Offshore Wind Stakeholders Pick Apart Proposed Funding Mechanism
Sector can't seem to get beyond basic problem, preventing state from diverting funds to plug holes in budget.
Even with a new proposal floated by a state-retained consultant, industry executives, utility officials, and power suppliers remain at loggerheads over how to promote the development of offshore wind farms along the Jersey coast.
The New Jersey Board of Public Utilities called in the consultant to resolve the problem of, one of the major issues that's holding up the state's efforts to promote the technology.
But yesterday, the proposal received a tepid response, at best, from most of the stakeholders involved in the effort.
New Jersey lawmakers and the Christie administration are both eager to encourage offshore wind. The stateof capacity by 2020, a target most now view as extremely unlikely.
In a meeting in Trenton, offshore wind farm developers, the state’s four electric utilities, and power suppliers all poked holes in a proposal developed by Boston Pacific, saying it creates unnecessary administrative burdens and probably would make it difficult, if not impossible, to obtain financing to build the projects.
The proposal aims to resolve a lingering concern shared by most of those involved in the effort: how to ensure that ratepayer funds dedicated to helping finance expensive offshore wind farms are not diverted for other purposes.
The possible state appropriation of those funds scuttled a consensus proposal developed by offshore wind developers and others in the fall of 2011, because the Attorney General’s office concluded that allocations could be diverted by the Legislature and governor’s office in the annual budget process.
Since Gov. Chris Christie took office, he and lawmakers have appropriated more than $600 million in clean energy funds -- virtually all of which were raised by surcharges on utility customers’ bills -- to plug holes in the state budget.
Boston Pacific suggested the best way to prevent that practice would be ain which the money passed directly between the buyers (the state’s electric utilities) and sellers of Offshore Renewable Energy Credits (ORECs), the offshore wind developers. Ultimately, the utilities would pass on the costs to ratepayers.
“We think this framework minimizes the risk of state appropriation,’’ said Andrew Gisselquist, of Boston Pacific, who added that the proposal aims to ensure there isn’t a pot of money sitting there likely to be diverted to other uses.
That may be true, but most of those who spoke up at the meeting in BPU headquarters not far from the Trenton train station found many other flaws with the proposal.
Rob Gibbs, a vice president of Garden State Offshore Wind, a project being pushed by PSEG Global and Deepwater Wind, questioned how developers would line up financing without a reserve fund, which had been included in the initial proposal.
“If I don’t get paid by one of my suppliers, where do I get my money from?’’ asked Gibbs, saying the problem could affect a developer’s credit and debt ratings. “It will make financing extremely difficult, if not impossible.’’
Lance Miller, a consultant representing Offshore MW, another developer, agreed. “If a generator isn’t receiving the money they are entitled to, that creates problems.’’.
Others worried that the Boston Pacific proposal would force offshore wind developers to negotiate individual contracts with scores of power suppliers, which would be obligated to buy the offshore wind credits. Instead, they suggested adopting a regulatory approach, which would make clear the obligations of the suppliers to purchase the credits under the state’s renewable energy portfolio standards, a measure laying out targets for electricity produced from cleaner sources.
“The regulatory approach is a better way to go,’’ argued Gabrielle Figueroa, a lawyer representing the Retail Energy Suppliers Association.
Despite the criticism, the BPU staff seemed to be wedded to the Boston Pacific proposal, urging stakeholders to address how problems with the plan could be fixed, while not ruling out accepting different proposals. Various stakeholders are planning meetings to come up with a consensus approach by mid-April.