The state's offshore wind development law is working as intended -- even though two consultants panned the first proposed wind farm, concluding that the benefits of the project are outweighed by its cost to ratepayers, according to Christie administration officials.
Testifying at a legislative hearing on progress to develop several wind farms off the coast of New Jersey, the thumbs down given to the Fishermen's Energy project three miles off Atlantic City should not be viewed as a failure, according to Stefanie Brand, director of the Division of Rate Counsel.
Both a consultant retained by the division and one hired by the Board of Public Utilities reached the same conclusion: the proposed 25-megawatt project failed to demonstrate that it would provide net benefits to New Jersey ratepayers.
Under the bill signed into law by Gov. Chris Christie two years ago, before any offshore wind farm can qualify for expensive subsidies from gas and electric customers -- the main source of financing for the building of wind turbines -- it must demonstrate the net economic benefits, such as creation of new jobs and other advantages, outweigh the costs.
"To me, these protections that the legislature incorporated into the statute are working to make sure that any application that may ultimately be approved is worthy of the ratepayer subsidies they are seeking," Brand told the Assembly Telecommunications and Utilities Committee.
Robert Marshall, assistant commission for green energy at the state Department of Environmental Protection, echoed Brand, saying both of the consultants' reports raised "serious issues about the viability" of the Fishermen's project. Unlike other offshore wind projects that have been proposed by other developers, the Fishermen's proposal, would be built in two phases, the first involving a pilot facility 2.8 miles off of Atlantic City. Essentially, the project is too small to demonstrate that it can deliver the net economic benefits required by law.
Both Marshall and Brand suggested that the other, larger wind farms, located anywhere from 7 miles to about 23 miles off the coast, may be able to avoid some of the problems plaguing the Fishermen's proposal, simply with economies of scale.
Eleven developers have expressed interest in leasing blocks of tracts off the Jersey coast to build up to 12,000 megawatts of generating capacity, Marshall noted. Because all the potentials tracts off the coast have been targeted at least twice, a competitive bidding process will result, potentially driving down the cost of the projects, he said.
Still, Robert Gibbs, vice president of Garden State Offshore Wind, one of the offshore developers, said meeting the net economic benefit test "may prove challenging." His company is proposing to build a 350-megawatt wind farm in a joint venture with Deepwater Wind.
One way to meet that test is to attract a manufacturing segment of the offshore industry to the state, but Gibbs said no manufacturer is likely to come to New Jersey or anywhere else unless there are six to 10 years of projects in the pipeline.
Beyond meeting the state's benefit standard, offshore wind developers also face significant challenges at the federal level, Gibbs said, which include the loss of federal tax credits and a six- to eight-year permitting timeframe. Already NRG Bluewater Wind has pulled out of the New Jersey effort and put its offshore wind unit up for sale, citing the disappearance of the federal tax credits and other issues.
Daniel Cohen, president of Fishermen's Energy, said the company is planning on resubmitting its application to the BPU, claiming its project would increase ratepayers' bills by only 17 cents a month, or $2.04 a year.
"We don't think the costs are insurmountable," Cohen told the committee. "We believe we can easily overcome the benefits test. We will be sharpening our pencils so we won't be deemed the world's most expensive offshore wind farm," he said, a reference to a remark Brand made earlier in the day.
For her part, Brand said she was still hopeful Fishermen's Energy can prove it does provide a net economic benefit to the state. "I haven't given up yet on the state water's project."
Neither has Assemblyman Upendra Chivukula (D-Middlesex), the chairman of the committee, noting any new technology requires subsidies. "It is going to come at a price, but if we don't do it, it will come at a cost, as well," he said.