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Offshore Energy Farms Encounter Political, Economic Headwinds

Tom Johnson | November 29, 2012

Expiring tax credits, delays in state BPU regulations threaten wind-power initiative.

Prospects for the state’s efforts to develop an offshore wind industry seem to be growing bleaker by the day – even as clean-energy advocates and lawmakers tout the benefits of the strategy.

An aggressive push to develop offshore wind farms would not only help reduce global warming, but also has the potential to create thousands of “green economy” jobs, representatives of the group Environment New Jersey and Senate President Stephen Sweeney (D-Gloucester) yesterday said at a Statehouse press conference.

But even they conceded that the goal -- seemingly embraced by both the Christie administration in its energy master plan and the Legislature through a bill aimed at encouraging development of more than 1,100 megawatts of offshore wind farms – faces enormous and possibly crippling hurdles.

Lucrative tax credits to encourage production of wind power are due to expire by the end of the year and it is uncertain whether Congress will renew them. With Congress and the Obama administration locked in difficult negotiations to reduce the federal deficit, there is pressure from some quarters to eliminate those credits.

If the credits expire, a number of wind farms -- including some in New Jersey -- won’t be built, acknowledged Matt Elliott, clean energy advocate for Environment New Jersey.

The state’s goal of 1,100 megawatts of offshore wind farms, enough to supply 400,000 households, would be the equivalent of taking 376,000 cars off the road each year, Elliott said.

Beyond the issue of the production tax credits, Sweeney harshly criticized the Christie administration and the New Jersey Board of Public Utilities, which is more than a year behind in adopting regulations to implement the offshore wind law he sponsored.

The regulations are crucial to developing an offshore wind industry because it would set up a financing mechanism by which developers of the wind farms would receive credits — paid for by all electric customers — for the electricity the turbines produce.

Without a state program in place, manufacturers in the wind sector are hesitant about committing to operations in New Jersey, Sweeney said. Analysts said it would be difficult to line up financing for the projects, likely to cost more than $1 billion, without a state program in place.

“The lack of movement for this program from the administration, from the BPU, is troubling,’’ said Sweeney, who sponsored the offshore-wind bill and hoped to lure manufacturers to a port in Paulsboro. “The issue is when are we going to put a program together.’’

In July, NJ Spotlight reported that efforts to develop the regulations had stalled because developers feared revenues earmarked for the projects could be diverted to cope with New Jersey’s budget problems. Since Gov. Chris Christie took office, he has diverted approximately $680 million in various clean-energy funds to plug holes in state budgets.

Christie spokesman Michael Drewniak called the Senate president's remarks puzzling and "maybe a bit uninformed on where things actually stand.''

Drewniak called wind energy an important aspect of meeting one of the most aggressive renewable energy standards in the country, but blamed the federal government for repeatedly moving the dates for auctioning leases for offshore wind farms, a criticism that also has been leveled by offshore-wind developers.

In an e-mail message, however, Drewniak did not respond to why it has taken the state so long to develop its regulations to implement the offshore wind farm bill.

The BPU previously had said it hoped to have the regulations in place this fall. Under the law, the regulations were supposed to be in place by March 2011.

“This isn’t just about clean energy; it’s about jobs, too,’’ Sweeney said. “We need a diversified portfolio when it comes to energy.’’

Even given the lack of action at the state and federal levels, the development of offshore wind farms faces perhaps an even more daunting obstacle: historically low natural gas prices, which make the technology even less competitive with more conventional fossil-fuel plants that burn natural gas, according to analysts.

Many conservatives also oppose giving subsidies to offshore wind farms, a fact Sweeney noted may have influenced the governor’s commitment to the program during the recent presidential election, reflecting support for GOP nominee’s Mitt Romney opposition to the credits.

“It’s less about economics and more about politics,’’ said Paul Patterson, an energy analyst for Glenrock Associates. “If enough money is thrown at them, things could happen.’’

Patterson said that whether it is the taxpayer or ratepayers, someone will have to pay to make the projects viable.

If the offshore wind effort is derailed, not everyone will be disappointed. Business interests have often complained that the offshore wind-farms program could drive up energy prices once again in New Jersey, which typically has some of the highest electric bills in the nation.

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