The state’s effort to promote offshore wind farms is getting a bit of blowback from the state’s business community.
In a move advocates say could vault New Jersey to the forefront of states aiming to harness offshore wind as a clean and free source of energy, the Senate Environment and Energy Committee yesterday approved legislation designed to help developers finance wind projects off the Jersey coast.
The bill, dubbed the Offshore Wind Economic Development Act, won praise from four developers seeking to build offshore wind farms, as well as environmentalists and others who view it as critical to the state’s efforts to reduce greenhouse gas emissions, promote a green economy and create a large number of well-paying jobs.
The measure cleared the committee easily, even though business interests expressed worry that the costs associated with building wind farms, projected as high as $7 billion over the next two decades, could raise the electric bills of commercial, industrial and residential customers in a state already burdened with some of the highest utility rates in the nation.
A Spike in Utility Bills
It is a reflection of increasing concern among lobbyists in the business community the state’s highly aggressive targets for promoting solar and wind power, a concept they generally endorse, could lead to spike in utility bills because the technologies are not yet competitive with traditional sources of energy, such as nuclear, coal and natural gas.
The criticism was fairly muted given the sponsors—the leaders of the Democrat and Republican parties in the Senate. Sponsored by Senate President Stephen Sweeney (D-Gloucester) and Senate Minority Leader Thomas Kean (R-Union), the bill moves to the Senate appropriations committee for consideration but appears to be on track to win final approval before lawmakers break for summer recess in July. The Christie administration also has repeatedly spoken in favor of developing offshore wind as a way of attracting new manufacturing jobs to the state and has drafted a bill very similar in scope to Sweeney’s version.
Sen. Robert Smith (D-Middlesex), chairman of the committee, downplayed the costs associated with offshore wind, noting the bill sets up a comprehensive process where each developer must prove the merits of their project on a cost-benefit basis.
“The more we encourage it, the greater we will reduce our carbon footprint,” Smith said after the committee vote. “If we can do it at a reasonable cost, we should be doing it.”
Steven Gabel, head of Gabel Associates, an energy consulting firm based in Highland Park, projected the impact of building a 350-megawatt offshore wind farm, which is typical of the size of projects being pushed by developers, would be less than 1 percent increase of a customer’s monthly bill.
But even Gabel, who represents Fishermen’s Energy LLC, one of the four developers, acknowledged the precise impact to ratepayers “is something that can’t be determined today.”
Unknown Cost of Credits
The bill sets up a process under which developers earn offshore renewable energy credits for each megawatt of electricity generated by the wind farms. The developers would petition the state Board of Public Utilities with a fixed price for the credits over 20 years, with adjustments for inflation. The sticking point for critics is that the cost of these credits is unknown, and that once the price is established the state cannot reconsider the issue.
Division of Rate Counsel Director Stefanie Brand argued that with so many unknowns, the committee should not rush to adopt the bill. Her division projects the cost of meeting the state’s solar energy goals and offshore wind targets of 1,100 megawatts would likely amount to $5.6 billion, or a monthly increase of between $5 and $8. If projected costs of upgrading transmission lines are also included, which is expected, the price could double, Brand said.
Brand and others pointed to the experience in other states as cautionary tales. In Massachusetts, where the long-debated Cape Wind project was approved earlier this year, new projections show that consumers will have to pay at least $1.4 billion above market rates for half of the electricity generated by the project, according to Sara Bluhm, an assistant vice president for the New Jersey Business and Industry Association.
In Rhode Island, the Public Utility Commission recently rejected a deal between Deepwater Wind—which is one of the four developers in New Jersey in cooperation with PSEG Renewable Generation—and the local utility because it was found that ratepayers would pay nearly $390 million more in energy costs over 20 years, she said.
Illusory Job Gains
Jonathan Lasser, an energy industry economist retained by the business group, claimed the job creation benefits of the bill were illusory. “Aside from temporary construction jobs, wind facilities require few permanent jobs,” Lasser said. “Based upon my calculations, the legislation would produce perhaps 15 to 200 long-term maintenance jobs, but the higher electric prices would cost New Jersey thousands of jobs.”
Environmentalists disagreed. Michael Pisauro, a lawyer for the New Jersey Environmental Lobby, said the bill creates the same platform for wind that has been successful for New Jersey’s solar industry, which is now second behind only California in terms of total number of installations.
The developers, too, endorsed the bill and urged its swift consideration.
“If New Jersey doesn’t get this policy right, the offshore wind developers will go to Delaware or Rhode Island,” cautioned Doug Pfeister, New Jersey project director of NRG Bluewater Wind, which wants to build a 350-megawatt farm 16.5 miles southeast of Atlantic City.
The final developer is OffshoreMW, which is proposing to build an offshore wind facility 14 miles off the coast east of Brigatine. The company is affiliated with WindMW of Bremerhaven, Germany, which is developing an offshore wind farm in the North Sea.