Stakeholders Not Blown Away by Proposals to Finance Offshore Wind
Tepid enthusiasm may best describe response to three rival funding mechanisms for offshore wind
The state now hason how to promote the development of offshore wind, a goal that is appearing increasingly elusive with each passing month.
By 2020, New Jersey had hoped to develop 1,100 megawatts of offshore wind capacity. To date, no project is operational, and onlyis under consideration by the state agency overseeing the program. It has received a decidedly cool response from regulators.
Offshore wind developers also are unhappy about the pace of the federal government in offering leases off the Jersey coast to build wind farms, a permitting process they have frequently criticized as taking far too long.
It is a frustration shared by clean energy advocates.
Given that it has almost been three years since the state law promoting offshore wind developments was enacted, “it is urgent to complete a successful OSW (Offshore Wind) funding mechanism if the goal of 1,100 megawatts of OSW by 2020 is to be realized,’’ said Thomas Schuster, campaign organizer for the Sierra Club’s Beyond Coal Campaign.
If offshore wind does not happen, however, many in the business community would be happy. They already are worried about the steep costs the state is incurring in its efforts to promote solar energy and other renewable energy projects, an expense that could cost ratepayers more than $5 billion, according to the New Jersey Division of Rate Counsel.
The major impediment to moving forward on the state level is a dispute about how the state should finance offshore wind projects, a cost that will fall on utility ratepayers. An initial financing mechanism developed by offshore developers a few years ago, however, was deemed unworkable. Lawyers for the state argued that its structure would leave it vulnerable to being appropriated by legislators and the governor’s office to plug a hole in state budgets.
Such appropriations are a big worry because both lawmakers and the Christie administration have raided clean energy funds raised from ratepayers repeatedly in the past. More than $700 million in clean energy funds have been diverted to help balance state budgets under Gov. Chris Christie’s tenure. Another $162 million may be appropriated in the upcoming budget to be voted on by lawmakers this June.
With such a possibility, virtually everyone in the effort to develop offshore wind concedes it would be difficult for the developers to line up financing for the projects, which could cost more than $1 billion each. The state hired a consultant, Boston Pacific, to come up with a plan to avoid that eventuality, but its proposal did not receive much support at a public hearing in February.
In response, offshore wind developers agreed to try and come up with a consensus approach to financing so-called offshore renewable energy certificates (ORECs) that the wind farms would receive for the electricity they produce. In addition, Boston Pacific modified its proposal to address concerns raised by stakeholders.
All of the plans include steps to park the money generated by the offshore wind farms in certain accounts or structures that would prevent state appropriation. Inby the New Jersey Board of Public Utilities, the proposal winning the most support is a plan put together by Garden State Offshore Energy, which wants to build more than 1,000 megawatts of wind capacity about 18 miles off the Jersey coast.
Its proposal suggests setting up individual escrow accounts at each of the approved developers. It also includes a reserve fund in the escrow account to guard against power suppliers defaulting on their obligation to buy the wind credits, a provision crucial to lining up financing from banks, according to the offshore wind developers.
Without delving into the arcane details of each proposal, the modified plans offered by Boston Pacific and Offshore MW, another offshore wind developer, won little support from the stakeholders.
“We remained concerned that this may ultimately jeopardize the viability . . . [of] building any offshore wind projects,’’ wrote Rob Gibbs, manager of market strategy and policy for Public Service Electric & Gas, a partner with Deepwater Wind in the Garden State Offshore Energy project.