Countdown to Critical First Step in Offshore-Wind Application Process

Key action for governor’s ambitious clean-energy goals imminent, as developers press to take advantage of federal tax credits

Credit: Creative Commons
Offshore wind
The Murphy administration will solicit applications for offshore-wind farms this fall, an important step that could help developers qualify for lucrative tax credits to defray the cost to consumers.

The New Jersey Board of Public Utilities is expected to open a window to begin accepting applications at its monthly meeting Monday to build up to 1,100 megawatts of offshore-wind farms off the Jersey coast.

The move could mark the most significant step the administration has taken to implement its ambitious goal to develop 3,500 MW of offshore-wind capacity in the state — the most aggressive target in the nation.

The initial solicitation is critical because offshore-wind developers have spent months pressing the administration to speed up its review process, so they could qualify for federal tax credits to reduce project costs by 10 percent. The credits expire at the end of 2019.

“What the administration has demonstrated is a commitment by action to get the results they want,’’ said Scott Weiner, an attorney representing Deepwater Wind, which is seeking to build an offshore wind farm off Cape May.

Developers are happy

Fred Zalcman, head of government affairs for Ørsted, which has leases off South Jersey, agreed. “We’re pretty pleased with it. It’s a workable formula.’’

Precise details about the process, however, were not forthcoming. Peter Peretzman, a spokesman for the BPU, said only “I can’t go beyond the press release,’’ when asked when the solicitation would occur.

Calls and emails to the governor’s office were not returned.

In Gov. Phil Murphy’s announcement, delivered in a press release at the Global Action Climate Summit in San Francisco, he called on the BPU to issue two additional 1,200-MW solicitations in 2020 and 2022, to achieve his 3,500-MW capacity target.

“Every day that we don’t act to reverse the effects of climate change is another day that we abandon our economic, social and moral obligation to create a safe, clean environment for future generations,’’ Murphy said in the statement.

Environmentalists welcomed the governor’s move to set a time frame for achieving the 3,500-MW goal by 2030.

“Gov. Murphy is moving to make New Jersey a national leader in offshore wind,’’ said Doug O’Malley, director of Environment New Jersey. “This is a change from the Christie era.’’

Electric customers to bear most of the costs

Still, business interests are concerned about the projected costs of offshore wind, which largely will be borne by electric customers in New Jersey — already saddled with some of the highest energy bills in the nation.

The BPU is simultaneously moving to adopt a new rule that would establish a funding mechanism to funnel ratepayer funds to the offshore-wind farms to help make them economically viable. By most estimates, those projects will cost more than $1 billion.

Consumers in the state are facing huge increases in utility bills as companies move to upgrade aging power grids and make systems more resilient to extreme storm events from climate change.

But proponents argue offshore wind and other renewable-energy projects will deliver additional benefits by promoting clean energy technologies.

“The development of new, clean-energy sources will develop a new revenue stream in New Jersey and will create new jobs for our residents,’’ said BPU president Joseph Fiordaliso.

For offshore wind developers, a crucial issue has been getting the state to move forward on its goals before a federal tax credit expires at the end of 2019.

To qualify for the tax credit, developers must invest hundreds of millions of dollars by the end of next year. That would not happen unless the BPU decides by next July what projects to approve, according to developers.

“With some caveats, in order to qualify for the tax credits and make the necessary investments, we would need a final decision by the agency by next May,’’ said Zalcman.