Offshore-Wind Developers Want More Details on State Straw Proposal

Realizing the administration’s ambitious goal for offshore wind means working out a funding mechanism, long an impediment for developer schemes

Offshore-wind developers seem to like what they have seen so far of the state’s plan to promote wind farms along the Jersey coast, but they still added a plea: Hurry up.

In a public hearing yesterday on a still undefined straw proposal to have ratepayers foot the cost of paying for electricity from offshore wind farms, developers and others described it as a good first step to realizing the state’s ambitious goals for the sector.

The Murphy administration established some of the nation’s most aggressive goals for offshore wind, hoping to have 3,500 megawatts along the coast by 2030.

But it is not going to happen unless the state figures out the details of a complicated funding mechanism determining how offshore-wind developers would be paid for the electricity their wind farms produce, a cost largely borne by utility customers.

Unanswered questions

The straw proposal outlines general concepts about how the funding mechanism would work, but leaves many details unresolved and questions unanswered. The mechanism is crucial to moving projects forward; without subsidies projects will have a hard time lining up financing from Wall Street.

“There’s a lot of work left to be done,’’ said Stefanie Brand, director of the New Jersey Division of Rate Counsel, a state agency that is worried about how offshore wind will affect costs to customers. Brand has numerous issues dealing with provisions helping to deflate those costs.

Offshore wind is expected to boost energy bills, at least in the short term. While costs are dropping, it is more expensive than electricity produced from conventional sources, like natural gas.

The straw proposal hopes to cushion those costs by directing all revenue from energy and other payments from the facilities to be returned to ratepayers, a move that could help reduce their costs. Precisely how those diversions would work remains unclear.

But developers and others also worry that if the state does not move fast enough, it will not be able to qualify for a lucrative federal tax incentive for offshore-wind projects, which expires at the end of 2019. If projects do not qualify for that incentive, it could increase the costs by 10 percent, according to some.

For that reason, offshore-wind advocates urged the state to begin soliciting projects to qualify for the state subsidies — dubbed Offshore Renewable Energy Certificates.

“We certainly would like to see a solicitation open by the end of the year,’’ said Catherine Bowes, program director of offshore-wind energy for the National Wildlife Federation.

Bureaucratic slowdown?

Whether that could happen is questionable. The state said it plans to hire a consultant to oversee the drafting of the regulations, which have to still be approved by the state Board of Utilities, published in the New Jersey Register, presented to the public, and once again adopted in the New Jersey Register.

Nevertheless, offshore wind developers were mostly enthusiastic. “What we are at is an excellent starting point,’’ said Paul Lee, of Statoil, which has a lease to put offshore wind turbine 20 miles east of Sandy Hook.

His view was echoed by Jamil Khan, development manager of Deepwater Wind, which is pushing projects off New York, Maryland, and Cape May. “The governor’s goal is audacious but not unobtainable.’’

A major issue still unresolved by the straw proposal is who builds the transmission systems to bring the power from offshore wind farms into New Jersey and other areas. A huge fight is brewing, pitting developers and electric utilities against the Atlantic Wind Connection, which is seeking to build an offshore transmission backbone to deliver power to urban areas.

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