U.S. Interior Secretary Ken Salazar promised to speed approvals for the nation’s offshore wind farms in 2010, when he met with industry leaders in Atlantic City.
Since then, thousands of new windmills have been built in the United States – enough to power almost 15 million homes.
But they’re all spinning over land.
Every offshore wind farm proposed in New Jersey and the rest of the Atlantic seaboard remains grounded. The promises of new manufacturing jobs and a new energy industry have not materialized.
Jim Lanard, president of the Offshore Wind Development Coalition, said two projects off Nantucket Sound, Mass., and Block Island, R.I., are closest to breaking ground as the nation’s first offshore windmills.
A third project sponsored by Fisherman’s Energy, of Cape May, is nearing the start of construction, he said.
“We’re on the verge of launching a big multibillion-dollar industry that will be located in New Jersey and along the East Coast,” Lanard said.
The company was one of seven that received $4 million from the U.S. Department of Energy to engineer and design demonstration projects. Fisherman’s wants to build five turbines 2.8 miles off Tennessee Avenue in Atlantic City to generate about 25 megawatts, or enough to power about 20,000 homes.
The agency will pick three of these seven projects for investments of $47 million each for siting, construction and installation to get them up and running by 2017.
Breaking ground by the end of 2013 is not a condition of the grant. But the agency wants to see substantial progress in permitting and financing, Department of Energy spokeswoman Niketa Kumar said.
“The review will also evaluate technology development and economic feasibility, as well as the project’s ability to lower the overall cost of energy from offshore wind power,” she said.
Fisherman’s Energy is awaiting its last state approvals, from the New Jersey Board of Public Utilities, which has to decide whether the green benefits of offshore wind justify comparatively higher costs that could raise electric rates for consumers.
“We have permits in place. We have financing in place. The engineering is largely complete. All we are waiting for is the green light from the BPU. It’s as close to shovel-ready as we can get,” said Chris Wisseman, CEO of Fisherman’s Energy.
The BPU hosted a meeting Thursday to discuss the second consideration: how to finance this and other projects through offshore renewable energy credits.
Like solar power, wind currently costs more per kilowatt hour than other kinds of energy. As a result, energy companies typically need extra incentive to buy it. The solution has been for the state to require utilities to buy renewable energy credits from alternative energy producers.
The state BPU has such a system in place for solar. None yet exists for wind. Atlantic City will not see its first offshore windmill until this system is in place, because wind companies need energy buyers in place before they build.
“If we have approvals by summer, the pilot project would be in the water by summer 2014,” Wisseman said.
That’s a big if.
A 2012 study by the BPU’s consulting firm, Boston Pacific, concluded the capital costs for the five turbines exceeded the typical price of $4,500 per kilowatt. The actual costs estimated by Fisherman’s Energy – along with most other figures associated with the project – have not been disclosed publicly for business competition reasons.
Fisherman’s Energy responded with an economic-impact analysis by the Edward J. Bloustein School of Planning and Public Policy at Rutgers University that found the project provided net economic benefits of more than $1 billion.
In negotiations with the board, Fisherman’s Energy in September agreed on certain protections for electric customers, such as ensuring rate impacts no higher than a similar project in Rhode Island, financial security to prevent the abandonment of the turbines if the project fails and assumption of all risk for any cost overruns.
Wisseman said its small project would show investors that offshore wind is feasible in New Jersey, setting the stage for much bigger “utility-scale” projects with hundreds of turbines.
“The bankers we have worked with are very interested in seeing a demonstration project first,” he said. “They want to do all the checks and balances of getting the revenue to show it works on a small scale before they do a billion-dollar project.”
At least seven states are trying to harness the Atlantic’s offshore wind, but the process of permitting and financing has been difficult for all.
Maryland, Rhode Island, Virginia, Maine, Massachusetts, Delaware and New Jersey have projects in various stages of permitting or development.
Citing the “monumental challenges in developing a new domestic industry,” NRG Bluewater Wind last year put on hold its plan for 150 turbines off Rehoboth, Del. In the meantime, the company in October secured federal leases for the project, which could power 100,000 homes. The wind farm was sited to avoid the Delaware Bay, a major shipping lane to Camden and Philadelphia.
The U.S. Department of the Interior will accept bids this year for leases to build wind farms on the Outer Continental Shelf off Virginia and Rhode Island with the potential to power 1.4 million homes.
Maine’s Public Utilities Commission in February approved Norwegian energy firm Statoil’s four-turbine project 12 miles offshore south of Bar Harbor. That project had been opposed by the state’s governor, who raised concerns that the project would lead to higher electric bills.
The offshore-wind industry’s inertia caught the attention in January of the New Jersey Senate Legislative Oversight Committee, which met to find out why wind was lagging.
Lawmakers are eager to establish a new national industry in the Garden State, similar to what happened with the auto industry in Detroit, steel in Pittsburgh or the pharmaceutical industry in New Jersey.
If offshore wind on the Atlantic Coast is inevitable, New Jersey should be ready to capitalize on its manufacturing and development potential, said state Sen. Jim Whelan, who testified at the Senate hearing.
“It’s coming here. I want New Jersey to be at the forefront. What do we need to do today to jump-start this industry?” said Whelan, D-Atlantic.
The wind-trade group’s Lanard said the small Atlantic City project offers untold benefits for the broader industry in its successes and, perhaps more importantly, its failures.
“Lessons learned will be invaluable for the state, the regulators and the BPU to understand how to be more efficient and what unanticipated problems arose that can be avoided in the next round,” he said. “We saw this in Europe. Every big project started with a demonstration project.”
Lanard said decisions this year could have lasting consequences for the nascent industry.
“You don’t grow an industry one small project at a time. You need a critical mass of development to get the ports developed and get the work force trained,” he said. “New Jersey controls its own fate now.”
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