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Feds Want to Lease Offshore Wind Sites On Thousands of Acres Off New Jersey Coast

Leases are a start, but state has yet to come up with financing mechanism for offshore initiatives

offwind leases

The federal government is proposing the sale of leases for 344,000 acres off the coast of New Jersey to build wind farms, a prospect some hope may propel the state to meet its ambitious goals to develop an offshore wind industry.

The more pressing question, however, is whether it will jump start the state’s moribund program to come up with a much needed financing mechanism to allow offshore-wind developers to line up financing for their projects.

Without such a mechanism, developers say they will never be able to build the farms. In a law aimed at promoting offshore wind along the Jersey coast passed four years ago this August, the state Board of Public Utilities was supposed to develop a way to help finance the projects, but has never done so.

As a result, New Jersey is far behind its goals for offshore wind. The state’s Energy Master Plan calls for at least 1,000 megawatts of offshore wind by 2012 and 3,000 megawatts by 2020, according to the BPU.

No projects have been approved by the agency, and a small pilot off Atlantic City was deemed too expensive for electric customers, who will foot much of the cost, said the BPU. Other projects have not been submitted to the agency -- primarily because it has not come up with a financing mechanism.

Under the federal proposal, developers awarded leases to build offshore wind farms will have to pay $1 million a year if no wind farms are in operation, and half of that if the project is bigger than 500 megawatts.

Despite the remaining obstacles, some welcomed the announcement by the U.S. Department of Interior.

“New Jersey has the offshore wind resources to be a national leader in clean energy generation and this is an important step in that direction,’’ said U.S. Sen. Robert Menendez (D-NJ).

Others were not so optimistic.

Erich Stephens, a vice president of Offshore MW, a developer seeking to build wind farms off the Jersey coast, said there needs to be better coordination between the federal government and the state over efforts to promote the projects.

“Developers need both a lease and a financing mechanism’’ Stephens said. “You need both processes.’’

Doug O’Malley, director of Environment New Jersey, agreed, questioning whether the Christie administration will move forward. “Offshore wind is failing to national ambitions right now,’’ he said, referring to Gov. Chris Christie’s possible entry into the Republican presidential primary in 2016. Many conservative groups oppose any subsidies for offshore wind -- as the law the Governor signed in 2010 would allow.

Jeff Tittel, director of the New Jersey Sierra Club, however, hoped the federal announcement could push the state to finally act. “Maybe this will put a fire under New Jersey to move forward,’’ he said.

As much as environmentalists support the effort, many business groups question the cost of developing offshore wind, especially in light of low prices for natural gas.

Under the law passed in 2010 with broad bipartisan support, offshore wind farms -- once they are operating -- would receive credits for the electricity they produce, if the state ever crafts such a program. The proposal is supposed to be modeled somewhat after a program the state uses to incent installation of solar systems.

With New Jersey residents and businesses paying some of the nation’s highest energy rates, some say the last thing the state needs is new subsidies to encourage renewable energy.

“I would support offshore wind if it can compete in the marketplace without ratepayer’s subsidies,’’ said Hal Bozarth, executive director of the Chemistry Industry Council of New Jersey. “We can’t afford any more subsidies.’’

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