Moody’s Likes the Look of NJ, Other Northeastern States, for Offshore Wind

Favorable regulatory climate, natural attributes like wind speed, shallow waters, proximity to cities with high energy demand play into favorable assessment

With costs declining and a favorable regulatory environment, the U.S. offshore wind market will grow rapidly in the coming years, according to Moody’s Investors Service in a new analysis of the sector.

The Northeast, particularly New Jersey, New York, and Massachusetts, should see significant investment in offshore wind, partly with support from policymakers, partly thanks to varied natural attributes, like good wind speed, shallow waters, and proximity to large centers of power demand, according to the analysis.

The analysis could help New Jersey bolster its lagging efforts to tap the technology to accelerate its transition to cleaner energy. Gov. Phil Murphy has established a goal of having 3,500 megawatts of offshore wind capacity by 2030, the most aggressive target in the nation.

“Europe and Asia have been leading the way in developing the 32 gigawatts of offshore wind estimated to come online by 2020,’’ says Leslie Ritter, an assistant vice president and analyst at Moody’s. “But with over 13 gigawatts currently under development, the U.S. is poised to become a more material player in the industry as well.’’

Although prices for offshore wind remain substantially higher than U. S. wholesale power-market prices, forecasts from the National Renewable Energy Laboratory project costs to decline to more competitive ranges in the coming years.

Putting wind on hold

While onshore wind is cheaper than conventional energy power, the cost of offshore wind has hindered development along the Eastern Seaboard. In New Jersey, the Christie administration twice rejected a pilot, 24-megawatt project three miles off Atlantic City because of its projected impact on electric customers, who would pay for the project’s power.

In a sign of an improved regulatory climate, that project, dubbed Fishermen’s Energy, is being revived under a bill (A-2485) moving through the New Jersey Legislature, and scheduled to be taken up this week by committees in both houses.

The bill, part of a package of bills designed to promote a clean-energy agenda in the state, include a measure that would ramp up the renewable energy goals in New Jersey to have 50 percent of its electricity come from such sources by 2030, a target identical to one established in New York.

Offshore leases

Also, two developers, U.S. Wind and Ørsted, have paid nearly $2 million to secure leases in offshore waters along the Jersey coast to build 2,500 megawatts of wind capacity. Those projects, still in the study phases, are not expected to be operational until 2023 at the earliest.

In New York, Empire Wind is moving ahead with a project 20 miles off Long Island that could result in up to 1,500 megawatts of wind capacity. Both New York and New Jersey are expected to offer solicitations for up to 800 megawatts and 1,100 megawatts, respectively, of offshore wind in the coming year, according to the analysis.

The big unanswered question here in New Jersey is how much will ratepayers be asked to help to make offshore wind a reality, especially at a time when utility customers may be asked to continue to subsidize solar and keep nuclear power plants afloat. PSEG Power, the biggest power supplier in the state, is seeking $300 million a year to subsidize three plants it owns.

The cost issue, in part, caused the Christie administration to cool on offshore wind, but the Moody’s analysis suggested offshore wind — at least in Europe, is becoming competitive with conventional sources.

Ørsted, one of the developers seeking to build off the Jersey coast, submitted a zero-subsidy bid to build capacity in Germany off its coast, expecting that its projects would be profitable without the benefit of any subsidies there on top of wholesale power prices.

The analysis also cautioned the development of offshore wind could have a negative impact on existing power suppliers, potentially including PSEG Power, which could see prices for providing capacity power decline.