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Wind Farms for the Jersey Shore — State Outlines a Critical Rule

Board of Public Utilities explains key funding mechanism for offshore-wind projects. Developers are keen, but some clean-energy advocates chide agency for lack of specifics

Offshore wind
Credit: Creative Commons

The state yesterday proposed a funding mechanism to develop offshore wind, one of the first concrete steps and perhaps most critical of the regulatory components needed to build wind farms off the Jersey coast.

The new rule, proposed by the Board of Public Utilities (BPU), sets forth the framework for how ratepayer subsidies will flow to the offshore-wind developers and how revenues earned by projects from the wind-generated electricity will be returned to utility customers.

More significantly, the mechanism, dubbed Offshore Renewable Energy Certificates (ORECs), ensures that project developers obtain a steady and long-term stream of funding that will allow them to gain financing for the wind farms from Wall Street.

The BPU did not release any version of the proposed rule, which is expected to be published in the New Jersey Register within the next few weeks, so details about exactly how the system would function remain unclear.

The proposal, however, was welcomed by offshore-wind developers and clean-energy advocates, who have been waiting eight years for the BPU to propose such a rule. During the prior administration of Gov. Chris Christie, the agency had developed a rule, but it never won approval from the governor, who had cooled on the prospect of developing offshore-wind energy.

It’s a significant piece of the puzzle

“It’s significant because it is the final piece of the regulatory program that will enable the development of offshore wind,’’ said Scott Weiner, a former BPU president who now represents Deepwater Wind, one of four offshore developers expected to submit applications to the agency to build wind farms.

The step also won praise from Gov. Phil Murphy, who wants the state to build 3,500 megawatts of offshore wind by 2030, the most aggressive target in the nation. Initially, the BPU’s target is to approve 1,100 megawatts.

“There has been more activity in the first six months of this administration when it comes to achieving our offshore wind goals than there was in the eight years since the signing of the Offshore Wind Economic Development Act,’’ Murphy said in a press release. “The action by this board shows we are truly all-in on offshore wind.’’

But they still have a long way to go. Offshore-wind developers are pressing the BPU to begin accepting applications before the end of the year, fearing that if the state does not move swiftly, they will not be able to qualify for lucrative federal tax credits. The credits expire at the end of 2019 and developers need to start spending big dollars on their projects before then or they will not qualify for the incentives.

Developers to be asked for ‘all-in’ price

The state hopes to formally adopt the funding mechanism by the end of the year, according to officials. The proposed rule does not specify how much the offshore-wind farms will be subsidized by ratepayers; that will be determined by the BPU once it begins reviewing applications.

In their applications, the developers will submit a so-called ‘’all-in’’ price spelling out the range of costs they will incur in building the wind farms, including for the wind turbines, transmission lines, and such things as decommissioning costs. The price that ratepayers end up paying for ORECs will be based on those costs. The revenue generated from the farms will eventually be returned to ratepayers through their electric companies.

“I like the flow of money coming back to the ratepayer. That’s important,’’ said BPU president Joseph Fiordaliso, commenting on the possible structure of the funding mechanism.

Others, however, were unhappy the board did not disclose more specifics about the program.

“We need to know what the total costs and benefits will be,’’ said Jeff Tittel, director of the New Jersey Sierra Club, questioning whether provisions dealing with net benefits of offshore wind will include projected reductions in emissions and public health gains. “We need to know what the return to ratepayers will be.’’

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