Underwater Transmission System Slated to Start Off New Jersey Coast

Backers of $5 billion project cite state's efficient and economical wind resources as part of reason for their decision

The backers of an offshore wind transmission system plan to begin the first phase of the $5 billion project off the coast of New Jersey, because it offers the most efficient and economical wind resources on the Eastern Seaboard.

Atlantic Wind Connection (AWC) yesterday filed the first-ever unsolicited right-of-way application with the U.S. Department of Interior’s Bureau of Ocean Energy Management for the use of certain areas of the nation’s outer continental shelf to a build transmission system spanning 350 miles.

The initial stage of the five-phase $5 billion plus project would extend from southern New Jersey to Delaware with the capability of moving up to 2,000 megawatts of offshore wind power to markets in the densely populated parts of the region, which currently pay steep prices for electricity because of congestion on the regional power grid.

Markian Melnyk, president of Atlantic Grid Development, AWC’s development company, said the decision was made to begin building the transmission system there because that is where the greatest likelihood the offshore wind farms will be developed, a prospect driven by better wind resources and a more shallow outer shelf on the floor of the ocean, which would make it more economical to build.

Still, the developer, which has financial backing from a number of companies, including Google, faces a number of steep hurdles before the project moves forward beyond acquiring permits from the federal government. Project developers met yesterday with officials from the state Department of Environmental Protection (DEP) about permit issues associated with the system.

“It’s just the beginning,” Melnyk said. “We’ve got a lot of work going forward.”

Meanwhile, Dominion Virginia Power, a subsidiary of Dominion, announced yesterday it is initiating a study of what it would take to build a high-voltage underwater transmission line from Virginia Beach into the Atlantic Ocean to support potentially multiple offshore wind farms.

New Jersey’s Division of Rate Counsel Stefanie Brand and the New Jersey Board of Public Utilities (BPU) have expressed concern about how the costs of the Atlantic Wind Connection project would be passed on to ratepayers in the state.

In asking to intervene in the case in a filing with the Federal Energy Regulatory Commission (FERC), the two agencies argued that the project, stretching from Virginia to New Jersey, could adversely affect the rates paid by consumers and also place much of the risk on the ratepayer instead of the developers.

Atlantic Wind Connection is a 350-mile underwater transmission line that aims to connect the spate of offshore wind farms being developed by New Jersey and other states. Besides Google, its backers include Trans-Elect, a transmission company.

Among other things, the state has objected to a filing made by AWC with FERC for special incentive rates, which allow it to being collecting from ratepayers even before the system starts moving power on the line and to recoup all of its costs if the project fails to finish. The state is also unhappy with the company seeking a 13.58 percent return on its equity in the project.

In a conference call with reporters, Melnyk and other Atlantic Wind Connection officials defended seeking the special incentive rates, arguing the government has recommended special treatment be given to projects that enhance state efforts to develop renewable energy resources.

New Jersey has at least five developers seeking to build up to 3,000 megawatts of offshore wind capacity, approximately 16 miles from the coast in most cases. Melynk, however, said he expects up to eight developers to emerge trying to build wind farms off the Jersey coast.

Initially, Atlantic Wind Connection said its system could move up to 6,000 megawatts of electricity, but yesterday ramped up the number to 7,000. Melnyk said that would increase the cost of the project, but he declined to say by how much. The company also was tight-lipped about how the project would affect ratepayers, other than saying it would reduce congestion on the grid, ultimately saving consumers $9 billion to $15 billion over the life of the project.

While state officials may have concerns, clean energy advocates said the project looks promising.

“The developers indicated today that New Jersey will be in the first phase of their development, underscoring the tremendous offshore wind potential that our state holds,” said Matt Elliott, clean energy advocate for Environment New Jersey. “Our waters are relatively shallow and our winds are strong and consistent, and we’re pleased to see that major companies are looking to New Jersey to be a hub for offshore wind development that will grow the economy and curb our fossil fuel dependence.”

Atlantic Wind Connection’s schedule has manufacturing and construction of the first phase between Indian River, DE, and southern New Jersey beginning in early 2013, with completion and commencement of commercial service in 2016.

It is highly unlikely any of the offshore wind farm developers vying to build generation systems off the Jersey coast will be operational by then, since the state Board of Public Utilities has yet to begin accepting applications to build the wind farms. Those developers have greeted the Atlantic Wind Connection project with mixed views, since most have already lined up interconnections on land to feed the electricity into the grid.

A sign of the hurdles in the development of offshore wind farms was underscored this week when Garden State Offshore Energy, which is hoping to build a farm about 20 miles off the coast, had to seek an extension of a $3 million grant from BPU because a federal agency still had not approved its final permit.
The extension was granted by the agency until May 31.