State Seeks to Modify Rules Governing Offshore Wind Farms

Tom Johnson | August 13, 2012 | Energy & Environment
Even with revised rules in place, state must still resolve issues on how to finance these projects

The state is proposing to readopt rules that will establish a framework for approving projects to build wind farms off the Jersey coast. But it still must resolve questions on how to finance the ventures.

In a rule proposal to be published in the New Jersey Register later this month, the state Board of Public Utilities modifies somewhat previously adopted regulations aimed at creating a process for approving offshore wind farms. The state hopes to develop 1,100 megawatts of electricity from a series of wind farms off New Jersey’s coast.

The measure, however, does not address what is emerging as one of the biggest hurdles to achieving that goal — how developers will be compensated for the electricity their turbines produce.

Under a bill signed into law two years ago, the state proposed that wind farm developers receive offshore renewable energy credits for the power produced by their systems, similar to those owners of solar arrays receive for the electricity they generate.

Earlier this year, the state Division of Rate Counsel urged the BPU to reject a proposed offshore wind farm pushed by Fishermen’s Energy

But the real obstacle is the fear among developers that the state can divert the revenues targeted to those projects for generating power to cope with New Jersey’s relentless budget problems.

Unless the problem is resolved, no banks will be willing to fund the wind farms, which probably will cost more than $1 billion to build.

The Christie administration acknowledges the problem and is hoping to hire a consultant to resolve the issue by this fall.

Meanwhile, the state is moving ahead to readopt the other rules governing how offshore wind applications will be judged.

The rules lay out the process and information offshore wind developers must detail in seeking approval for their projects, ranging from exhaustive financing data, organizational structure and key employees, and projected output from the facility over the life of the project.

The most formidable hurdle, however, is a requirement that the developer must demonstrate a net economic benefit for ratepayers, who ultimately will bear the cost of paying off the credits for the electricity the systems produce.

The first project being proposed to be built three miles off of Atlantic City is being opposed by the state Division of Rate Counsel, which argues that it fails to deliver a net economic benefit, a position disputed by the developer, Fishermen’s Energy.

Besides the state of New Jersey, the federal government also is hoping to develop an offshore wind industry along the eastern seaboard. In New Jersey, 11 developers have expressed interest in building wind farms up to 233 miles off the coast, from Barnegat Light to Avalon.

In its new rule proposal, the BPU said “these projects would further the use of renewable energy, which helps reduce air pollution and dependence on foreign oil and gas.”

If the developers meet the net economic benefits threshold, the inclusion of 1,100 megawatts of offshore wind is anticipated to have significant economic and rate impacts, according to the rule proposal.