NJ rejects financial plan for offshore wind turbines

March 20, 2014 by  
Filed under Green Energy News

The state has rejected a financial plan proposed by a company that wants to build five wind turbines off the Jersey Shore, a setback that some argue could put New Jersey far behind other states in vying to become a leader in the next clean energy frontier.

Fishermen’s Energy, a Cape May-based group of commercial fishermen, has proposed building the wind farm about three miles offshore from Atlantic City. It would produce up to 25 megawatts of clean energy, because wind farms don’t emit pollutants the way coal- and oil-fired power plants do.

The state’s Board of Public Utilities’ 4-0 vote against the project this week generated cries of dismay from environmental groups, which have been supporting the project as the first pilot for developing an industry of clean offshore wind energy in New Jersey.

The board rejected the proposal in part because it did not meet a basic test the state has laid out for such projects – that it provide net benefits for electricity ratepayers. The board calculated that the project would need subsidies from the state that would make the energy produced too costly for ratepayers.

Environmentalists castigated the board, noting that the state’s Energy Master Plan calls for developing offshore wind energy as a goal. When unveiling the master plan in 2011, Governor Christie said it demonstrated his firm commitment to drive “the development of cleaner and renewable sources of energy to spur business and economic growth.” But the plan had also emphasized as a goal the need to reduce electricity rates for ratepayers.

“New Jersey has fumbled offshore wind over the last three years,” said Doug O’Malley, director of Environment New Jersey. “We have the potential to be a national leader, but we’re quickly falling behind neighboring states. This pilot would have been an important step forward – and you can’t be an offshore wind leader if you’re not building turbines.”

The group was worried that the state could lose out as wind turbine manufacturers and other businesses that service wind farms decide to locate in states that move forward with wind projects, causing New Jersey to lose out on those new jobs.

Americans for Prosperity, on the other hand – a conservative group founded by the billionaire Koch brothers that pushes to reduce the size of government – called the wind farm a “misguided” project and applauded the state for rejecting it. “The BPU concluded what we have said all along: this offshore wind scheme would have led to significant rate hikes,” the group said in a statement.

Still, the state’s Division of Rate Counsel — which advocates for ratepayers — had actually negotiated with Fishermen’s Energy the financing proposal that the board rejected.

The Fishermen’s Energy proposal was based on an expectation of receiving about $100 million in federal grants and tax breaks. The group projected it could complete the project and recoup the cost of financing if it also received financial credits – called Offshore Wind Renewable Energy Certificates, or ORECs — from the state worth $199 for each megawatt hour of energy it produced. The state legislature created the ORECs program as a way to support the fledgling wind energy industry by providing it more revenue per megawatt hour than coal- and oil-generated electricity earns.

But the Board of Public Utilities, concerned that the company had no guarantees that it would actually receive the $100 million in federal money that was key to its plan, rejected the bid. The board argued that without that $100 million, the project would need to receive ORECs from the state of $263 per megawatt hour to be viable. The project would therefore fail one of the basic tests for approval – providing net benefits to ratepayers.

Fishermen’s Energy spokeswoman Rhonda Jackson said the board had ignored what the company has been arguing all along – that it would shoulder the risk of covering the $100 million should it not land the federal grants and tax breaks.

Stephanie Brand, the state’s rate counsel director, said that guarantee was negotiated into its agreement with the company to protect ratepayers and the state’s taxpayers. “It was part of our settlement,” she said. “We initially had significant problems with the company’s plan but we were able to get them to come down to the point where we thought the deal was approvable.”

The company has a meeting scheduled in early April to discuss a grant proposal of $47 million with the federal Department of Energy, Jackson said, and a decision is expected by mid-May.

Jackson said the company is weighing its options, which could include filing a motion with the board to reconsider its decision or filing an appeal in the state superior court’s appellate division. She said the company might also look at how to proceed with the project by finding some other revenue source besides the ORECs.

The company has already received the permits necessary from the state and the U.S. Army Corps of Engineers to start the project.

Email: oneillj@northjersey.com

Twitter: @JamesMONeill1


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