The developer of an offshore wind transmission system is seeking to qualify for $100 million in tax credits offered under a New Jersey law aimed at luring manufacturers of offshore wind turbines to the area.
Atlantic Wind Connection, which is aggressively pushing an ambitious plan to create a 350-mile offshore backbone transmission system stretching from New Jersey to Virginia, said its project calls for as many as three interconnections between offshore wind farms and the regional power grid in New Jersey, reflecting a value of approximately $806 million.
"Accordingly, an offshore wind farm built in New Jersey's wind energy areas and connected to AWC should be able to qualify as a 'qualified offshore wind project' under the proposed regulations," the company said in written testimony submitted to the state Board of Public Utilities (BPU) earlier this month.
If the BPU agrees, AWC would be able to garner some of the measure's $100 million in tax credits. Beyond developing a new source of clean energy, the bill hopes to create well-paying green jobs associated with manufacturing some of the thousands of components needed for the turbines, such as blades and cables.
That possibility that a backbone transmission system could win the credits struck some lawmakers and conservationists as an overly expansive interpretation of the law.
"It was geared to manufacturing, not for anything else,"' said Assemblyman Upendra Chivukula (D-Middlesex), a sponsor of the offshore wind law. "I don't know how it would qualify."
Sen. Bob Smith (D-Middlesex), the chairman of the Senate Environment and Energy Committee, agreed. "That $100 million is very focused," he said. "It was focused on creating permanent jobs."
"On its face, it doesn't make sense to use a state tax credit to finance a transmission line that would send electricity out of New Jersey," said Sean Dixon, counsel to Clean Ocean Action.
Jeff Tittel, director of the New Jersey Sierra Club, said the tax credit was inserted into the offshore wind bill as a way of attracting onshore support facilities for the offshore wind farms. "I don't think the intent was to build an offshore backbone transmission system," he said.
Tittel also argued that the backbone transmission system might drive up the costs of offshore wind, making it less likely the state will achieve its goals of developing a vibrant new green industry.
Atlantic Wind Connection, a project backed by Google and other international companies, already has won some special incentive rates from the Federal Energy Regulatory Commission (FERC) for its proposed $5 billion project. Those incentives include the ability to begin collecting from ratepayers before the project is completed, a way to recover all costs if the project is cancelled through no fault of AWC, and a rate of equity on its investment of 12.59 percent. All of those incentives, however, hinge on the project being approved by the PJM Interconnection, the operator of the nation's largest regional power grid.
The special incentives awarded to transmission projects have become a controversial issue among state regulators. New Jersey and other states have argued to the federal agency that incentives too often are awarded to routine projects, resulting in higher energy bills for customers because the rate of equity is generally higher than for other projects. The cost to consumers is more than $650 million a year, according to a filing with FERC by several states.
AWC did not return a call for comment.
In its testimony to the BPU, AWC argued offshore wind farms connected to its backbone will require less support from ratepayers, who will foot the bulk of the bill for developing the offshore wind farms by ultimately paying for the electricity the turbines produce. AWC said the savings would accrue because connecting to its transmission system will lower capital costs for developers by reducing the need for connections on land.
Eleven developers have expressed interest to the federal government in leasing tracts off the coast of New Jersey, which is hoping to develop 1,100 megawatts of capacity under the current process, although some have argued the state should expand that target. New Jersey is considered a prime location for offshore wind because of the relatively shallow waters along its coast and because of its program to award certificates to developers of wind farms for the electricity they generate, a source of revenue for the wind farms.