Atlantic Shores Ends New Jersey Wind Contract Citing Rising Costs

The developers of the Atlantic Shores offshore wind project have withdrawn from their power agreement with New Jersey’s Board of Public Utilities (BPU), citing financial pressures from inflation and market instability. This move disrupts New Jersey’s renewable energy strategy and highlights the growing economic hurdles for large-scale offshore wind ventures across the U.S.

Atlantic Shores Offshore Wind—a joint venture between Shell New Energies and EDF Renewables—was selected in 2021 to deliver 1,510 MW of offshore wind energy to New Jersey as part of the state’s ambitious decarbonization plan. The project, known as Atlantic Shores Project 1, was a key part of the state's goal to install 11 GW of offshore wind capacity by 2040.

However, in a formal request to the BPU, the project developers asked to cancel their Offshore Renewable Energy Certificate (OREC) award, claiming they could no longer meet the terms due to “unforeseen economic changes.” The BPU approved the request on June 5, officially releasing the project from its previous obligations.

The developers cited macroeconomic factors—primarily steep inflation, high interest rates, and ongoing supply chain disruptions—as the main reasons for walking away. These conditions have escalated the cost of offshore construction, turbine materials, vessel rentals, and financing, making the fixed-price power contract negotiated in 2021 financially unsustainable.

The cancellation adds to a growing list of setbacks for U.S. offshore wind development. In late 2023, Ørsted canceled its Ocean Wind 1 and 2 projects in New Jersey for similar reasons. Vineyard Wind in Massachusetts and Sunrise Wind in New York have also faced cost renegotiations, delays, or partial rollbacks.

For New Jersey, this development marks a critical disruption in its clean energy roadmap. The Atlantic Shores project was expected to power over 700,000 homes and generate significant local employment and port investments. Its withdrawal will delay the state’s ability to meet both emissions reduction targets and Renewable Portfolio Standards.

The BPU, in its statement, clarified that the project’s termination does not imply the end of offshore wind ambitions. Rather, the board said that canceling the OREC agreement enables a more transparent and competitive rebid in future solicitation rounds. New Jersey is planning a fourth offshore wind solicitation in early 2026, with reforms to account for changing market conditions.

Industry analysts believe these project withdrawals are signaling the need for updated procurement models that better reflect inflation-linked pricing and long-term project viability. Fixed-price contracts set years in advance may no longer be compatible with volatile global economic realities.

Developers are now calling for more flexible contract structures, including inflation indexing, enhanced state and federal tax incentives, and expedited permitting processes. The federal Inflation Reduction Act provides some support, including a 30% Investment Tax Credit (ITC) for offshore wind and potential bonus credits for domestic content and energy communities, but gaps remain.

The Atlantic Shores team has not confirmed whether it will rebid in the upcoming solicitation rounds. However, the developers have reaffirmed their commitment to developing offshore wind in the region. Their lease area off the coast of New Jersey has the potential to host multiple projects beyond the canceled one.

Offshore wind remains a vital piece of the Biden administration’s clean energy strategy, which includes a goal of deploying 30 GW of offshore wind capacity by 2030. But with inflation pushing up turbine prices, supply chain bottlenecks in Europe and Asia, and a shortage of specialized U.S. vessels, the entire industry is grappling with execution risks.

Meanwhile, U.S. states continue to show strong policy support. New Jersey, New York, and Massachusetts are revisiting procurement strategies and exploring hybrid financing models to bring projects back on track. This includes potentially allowing for mid-project price renegotiations or greater use of public-private partnerships.

While the cancellation of the Atlantic Shores OREC marks a setback, it also acts as a catalyst for policy evolution. It underscores the importance of adaptable frameworks that can support clean energy growth amid global economic uncertainty.

Conclusion

The termination of the Atlantic Shores wind contract illustrates the complex financial and operational challenges facing offshore wind development in the U.S. As inflation and market volatility reshape project economics, states and developers must recalibrate their approach to ensure the future of clean, resilient energy. New Jersey's next offshore wind solicitation round will be a test case for how the industry can adapt and move forward.

Source: ESG Dive