Follow Us:

Energy & Environment

  • Article
  • Comments

Developers of Underwater Transmission System Seek Special Incentive Rates

Backers of a $5 billion scheme to link offshore wind farms are looking to the government to help finance the venture.

The backers of a $5 billion project that aims to build an underwater transmission system to wheel power from offshore wind farms to New Jersey and parts of the Eastern Seaboard are asking a federal agency to award them special incentive rates to help finance the venture.

In a filing with the Federal Energy Regulatory Commission (FERC), the Atlantic Wind Connection said the project deserves special rates because it will improve reliability of the power grid, reduce electricity costs for consumers and curb emissions from fossil fuels.

Because of technological, regulatory and financial risks posed by the project, the developers are seeking higher incentive rates, which allow them to collect revenue while the project is under construction, as well as a return on equity (ROE) of 13.58 percent, higher than conventional power projects.

A Cool Response

The project, unveiled last fall, seeks to link the offshore wind farms being developed by New Jersey and other eastern states. The project calls for construction of a 350-mile long underwater transmission line stretching from Virginia to New Jersey. Thus far, however, it has gotten a cool response from developers trying to build offshore wind farms.

The proponents of the project, which include Google and other companies, argue that a backbone transmission system is necessary if the states are going to achieve ambitious goals to have offshore wind replace a good portion of the electricity they now get from conventional power plants, which rely on fossil fuels, such as natural gas and coal.

But the steep price tag associated with the offshore transmission system, combined with the already high costs of developing offshore wind farms, worries some clean energy advocates. If the project is approved, the cost would be borne by ratepayers up and down the Eastern Seaboard.

"My concern is I don’t want construction of this [transmission system] to slow down the development of offshore wind farms," said Matt Elliott, clean energy advocate for Environment New Jersey, which has lobbied for greater reliance on renewable sources of energy.

Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club, marveled at the rate of equity sought by the developers, saying it is a better return than what Google earns as a web giant. "The amount of money they would make on this project undermines offshore wind and other renewable energy technologies," Tittel said.

Paul Patterson, an energy analyst with Glenrock Associates, said the rate of equity they are seeking is not surprising, especially considering the risks posed by the project, the technology involved and the renewable nature of the undertaking.

No Need for the System

New Jersey has four developers seeking to build wind farms off the coast. They say they already have lined up connections with transmission systems on shore and do not need the backbone transmission system to move ahead.

In its filing, Atlantic Wind Connection described the project, which would be able to transport 6,000 megawatts of electricity, as cutting edge and unprecedented.

"Without a timely and cost-effective transmission solution, federal and state policy initiatives to spur an offshore wind industry cannot be real," the developers said in the filing. Atlantic Wind Connection did not respond to a reporter’s call for comment.

In the filing, the developer said the request for incentive rates and the ROE are necessary and appropriate to facilitate the project, which aims to begin construction off the Jersey coast in 2013. The rates are necessary because of the substantial financial, technological and regulatory challenges associated with the project, the developers said.

If the project moves forward, it could lower energy production costs by $1.1 billion per year because there is no commodity charge associated with wind as a fuel; reduce delivered electricity costs to consumers by $1.6 billion; and potentially cut another $600 million annually in capacity costs, the expense associated with ensuring there is enough juice in the system to meet peak demand.

Sponsors
Corporate Supporters
Most Popular Stories
«
»