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Developer Considers Building 1,000-Megawatt Offshore Wind Farm

Garden State Offshore Energy may triple the size of its proposed project, if new offshore wind regulations permit it to scale up.

Garden State Offshore Energy is thinking about nearly tripling the size of its proposed offshore wind farm project, a decision that would mean building 1,000 megawatts of generating capacity more than 16 miles off the coast of Atlantic and Cape May counties.

The company, a joint venture between PSEG Global and Deepwater Wind, is one of four currently vying to build offshore wind farms. Its original proposal, which called for a 350-megawatt project, has won funding from the state of New Jersey and is one of several projects hoping to win approval from the Board of Public Utilities (BPU).

Now, with the state agency set to unveil its rules today governing how it will determine what offshore wind farms move forward, Garden State is considering asking the state to allow it to build practically the entire amount of wind capacity legislation signed into law by Gov. Chris Christie.

"That’s the option we are leaning toward very heavily," said Rob Gibbs, a vice president of Garden State Offshore Energy. Its partner in the venture, Deepwater Wind, recently proposed building a similar scale project in Rhode Island Sound, he noted.

Economies of Scale

The advantage of a utility-sized project involving one company is that it allows the developer to capture the economies of scale that make the undertaking more financially feasible, Gibbs said.

With those economies of scale, Garden State Offshore Energy projects it can save up to 20 percent of the cost of the project, according to Gibbs. If so, that could give the venture a competitive edge over rivals in how it prices the Offshore Renewable Energy Certificates (ORECs). That could be decisive. The BPU wants to price ORECs as cheaply as possible since the cost will be picked up by ratepayers.

In addition, a larger-scale project is probably the only way the state is going to achieve its goal of attracting a wind turbine manufacturer to New Jersey, Gibbs said.

"It’s really the best way to achieve those goals," Gibbs added. The offshore wind legislation includes a provision offering up to $100 million in tax credits to manufacturers as an inducement to jump start New Jersey's green economy. Garden State first talked about its expansion plans at an offshore wind conference in Boston last week.

Other wind developers said it probably is premature to talk about the size of projects given uncertainties about New Jersey’s rules and the federal process of leasing blocks to build offshore wind farms.

"There are a lot of unknowns at this point," said David Gaier, a spokesman for NRG Energy, whose subsidiary, NRG Bluewater Wind, has proposed building a 350-megawatt wind farm off the coast. He noted the number of lease blocks the federal government makes available will largely determine how many turbines any project will be able to build.

"It is for none of us developers to decide how big the project is," agreed Erich Stephens of OffshoreMW, another developer. He said that will be determined by New Jersey and how it adopts its offshore wind regulations.

A Tough Challenge

But Gibbs said the offshore wind legislation has a provision in it requiring any project to have a net positive economic benefit for the state before it can move forward. Because of the high cost of the projects, all of which are expected to have pricetags of $1 billion or more, that will be a tough goal to meet.

"When you concentrate it in one entity, it gives vendors and businesses the confidence they will have four or five years of orders to invest in the state," Gibbs said. "That is what is going to get you over the hurdle. If you cannot attract a big manufacturer here, I’m not sure you can claim credit for job creation."

Stephens argued that wind-turbine manufacturers would prefer to see multiple offshore wind developers to lessen their risk. Otherwise, he said, if a single developer stumbles, so do all the hopes for creation of jobs and a new green economy.

Still, the debate over Garden State Offshore Energy’s proposal underscores how New Jersey is likely to be in the forefront of efforts to build offshore wind farms. Last week, the federal government designated a wide swath of coastal waters as Wind Energy Areas, a step aimed at streamlining the permitting process.

The news was encouraging to environmentalists. "We’re happy with three times the amount of wind," said David Pringle, campaign director of the New Jersey Environmental Federation. "This stuff has to be manufactured somewhere. If we get out in front, we can be manufacturing turbines not only for New Jersey, but Maryland, Virginia and elsewhere."

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