Lawmakers Propose Another Tax Break for Offshore Wind

New bill would exempt wind manufacturers from paying sales tax on materials and equipment

New Jersey has not been shy about creating incentives to lure segments of the renewable energy industry to the state — as evidenced by a bill making its way through the Legislature, offering a new tax exemption for offshore wind.

The bill (S-1561), which would eliminate sales taxes on materials and equipment used to manufacture wind energy components, cleared the Senate Environment and Energy Committee on Thursday with bipartisan support.

The Christie administration and lawmakers have made it clear that they hope to establish New Jersey as the hub of the offshore wind industry along the Eastern Seaboard. The goal is to develop more than 1,100 megawatts of wind capacity off the Jersey coast by 2020.

But delays at both the federal and the state level regarding permits and how offshore wind farms would be allowed to recoup their investments from ratepayers are making that goal look increasingly unrealistic.

Sen. Jim Whelan (D-Atlantic), sponsor of the new bill, cites the success New Jersey has enjoyed in establishing a vibrant solar energy industry. The state ranks second nationwide, trailing only California in the number of solar installations.

Whelan noted, however, that most solar panels used in the state are manufactured in China — something he would like to change when it comes to wind power.

“I would love to see New Jersey become the hub of wind manufacturing,’’ he said.

But his proposed sales-tax exemption is opposed by the Christie administration, which says it would cost the state an estimated $7 million in revenue, according to Whelan, who said he finds that argument hard to understand.

“How do you lose $7 million when we’re not manufacturing anything right now?’’ he asked.

Sen. Jennifer Beck (R-Monmouth) agreed: “This is an important bill. We may lose $7 million in sales tax revenue, but we could generate a lot more in income tax revenue.’’

The debate over how much to support development of cleaner ways to produce electricity is emerging as a divisive issue both in the Legislature and within the Christie administration.

The state Senate panel’s go-ahead on the wind-energy bill is expected to kick off a lengthy discussion of what type of incentives and programs are needed to promote alternative-fuel vehicles, such as plug-in electric cars, as well as vehicles fueled by compressed natural gas and other non-petroleum-based fuels.

The state already has lucrative tax incentives aimed at luring offshore wind-manufacturing firms to New Jersey.

The state is offering up to $100 million to attract a manufacturer of offshore wind components seeking to establish a wind farm industry in Paulsboro in South Jersey. That effort has lagged, however, because the state has yet to come up with a financing mechanism for the initiative.

Those regulations were supposed to have been adopted more than a year ago, but have been held up because would-be developers fear the state could raid funds intended for the offshore wind farms.

Wind-energy developers also have a big hurdle to clear before they can obtain ratepayers’ subsidies. To qualify, they must show they are providing a net economic benefit, a benchmark that several state consultants say New Jersey’s first offshore wind developer has so far failed to achieve.

That project is a pilot demonstration facility three miles off Atlantic City operated by Fishermen’s Atlantic City Wind Farm. Last week, the developer argued, in a filing with the state Board of Public Utilities, that its project would generate more than $1 billion in economic benefits to the state.

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