N.J.’s push for offshore wind farms loses steam | By James M. O'Neill, Staff Writer | The Record | August 30, 2015 | www.northjersey.com
A few years ago, New Jersey’s political leaders laid out a vision: acres of giant wind turbines, rising like a modern flotilla in the Atlantic, their white blades spun by ocean gusts, generating clean renewable energy just beyond the horizon at the Jersey Shore.
Governor Christie and other state policymakers set ambitious goals to develop New Jersey’s huge potential as a leader in offshore wind energy.
But due to a combination of factors, New Jersey’s bid to become a trailblazer in offshore wind energy appears to have stalled.
The state Board of Public Utilities has repeatedly rejected a proposal by Fishermen’s Energy to build a small wind farm off the coast of Atlantic City as a pilot project. And five years after the Legislature directed it to do so, the board has yet to complete an essential funding mechanism for offshore wind projects that would guarantee a buyer for the energy they produce.
Meanwhile, a company called Deepwater Wind has started construction on the first offshore wind farm in the United States. But it’s not in New Jersey. The project, near Block Island off Rhode Island’s coast, will consist of five turbines and should be ready to produce electricity by the end of next year.
Industry experts say New Jersey risks forfeiting a chance to generate local jobs if it fails to create a regional offshore wind industry. “Whoever goes first keeps those jobs for decades,” said Chris Wissemann, chief executive officer of Fishermen’s Energy.
And as a coastal state that would disproportionately feel the brunt of rising sea levels and other effects of climate change, New Jersey is missing a chance to promote its own abundant renewable energy supply, rather than continue to rely on fossil fuels, proponents say.
“In the near term, the New Jersey situation doesn’t look great; there’s been a pushback from the original enthusiasm,” said Walt Musial, who heads offshore wind research at the National Renewable Energy Laboratory.
Some of Christie’s political foes say he soured on offshore wind because of his presidential ambitions – aware that key Republican financial donors, such as Charles and David Koch, favor the fossil fuel industry.
“Whatever enthusiasm Christie had for wind a year and a half ago has been done away with,” said state Sen. Bob Smith, D-Middlesex, who heads the state Senate’s Environment and Energy Committee. “The governor is running for president. The Republican Party is not into renewable energy.
“The governor has done everything he can to put hurdles in the path of offshore wind,” Smith said.
The Christie administration responded on Friday by defending its overall record on renewable energy.
“All harping from partisans aside, our clean energy record speaks for itself,” said Brian Murray, a Christie spokesman. “This governor has put clean power on the front burner with natural gas infrastructure and with New Jersey being among the top three in the nation in solar capacity.”
As for offshore wind, he said, “there still has not been an economically viable wind project put forward for consideration.”
Legislation in 2010
New Jersey’s push to be a leader in offshore wind was launched with promise. In August 2010, Christie, then in his first year as governor, signed the Offshore Wind Economic Development Act, which directed the BPU to develop a mechanism that would require the companies that sell electricity in the state to obtain a portion of that electricity from offshore wind farms – guaranteeing the farms a buyer for their energy and a revenue stream to cover their investments. In addition, the rate for that electricity would be higher than for electricity from traditional sources to help the wind farm developers and their investors recoup the significant upfront costs of building the wind farm infrastructure – in effect, a subsidy covered by New Jersey’s residential and commercial electric customers.
Given that the industry is still in its infancy in the United States, and that early projects will cost more until the industry can develop economies of scale, such government assistance is essential to help the industry get off the ground, energy experts say.
“Developing New Jersey’s renewable energy resources and industry is critical to our state’s manufacturing and technology future,” Christie said when he signed the bill. He said his administration would maintain a strong commitment to making the state “a national leader in the wind power movement.”
The system that the BPU is developing to promote wind energy involves offshore renewable energy certificates, or ORECs. For each unit of energy that an offshore wind facility produces, it could cash in an OREC, receiving in exchange a predetermined amount from the buyer of the energy.
Five years on, the BPU has yet to complete the policy.
“We can’t speculate on when the board may consider the OREC proposal,” said Greg Reinert, the agency’s spokesman. “They’ve been working on it for a long time.”
A second setback for offshore wind in New Jersey has been the BPU’s repeated rejection of a pilot offshore wind project proposed by Fishermen’s Energy. The plan calls for a five-turbine farm in state waters about three miles off Atlantic City that would be capable of powering about 10,000 homes.
Through the legislation Christie signed in 2010, the BPU is charged with making sure that any renewable offshore wind project meets a “net benefit” test – the subsidies that a project receives must be low enough to provide a net benefit to ratepayers.
