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By Scott DiSavino
(Reuters) - Danish energy firm Orsted's shock decision to cancel two offshore wind farms off New Jersey this week was based in large part on big delays securing the ship it needed to build the project, company officials said.
The world's biggest offshore wind farm company on Tuesday said it would cease all development on the Ocean Wind projects even as it moves forward with developments off neighboring New York, triggering an angry response from New Jersey Governor Phil Murphy.
The decision came as a surprise in part because New Jersey had passed a law letting offshore wind developers like Orsted keep federal tax credits that were previously destined for ratepayers to offset their power costs, a concession intended to keep the projects alive.
"People did not anticipate (Orsted) backing out of Ocean Wind," said Timothy Fox, VP at research firm ClearView Energy Partners.
Orsted CEO Mads Nipper, on a call with analyst the day after announcing the cancellation said: "Significant delays on vessel availability ... in the entire market has now meant that it would implicate a multi-year delay of the entire project."
He said those delays would put Orsted in "a situation where we would need to go out and recontract all or very large scopes of the project at expectedly higher prices."
MOVING AHEAD IN NEW YORK
In New York, Orsted is moving forward with construction of its 704-megawatt (MW) Revolution project and is taking "a cautionary approach" to its 924-MW Sunrise project.
Nipper told analysts that unlike Ocean Wind, Orsted is still pursuing Sunrise for several reasons, including the fact that the company has already lined up a vessel to build it.
He added that Orsted believes it can secure a 10% bonus federal tax credit for Sunrise – reserved for projects that use a certain amount of domestically-produced content - and more money for its power by rebidding the project in an expected expedited solicitation in New York.
Under the most accelerated proposal, the New York State Energy Research & Development Authority said it could release the next offshore wind request for proposals in late November or early December. Bidders would have four weeks to prepare proposals and awards could be made as early as late January.
Analysts had expected Orsted and a joint venture between European energy firms Equinor and BP, which has developed three other offshore wind projects, to cancel their contracts to sell offshore wind power in New York after state regulators earlier this month refused to renegotiate those agreements.