orsted, the world's largest wind energy developer, warned in August that it might walk away from one or both of its New Jersey projects, which it said needed more financial subsidies beyond a tax break approved by the state that would have let the company keep as much as $1 million in tax credits that otherwise would have had to be returned to electricity ratepayers.
At the time, New Jersey Gov. Phil Murphy, who is pushing to make his state the East Coast hub of offshore wind, said the break was necessary to save the jobs and economic activity Orsted would have brought to the state.
Murphy, who took significant political heat for the tax break, called this decision "outrageous," saying it calls into question Orsted's credibility.
"Today's decision by Orsted to abandon its commitments to New Jersey is outrageous and calls into question the company's credibility and competence," the Democratic governor said. "As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind I project."
The governor also said his administration, "insisted upon important protections that ensure New Jersey will receive $300 million to support the offshore wind sector should Orsted's New Jersey projects fail to proceed."
He said he's directing his administration to take steps to ensure Orsted honor that financial obligation.
Murphy said Orsted was facing the same supply chain, inflation and other challenges that competitors in the offshore wind industry face. But he insisted the industry will succeed in New Jersey, noting that the state will solicit yet another round of project proposals soon.
Meantime, Cape May County officials are applauding the decision to pull the project that they had been fighting.
"We knew all along that our economy, our environment, our very way of life was at stake.... We intend to redouble our efforts to ensure that our horizon remains free of massive offshore industrialization," Cape May officials said in a statement.
The decision was the latest in a series of setbacks for the offshore wind industry in the northeast. Two weeks ago, New York regulators rejected a request from companies for larger subsidies to complete large-scale wind, solar and offshore wind projects, saying the companies were expected to to abide by the terms of their deals with the state.
A handful of other offshore wind projects have been canceled. They include the Park City Wind project off the coast of Massachusetts. Avangrid, a subsidiary of Spanish utility company Iberdrola, and several Connecticut utilities scrapped a long-term power purchase agreement.
Offshore wind in general, and particularly in New Jersey, has faced growing opposition, both politically - mostly from Republicans - and from residents concerned about impacts on the environment, increased costs and the impairment of views of the ocean horizon.
Jeff Tittel, a longtime environmentalist and former New Jersey chapter president of the Sierra Club, called Orsted's decision "a devastating setback for offshore wind in New Jersey."
"These projects have been mishandled from the beginning by Orsted," he said. "They didn't listen to the public and did not understand our needs or politics. They thought they would get a blank check."
Still projects in some places are moving forward.
In Virginia, a utility's plans for an enormous wind farm off that state's coast gained key federal approval Tuesday. Dominion Energy received a favorable "record of decision" from federal regulators who reviewed the potential environmental impact of its plan to build 176 turbines in the Atlantic, more than 20 miles (32 kilometers) off Virginia Beach.
Dominion said its project will be the largest offshore wind farm under development in the U.S. and eventually expected to generate enough electricity to power up to 660,000 homes after completion of construction by late 2026.
And New Jersey still has several other offshore wind projects in various stages of development, with four new proposals submitted in August alone. They join the one remaining project of the three originally approved by the state, Atlantic Shores. That is a project by Shell New Energies US and EDF Renewables North America.
The White House in statement Tuesday night noted that in just the past week several investments in offshore wind had been made.
"While macroeconomic headwinds are creating challenges for some projects, momentum remains on the side of an expanding U.S. offshore wind industry - creating good-paying union jobs in manufacturing, shipbuilding, and construction; strengthening the power grid; and providing new clean energy resources for American families and businesses," Michael Kikukawa, White House assistant press secretary, said in the statement.
However, this is a blow to the Murphy and Biden administrations, as they both pushed for the expansion of the offshore wind industry.
The Associated Press contributed to this report.