Perhaps New Jersey is getting it right after all, in its efforts to nurture an offshore wind industry along its coast.
A new report by the Natural Resources Defense Council suggests that the state’s proposal to finance offshore wind by offering developers Offshore Renewable Energy Certificates (ORECs) for the electricity their turbines produce ought to be copied by other states along the Eastern Seaboard.
The findings may bolster the state’s efforts to promote offshore wind when it is struggling to get developers, electric utilities, and power suppliers to line up behind the latest version of a funding mechanism to jumpstart its efforts. The plan, developed by a state-retained consultant, won a lukewarm response from various stakeholders last week in a meeting with state regulators.
The issue of how to guarantee revenue for offshore wind developers for the power they produce has been a major sticking point in the state’s efforts to spur the creation of a new green industry. The previous funding proposal, developed in a consensus among stakeholders more than a year ago, was deemed unworkable by the Attorney General’s office because it allowed clean-energy funds to be diverted to help plug gaps in the state budget.
The state’s Energy Master Plan calls for more than 1,000 megawatts of offshore wind capacity by 2020, a goal seemingly embraced by both lawmakers and the Christie administration.
New Jersey is one of a handful of Eastern Seaboard states looking to become the hub of an offshore wind industry, a goal that would provide not only cleaner sources of electricity but also thousands well-paying manufacturing jobs.
The U.S. Department of Energy projects 20 percent of the nation’s electricity could be produced by wind by 2030, half of which could come from offshore farms.
Not everyone supports the offshore effort, however. Wind farms will rely on subsidies from New Jersey ratepayers, according to the proposal developed by the state. This strategy is worrisome to both consumer and business groups in a state already saddled with some of the highest energy costs in the nation.
Some energy lobbyists also privately question whether the state’s efforts will ever bear fruit.
Repeated raids of clean-energy funds has made it difficult for developers to line up financing from Wall Street to build wind farms, which are expected to cost more than $1 billion each. Both the state and developers are looking for ways to ensure that funds earmarked for the wind projects will not be diverted in the future.
So far, a consensus has yet to be found.
But Douglass Simms, an energy project finance specialist for the NRDC and an author of the report, sees reason for optimism.
“Everyone wants the risk [of funds being diverted] to eliminated. The question is how. I think New Jersey is very close,’’ said Simms in a telephone interview. He also attended a stakeholders meeting of offshore wind proponents in Trenton last Thursday. “The fundamental structure is good.’’
The report notes that Maryland is following in the steps of New Jersey, setting up a program that will award developers offshore wind credits for the electricity their turbines produce.
“In sum, the U.S. can quickly tap into this unparalleled resource if we take the lead by ensuring revenue certainty by strategically refining the Offshore Wind Renewable Energy Certificate (ORECs) programs, such as those adopted in New Jersey and under consideration in Maryland,’’ the report said.
Nevertheless, the report argued it is essential to get the basic financial and economic conditions in place to support the sector.
“Without them investors are not comfortable providing capital for these projects, and the sector will inevitably struggle to get off the ground,’’ the report concluded.
Simms, however, said New Jersey still might be in the lead to get an offshore wind sector growing in the state. “New Jersey still has an opportunity to be a leader, but it has to happen this year,’’ he said.