New Jersey Developer Says It’s Giving Up on Offshore Wind

NRG Energy scraps plans for wind farm off Jersey coast, puts NRG Bluewater Wind on the block

The fate of New Jersey’s offshore wind projects took an unexpected turn this week, with the announcement by one of a handful of companies bidding to develop a wind farm off the coast that it is pulling out of such projects.

NRG Energy on Monday announced it would terminate an agreement to build a 200-megawatt wind farm off the coast of Delaware. Yesterday, it said it would put its subsidiary, NRG Bluewater Wind, up for sale and not proceed with its proposal to build a wind farm off the Jersey coast.

The decision comes at a time when New Jersey has been struggling to adopt a complicated financing program that would support the development of 1,000 megawatts of offshore wind capacity through ratepayer subsidies, a process NRG Bluewater Wind had been a key player in structuring.

The Christie administration has been bullish about the prospects for offshore wind, joining with lawmakers to steer a bill aimed at making New Jersey the center of the offshore wind industry along the eastern seaboard, a goal that they hope will result in thousands of well-paying green manufacturing jobs. Princeton-based NRG’s decision underscores the enormous challenges facing offshore wind developers, even with generous support from the state government. Even wind farms on land are not competitive with conventional ways of generating electricity, and offshore wind is more expensive.

In talking about the decision, Peter Mandelstam, president of NRG Bluewater, said the move was based on a confluence of factors. Primarily, these were uncertainty about continued federal support from federal tax credits and federal production credits, which are due to expire at the end of 2012, as well as a decision by Congress to eliminate funding for a U.S. Department of Energy loan guarantee program for offshore wind.

Those same factors are likely to raise serious questions about the ability to move the other wind projects proposed off the Jersey coast forward, according to energy industry analysts.

“Offshore wind will not happen unless there are copious amounts of government support,’’ said Paul Patterson, an energy analyst with Glenrock Associates in New York City. “It’s all a question of the subsidy. That is what comes down to.’’

Hal Bozarth, executive director of the Chemistry Industry Council of New Jersey, and a skeptic about offshore wind in New Jersey, agreed. “Without big federal subsidies, you cannot make wind power affordable,’’ Bozarth said.

Nevertheless, two of the other companies proposing to build offshore wind farms said they are moving forward with their plans.

“The decision by NRG to cease its offshore wind development is another indication of the increased need for clear federal and state policy for the development of offshore wind,’’ said Rhonda Jackson, a spokesman for Fishermen’s Energy LLC, which is hoping to begin the first phase of its project to build offshore wind turbines a few miles off of Atlantic City in 2013.

Michael Jennings, a spokesman for Garden State Offshore Energy, a joint venture between PSEG Global and Deepwater Wind, said the company is “continuing to move cautiously forward’’ with its proposal.

Others took a more pessimistic view.

“It’s very unfortunate,’’ said Jeff Tittel, director of the New Jersey Sierra Club, an outspoken advocate of offshore wind. “Everything is caught up in a regulatory morass. It’s a clear signal that state and federal authorities are not moving fast enough.’’

Indeed, offshore wind developers have been lobbying hard to have both the state and federal governments expedite rules and permitting to support offshore wind. Mandelstam, however, said the state process was not a factor in the decision.

“The process is still too wrong, but it is trending in the right direction,’’ he said. A bigger concern is establishing regulatory certainty, a factor Europe has been able to achieve and the U.S. has not, Mandelstam said.

In New Jersey, the offshore wind developers have been frustrated with the state Board of Public Utilities because it has yet to set a timeframe for adopting a rule that would allow them to obtain offshore renewable energy certificates (ORECs) for the electricity their wind farms generate. Modeled on a similar system used to promote solar power in New Jersey, the wind certificates would be purchased by electricity suppliers and then paid off by ratepayers.

New Jersey is considered a prime location for offshore wind because of the relatively shallow waters along its coast and because of its program to award certificates to developers. It also has enacted a law that would offer up to $100 million in tax credits to manufacturers that locate in the state.

Under an offshore wind law, developers propose the price they will receive for the power their wind turbines produce. It will be up to the state agency to determine whether the cost is justified when weighed against other factors, such as generating cleaner power, jobs an offshore wind industry could generate, and increasing reliability of the regional power grid. The price would remain unchanged for 20 years.
The BPU declined comment on NRG’s decision, saying there is no application from the company before it.