Feds Announce First Offshore Wind Leases, but Where’s New Jersey?

Delays in creating a workable funding mechanism for offshore wind may have contributed to NJ not being in first round of lease sales

The federal government is holding the first competitive lease sale for offshore wind farms along the Eastern Seaboard later this summer off the coasts of Massachusetts and Rhode Island — but not New Jersey.

The July 31auction will include more than 164,000 acres for commercial wind leasing, a top priority of the Obama administration and one eagerly embraced by New Jersey officials, who hope to develop 1,100 megawatts of offshore wind farms along their own coast.

“Today we are moving closer to tapping into the enormous potential offered by offshore wind to create jobs, increase our sustainability, and strengthen our nation’s competitiveness in this new energy frontier,’’ said U.S. Secretary of the Interior Sally Jewell in a press release announcing the offering.

According to a spokeswoman for the Bureau of Ocean Energy Management, an arm of the Interior department, the agency is moving forward with a competitive leasing process for areas off the Jersey coast on an independent track from Rhode Island and Massachusetts.

Offshore wind developers eager to build along the Jersey coast and state officials downplayed the significance of New Jersey not being included in the first auction.

Christie administration officials, who have been working with the Bureau of Ocean Management within the Department of Interior since early 2010, suggested that the reason the agency keeps moving the date to release the sales notice for New Jersey seems to be that it has not yet delineated the lease zones.

Erich Stephens, a vice president of Offshore MW, one of the developers interested in building wind farms off the Jersey coast, agreed with the state’s assessment. He noted that the proposed leasing area off the Jersey coast is much larger than the one off Rhode Island, making it difficult to break it up into auction zones and simplify bidding on tracts.

“I always come back to the state-level offshore wind finance program as being the real driver for project development, and in this regard I continue to find New Jersey to be ahead of the game relative to other states,’’ Stephens said. “More important that New jersey get its offshore wind program right, with all the pieces in place and coming in an order that makes sense, than it be the first to go to auction.’’

To the dismay of many, however, some of those pieces are not yet in place.

Those concerns reflect, in part, the failure of the New Jersey Board of Public Utilities to adopt a workable funding mechanism to help offshore wind developers line up financing for their projects.

A law promoting offshore wind would saddle ratepayers with subsidizing the electricity wind farms produce, but developers want to see a system that would prevent the Legislature and Christie administration from diverting those funds to balance the state budget, a practice that has occurred with increasing frequency in the past three years.

But even if a consensus on the funding mechanism is reached, it could be close to a year before a formal rule is adopted by the agency, further delaying the development of offshore wind.

The timing is important because New Jersey, like other states along the Eastern Seaboard, view offshore wind as a way to promote a new green industry here, creating thousands of well-paying manufacturing jobs.

Greg Reinert, a spokesman for BPU, said that is still the case. “New Jersey is in a strong position with the state’s wind resources and commitment to 1,100 megawatts of offshore wind capacity to attract offshore-wind manufacturing jobs.’’

Meanwhile, the federal permitting and leasing process continues to move much too slowly, according to some developers. At one point, the state was told the auction would be conducted in the fall of 2012. Now, state officials say they are working with the bureau to complete the zone recommendations and hope the agency is able to release a draft sale notice this summer.

Still, some offshore wind advocates hailed the agency’s decision.

“The competitive lease sale for two offshore wind farms off the coasts of Rhode Island and Massachusetts is a vital step for the offshore wind industry,’’ said Jim Lanard, president of the Offshore Wind Development Coalition.

The Institute of Energy Research, a trade group representing traditional energy companies, argued the action hurts consumers. The group cited estimates by the U.S. Energy Information Administration that offshore wind is 2.6 times more expensive than onshore wind and 3.4 more costly than power produced by a natural gas combined-cycle plant, a generating unit that is among the most cost effective operating today.