State Lets $100M Tax Credit for Offshore Wind Expire

Tom Johnson | March 18, 2013 | Energy & Environment
Lawmakers push to extend deadline for deal to lure offshore wind manufacturers to New Jersey

The state is hoping to lure an offshore wind manufacturer to New Jersey to help jump-start a thriving green industry, but a lucrative incentive aimed at attracting this business is no longer available.

A landmark offshore-wind law enacted by the Christie administration in 2010 offered up to $100 million in tax credits if a manufacturer located its operations in the state, but in order to qualify, a company had to make its decision by the end of 2012.

Recognizing the problem, lawmakers in both houses have introduced bills to rectify the situation, extending the deadline to July 1, 2014. To qualify for the credits, the manufacturer must invest at least $50 million and employ 300 employees at their facility, which would be built at one of two ports in the state.

With a Chinese manufacturer offering to build a facility as part of its participation in a pilot offshore wind farm three miles from Atlantic City, the bill is likely to move forward before the new fiscal year begins in June.

Assemblyman Upendra Chivukula (D-Somerset), the chairman of the Assembly Telecommunications and Utilities Committee and a sponsor of one of the bills, last week said he expects the legislation to be approved before the budget break.

More than anything else, the expiration of the tax credit reflects the fits and starts that the state has experienced in trying to develop an offshore wind industry. New Jersey’s Energy Master Plan calls for 1,100 megawatts of offshore wind capacity to be developed by 2020. To date, no projects have been cleared to begin construction, experiencing delays at both the state and federal levels.

The biggest hurdle at the state level involves how to finance the projects with ratepayers’ subsidies — without having that money appropriated by lawmakers and the Christie administration to plug holes in the state budget. That sort of appropriation has occurred repeatedly in recent years.

In the draft state budget for New Jersey’s coming fiscal year, the governor again proposes to divert $152 million in ratepayer-financed funds intended for energy efficiency projects and cleaner ways of producing power.

The state Board of Public Utilities retained a consultant to try and develop a framework to prevent appropriation of clean energy funds, but its proposal was met, at best, with a lukewarm reception from offshore wind developers at a meeting in Trenton last month. The various stakeholders are holding meetings trying to develop an approach to resolve the problem, but no consensus has emerged.

Even if developers hammer out a new mechanism, New Jersey’s first offshore wind project, a 25-megawatt facility proposed by Fishermen’s Energy in state waters off Atlantic City, still faces big hurdles. Consultants retained by both the BPU and New Jersey Division of Rate Counsel say the $200 million project is too expensive to ratepayers to move forward.

In its latest filing with the regulatory agencies earlier this month, however, Fishermen’s Energy said its backer, XEMC, signed a written agreement to build a manufacturing facility, probably in Paulsboro, if the project is approved and certain other conditions are met. Primarily, XEMC wants approval given to it or other companies to develop offshore wind facilities along the coast of Jersey.

XEMC’s commitment is important because some offshore wind developers say privately that they will never meet the so-called threshold of providing a “net economic benefit’’ to the state unless several manufacturers locate their operations within New Jersey.

At the federal level, the main stumbling block has been a slow permitting process. as well as a failure to offer leases where more than a dozen offshore wind developers would want to build wind farms off the Jersey coast.

Offshore wind is strongly supported by many environmental groups, who view it as providing a cleaner way of meeting the state’s electricity needs, without contribution to global climate change.

In an interview on WHYY last week, Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said New Jersey has the potential to be the “Saudi Arabia’’ of wind energy.

Business groups dispute that view. They worry that the subsidies paid by ratepayers, including big companies, will drive up energy bills in a state already saddled with some of the highest in the nation.