Company Still Touts Benefits of Transmission Line Off Jersey Coast

Many question $1.8B project’s worth without original plan’s offshore wind component

Robert Mitchell, chief executive officer of NJEL, which wants to build a transmission line under the ocean floor off the coast of New Jersey.
The backers of plans to construct a transmission line under the ocean floor miles off the New Jersey coast are saying it still could deliver savings to ratepayers, even if offshore wind farms – the original driving force behind the proposal — are never built.

That assertion comes at a time when the controversial transmission project, dubbed the New Jersey Energy Link (NJEL), and proposals by others developers to build offshore wind farms appear to be mired in red tape and bureaucratic inertia at the federal, state and other levels.

New Jersey has a goal of developing 1,100 megawatts of offshore wind capacity by 2020, a target many view as extremely implausible to achieve, given regulatory hurdles and financial costs facing the sector. No offshore wind farms have been developed in the United States, even though Obama administration officials say it could provide a significant amount of energy, particularly along the Eastern Seaboard.

The situation in New Jersey suggests why that has not happened. A state regulation to propose a financing mechanism to spur development of offshore wind farms is years late and still hasn’t been adopted — and, without it, offshore developers say their projects will never attract Wall Street financing.

In addition, attempts to speed up federal permits for the projects have yet to bear any results. Meanwhile, state regulatory officials have yet to act on a proposal for a pilot offshore-wind project in Atlantic City that was submitted to the agency more than 29 months ago; the project will probably die if not approved by the end of the year.

All of this inaction has some questioning whether the state will ever move forward on offshore wind projects.

However, an executive of the firm proposing the offshore wind transmission project, which is being backed financially by Google and other major international corporations, remains optimistic about its prospects.

Robert Mitchell, chief executive officer of NJEL, insisted the company is not shifting its focus away from offshore wind. “It’s just a matter of timing,’’ Mitchell said. “With or without offshore wind, there are many benefits to ratepayers.’’

Those benefits would involve transmitting electricity from southern New Jersey, where prices are less expensive, to northern portions of the state, which has some of the highest power prices in the nation. Those energy prices spike, particularly in summer months, because congestion on the grid prevents electricity from being delivered to areas of high demand, a problem the NJEL project might resolve.

The project would rely on funding from New Jersey ratepayers to move forward, an issue that is raising fears among business interests that it will increase the state’s already steep energy costs.

The developer has scaled back the transmission project, which in its original configuration would have extended from Virginia to New Jersey, at a cost of at least $5 billion. It now calls for building a so-called underground transmission line only off the coast of New Jersey, with a price tag of $1.8 billion, a cost entirely borne by Garden State utility customers.

Mitchell argued that the cost would be more than offset by the savings reaped by ratepayers by delivering low-cost electricity from the south to northern portions of New Jersey.

Nevertheless, the company has a high bar to leap in try to win over Christie administration officials.

“I don’t think it’s cost-effective,’’ said Stefanie Brand, director of the New Jersey Division of Rate Counsel, which represents the interests of ratepayers in such cases.
“Without offshore wind, I don’t think we need an ocean transmission line. From our perspective, unless it is cost-effective, we’re not going to support it.’’

But Mitchell argued the project could deliver up to 1,000 megawatts of power (one megawatt is enough to serve more than 800 homes) from southern New Jersey up to Jersey City, where it could help relieve congestion on the grid. “There’s plenty of benefits going ahead with our line with or without offshore wind,’’ he said.

The project has its supporters. In June, the Legislature passed a resolution directing the New Jersey Economic Development Authority to study the economic benefits of the project and directed the New Jersey Board of Public Utilities to push the regional operator of the power grid, PJM Interconnection, to look into the possibility of including it on its list of new projects designed to boost the reliability of the grid. Neither study has been completed.

But Brand contended that without an offshore-wind component, there is no way the transmission project will ever be included in PJM’s plans to upgrade the regional grid.

Michael Drewniak, spokesman for Gov. Chris Christie, told Bloomberg News last week that the administration “is not ready to support’’ the project. Drewniak did not respond to an email message seeking further comment.

Jeff Tittel, director of the New Jersey Sierra Club, agreed with those opposed to the project: “We don’t believe it is necessary.”