It wasn’t a good day for offshore wind in New Jersey yesterday.
More than 1,000 days after the proposal was filed, the state Board of Public Utilities killed the only offshore wind project yet to be considered by the agency, a small pilot to build a 25-megawatt wind farm about three miles off Atlantic City.
The decision was not unexpected. Last summer, the board rejected a proposed settlement between the company and the New Jersey Division of Rate Counsel, which would have allowed the project to go forward. The proposal resurfaced during hearings before the agency this winter.
NJ Spotlight reported last week that the agency’s staff was, a stance unanimously adopted by the board. In opposing the Fishermen’s Energy Atlantic City Wind Farm, commissioners agreed with staff that the project would be too costly to electric ratepayers, who would foot a big portion of the bill. They also questioned whether the project was financially viable.
Perhaps more importantly, clean energy advocates viewed the decision as sending the wrong signal to other offshore developers. Many of them have lined up to propose projects to help New Jersey meet its goal of developing 1,100 megawatts of offshore wind capacity by 2020.
“It’s not a good harbinger for the long-delayed process at the BPU to move forward with New Jersey’s offshore wind program,’’ said Doug O’Malley, director of Environment New Jersey after the vote by the commission. “This is a blow for offshore wind in the state.’’
Paul Gallagher, chief operating officer and general counsel for Fishermen’s Energy agreed. “I don’t think it plays really well if you are a European company looking at offshore wind in New Jersey,’’ he said after the vote.
When the federal government proposed to offer leases to build offshore wind farms along the Jersey coast in federal waters, more than 10 developers, including some European companies, expressed an interest in pursuing projects.
Privately, some speculated the decision reflected more of a political decision than one based on policy. With Gov. Chris Christie still harboring ambitions to run for president in the Republican primary, any approval of an offshore wind project would not play well with some conservative wings of the party, they said.
“It clearly seems. Christie’s administration has a vendetta against this project,’’ O’Malley said.
Jeff Tittel, director of the New Jersey Sierra Club, agreed. “The BPU sent a chilling breeze to offshore wind today,’’ he said.
In denying the Fishermen’s Energy application, BPU commissioners said the agency still supports renewable energy, but agreed with staff’s assessment that the project failed to meet key tests of a four-year-old law to provide a net economic benefit to the state.
A big point of contention revolved around how much the project would cost electric customers, who would help pay for the power the wind turbines produce. Those costs would be passed on to ratepayers under a mechanism awarding credits to Fishermen’s Energy for the electricity generated by their wind farms.
The company claimed those costs would amount to $199 a megawatt hour, but hinged on it receiving up to $100 million in subsidies from the federal government. The board’s staff questioned whether that aid will ever be received, part of which was based on a federal tax investment credit, which expired at the end of 2013.
Without those subsidies, the cost of credits to consumers would soar to $263 a megawatt hour, costing $240 million over the 20-year life of the credits, according to staff.
“It’s simply too high a price for ratepayers,’’ said BPU President Diane Solomon, in arguing against approving the project.
Gallagher took issue with that argument. “We’ll eat it if we don’t get it,’’ he said of the federal subsidies.
Paul Patterson, an energy analyst with Glenrock Associates in New York City, was not surprised by the decision. “Offshore wind doesn’t seem to have gotten much of a foothold here, largely because of the cost,’’ he said.
No offshore wind projects have yet to be developed in the U.S., although the industry is well established in Europe, primarily based on more lucrative government subsidies to encourage development.
The impact of the decision is likely to trigger a response from legislators, who have been unhappy with BPU over its slow pace in moving offshore wind projects forward.