Fishermen’s Energy estimated that its subsidies would be lower than what the BPU projected because the company would rely on $100 million in federal grants and tax benefits. But the BPU rejected the plan last year because the company had yet to secure the $100 million.
When the company later was awarded a $47 million federal grant, the BPU did not change its decision, saying there was no guarantee the full $100 million would be secured. Without that funding, the BPU argued, the energy produced by the farm would be too expensive for ratepayers.
When Fishermen’s Energy appealed, a state court backed the BPU. The company has filed papers with the state Supreme Court to appeal once again.
Smith and Fishermen’s Energy executives say the BPU – which is composed of five members, four of whom are Christie appointees – went beyond the Legislature’s intent as it considered the “net benefit” test.
“We have a contract with the U.S. government for $46.6 million – what more does the BPU want?” said Wissemann of Fishermen’s Energy.
“The court showed unreasonable deference to this agency,” he added. “We can’t let this court ruling be the last word or offshore wind will never occur in New Jersey.”
Reinert of the BPU said the agency could not comment on the case, since Fishermen’s is appealing the court decision.
“New Jersey has fumbled the ball on finalizing the OREC program and on the Fishermen’s proposal,” said Jeremy Firestone, an energy policy expert at the University of Delaware. “There’s got to be political will and the right state policies in place.”
Rhode Island acts
In late July, Deepwater Wind installed the first 400-ton steel jacket on the seafloor three miles off Block Island, a first step toward building five foundation structures for its 30-megawatt wind farm.
“A lot was based on Rhode Island’s desire to be a leader in this technology and spur new economic growth,” said Musial, of the National Renewable Energy Laboratory. “The political leaders in Rhode Island all saw this as something they wanted.”
The project was perhaps an easier sell than other offshore wind projects; Block Island pays high electric bills because the island is not connected to the mainland grid and must ferry in diesel fuel for its generators. The wind farm will actually lower electrical rates for the island.
Rhode Island developed a different mechanism from New Jersey’s ORECs to ensure a market for Deepwater’s energy. The state required National Grid, the main energy utility serving Rhode Island, to enter into a power-purchase agreement directly with Deepwater.
But such a mechanism wouldn’t work in New Jersey. While National Grid is the only company that sells electricity in Rhode Island, New Jersey has more than 70 electricity wholesalers, from the large utilities such as PSEG to third-party sellers.
“You couldn’t just make one of the wholesalers enter a power purchase agreement with an offshore wind developer – that would penalize their ratepayers and not those of the other wholesalers,” Wissemann said. That’s why the state has been developing a different system based on ORECs.
The federal government plans later this summer or fall to sell leases for nearly 344,000 acres of seafloor off the New Jersey coastline to companies that want to build wind farms in federal waters. The area extends from Cape May north for 60 miles to Barnegat, at least seven miles offshore.
In the past, at least 11 companies – including Fishermen’s Energy and Deepwater Wind – had expressed interest in leasing the areas off New Jersey. But given the uncertainty about New Jersey’s policies, it remains unclear whether much interest remains among developers.
Deepwater, for instance, appears ambivalent.
“Offshore wind in New Jersey has been stalled for many years now,” said Jeff Grybowski, Deepwater’s chief executive officer. “Whether the state moves forward with OREC program and regulations – we’re still waiting for them to be finalized. The industry is very frustrated with the status of the OREC program.”
Still, he and others say it is too early to rule out a long-term future for offshore wind energy in New Jersey. “We think there’s tremendous potential for offshore wind off New Jersey,” Grybowski said. “It’s a spectacular energy resource and has the potential to create hundreds of jobs in the state.”
In a bid to prod the BPU to act, the state Senate passed a bill that would force the agency to approve the Fisherman’s Energy pilot project and exempt it from the BPU’s cost-benefit analysis. But the bill has not moved in the Assembly, and Christie could always veto it. When Christie revamped the state’s energy master plan in 2011, he noted the exceptionally high cost of electricity in New Jersey and emphasized that any offshore wind project must clear a high hurdle – the developers must prove the project would provide more of an immediate economic benefit than a burden to the state’s ratepayers.
For now, the state’s image remains tarnished among those who follow the offshore wind industry.
“New Jersey certainly doesn’t appear to [the] industry that it’s very welcoming,” said Firestone, of the University of Delaware. “They will have to change that. They have a selling job to do as much as anything. If you’re going to invest $50 million or more in a project, you’re going to need to be convinced it’s going to pay off.”
URL to article: https://www.wind-watch.org/news/2015/08/30/new-jerseys-push-for-offshore-wind-farms-loses-steam/
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