Wind-farm developer wins $90 million in IDA tax breaks

A developer of offshore wind farms has won more than $90 million in tax breaks from Brookhaven Town for an operations center in East Setauket and onshore construction for one of its farms, officials said.

The largest savings, $87.4 million over 25 years, will support the construction of an electrical converter station and 18-mile underground cable-transmission line connecting the Sunrise Wind farm to a substation in Holbrook. The offshore wind farm will be located 30 miles east of Montauk Point.

The other $2.6 million in tax breaks are over 10 years and support the renovation of an existing building into an operations hub for Sunrise Wind and at least two other farms.  

Sunrise Wind is being constructed by Orsted, the world’s largest developer of offshore wind farms, based in Denmark, and Eversource, a New England-based utility company.

The farm will have up to 100 turbines that can produce electricity for nearly 600,000 homes. It will begin operating in late 2025, an Orsted representative told Newsday.

The tax-break package for the converter station and transmission line consists of a sales-tax exemption of up to $24 million on the purchase of construction materials and equipment, plus $63 million in property-tax savings over more than two decades.

In return, Orsted plans to spend nearly $500 million on the project and employ more than 2,200 construction workers, according to a cost-benefit analysis from the Brookhaven Industrial Development Agency, which granted the tax breaks.

“This is going to do so much for our community, in terms of electricity, job creation and contracts for local businesses,” said Lisa M.G. Mulligan, the IDA’s CEO. “There’s going to be an infusion of work and opportunity to Brookhaven.”

She and others noted that Orsted has committed to spending $408.5 million with businesses in the state on Sunrise Wind, from construction through the third year of operations, based on a signed contract with the New York State Energy Research and Development Authority.

One local company, Haugland Group LLC in Melville, has won a contract to help with the installation of Sunrise Wind’s cable-transmission line, company CEO Billy Haugland II told Newsday.

Even with the property-tax savings, Orsted will pay $1.1 million per year in payments-in-lieu-of-taxes for a quarter of a century. The payments will go to five school districts, Brookhaven, Suffolk County and other taxing jurisdictions.

"A lot of the land [that will be used for the underground electrical cable] is municipally owned, so it isn't taxed," said the IDA's Mulligan. "The project will bring additional revenue … This is going to be a windfall for all of them,” she said on Tuesday, referring to local governments.

Orsted spokeswoman Meaghan Wims said the developer will pay $28 million in payments-in-lieu-of-taxes in the next 25 years. “These payments represent revenue to the Brookhaven taxing districts that without this project wouldn’t be realized,” she told Newsday.

The operations center in East Setauket will oversee Sunrise Wind and Orsted’s other farms in the region, including South Fork Wind, which also is off Montauk Point. South Fork is expected to begin operating at year-end.

Orsted purchased the 59,500-square-foot building at 22 Research Way in 2021 for $7.3 million. It’s now undergoing renovations for an office and warehouse. The total project cost is nearly $38 million.

The IDA tax breaks consist of a sales-tax exemption of up to $1.85 million on the purchase of construction materials and equipment, and property-tax savings of $731,100 over a decade. The developer had requested that the property-tax breaks last for 25 years, according to the IDA application.

In return for the tax aid, Orsted has promised to create 65 jobs with annual salaries ranging from $75,000 to $290,000, the application states.

Previously, the IDA awarded tax breaks to the Cross-Sound Cable project, which brings electricity from Connecticut to Shoreham, and Caithness energy plant in Yaphank, among others. 

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.