Will New Jersey regulators approve key support for an offshore wind project proposed off the Jersey shore?
Many coastal states and nations are placing new focus on energy projects designed to generate electricity from offshore winds. A project off New Jersey, first proposed in 2011, appeared to make some initial progress, but has since seemed to stall -- due in part to regulatory delays at the state level. With a decision by the state Board of Public Utilities (BPU) expected this week, will the Fishermen's Energy offshore wind project move forward?
Fishing boats in a small harbor along Maine's midcoast.
The New Jersey coast offers a fairly unique combination of wind resources and proximity to customer demand. To capitalize on this combination, the New Jersey legislature and government adopted measures promoting the development of the state's offshore wind resource. For example, New Jersey's Energy Master Plan calls for an ambitious target of 1,100 megawatts of offshore wind installed by 2020.
In response to the opportunity, in May 2011, Fisherman's Energy submitted an application to the BPU under the Offshore Wind Economic Development Act for an offshore wind demonstration project. The Cape May, New Jersey-based developer proposed five, five-megawatt wind turbines in state waters about 2.8 miles off the Atlantic City coast, with a total capacity of 25 megawatts and an estimated cost of $200 million to $300 million. By the end of 2012, the project had won substantially all of the permits necessary for its development and operation, including approvals by the New Jersey Department of Environmental Protection and Army Corps of Engineers -- but a key piece of the regulatory and financing puzzles remains missing.
Under New Jersey law, the BPU may select one or more qualified offshore wind projects for financial support in the form of a long-term contract to buy Offshore Wind Renewable Energy Certificates, or ORECs, from the developer. This revenue stream is viewed as essential to enable a developer to finance and construct a project.
But nearly 3 years later, the state OREC review process remains ongoing. Last year, BPU Staff recommended the BPU reject Fishermen’s project on the grounds that it demonstrated no economic benefits but bore unnecessary technology risk due to its selection of XEMC turbines. But project advocates, including the New Jersey Rate Counsel, support the project for its apparent consumer benefits. Nevertheless, the BPU has yet to approve an OREC program.
Meanwhile, crucial federal tax incentives such as the renewable energy business investment tax credit have ended. Many renewable project developers have found these credits essential in building financing packages for their projects over the last years; while the credits may be reenacted in some form, their loss may mean Fishermen's Energy needs to revise its financial projections.
Fishermen's Energy -- and the many other stakeholders following the project -- may soon learn the project's fate. The New Jersey BPU is scheduled to vote today on whether to approve the project and authorize it to produce and sell ORECs. Will the BPU grant Fishermen's Energy's request?