The Murphy administration is being urged to open up a critical part of its offshore wind initiative to a competitive bidding process, by an unusual coalition comprising business, labor and environmental organizations.
In a letter to Gov. Phil Murphy, the groups urged the state to allow independent transmission companies to participate in the initial solicitation of offshore wind developers who are vying to build wind farms off the Jersey coast, a process from which the former firms have so far been excluded.
The issue is shaping up as one of the more contentious disputes in the state’s efforts to vault New Jersey into a leadership position as the hub of the offshore wind sector. The unanswered question is who should build the underwater, high-voltage power lines bringing the power from the wind farms to the markets needing the electricity — and at what costs.
The state Board of Public Utilities, the agency overseeing the development of offshore wind power, expects to field several applications from developers by the end of the year to build up to 1,100 megawatts of capacity. Those developers want to construct not only the giant wind turbines generating the power, but also the transmission systems to connect to the wind farms.
But that option is troubling to the groups that signed the letter, which included the Chemistry Industry Council, the New Jersey Petroleum Council, Clean Water Action, the New Jersey Large Energy Users Coalition, IBEW and the New Jersey Sierra Club.
Worries about increased cost
The diverse nature of the coalition reflects widespread concerns over rising energy bills as the state pursues an aggressive clean-energy agenda at the same time utilities are facing pressure from federal and state regulators to modernize an aging electric grid and gas-distribution systems.
The BPU acknowledged the first solicitation does include transmission within the project development, consistent with enabling legislation to promote the technology. But it noted that future solicitations could expand to include separate transmission firms — beyond the wind developers.
In a statement, it added, “the board is considering an Open Backbone Transmission as part of the broad systems analysis undertaken in the Offshore Wind Strategic Plan and may include it as part of the two additional 1,200 MW solicitations of offshore wind capacity that Gov. Murphy has called for in 2020 and 2022.’’ (An “open backbone transmission system” is designed to be built offshore between wind farms, presumably up and down the Eastern seaboard.)
A so-called bundled generation and transmission system would interconnect with the regional power grid at multiple locations, resulting in efficiencies that could trigger significant upgrades to the grid but increase costs to ratepayers, the groups said in a letter to the governor.
Those concerns would be heightened in southern New Jersey where much of the offshore wind farms are expected to be built, the organizations claimed. There is little question the power grid in the southern portion of the state is not robust enough to accommodate the importation of 3,500 MW of offshore wind power as the administration envisions, the groups said.
“It is going to hurt competition and just put more pressure on energy prices, which already are high,’’ said Dennis Hart, executive director of the CIC and one of the signees to the letter.
Amy Goldsmith, state director of Clean Water Action, agreed. “We want to get offshore wind fully operational as quickly as possible and we want to keep the rates down,’’ she said.
Developers are concerned about risks
Offshore wind developers, however, argue otherwise, claiming that when a single developer is responsible for both generation and transmission, they can optimize the size, design and location of the systems.
In an Op-Ed in NJ Spotlight this summer, Thomas Brostrøm, president of Ørsted North American, one of the firms seeking to build wind farms off the coast, argued that forcing developers to interconnect with such a system would create intolerable risks that could stymie New Jersey’s offshore wind market.
Clarke Bruno, president of transmission at Anbaric Development Partners, disagreed. “The absence of a strategic approach to transmission — one that includes a separate, competitive bidding process — could inadvertently lead to the creation of another energy monopoly, giving significant first-mover advantages to the first developers,’’ he said.
In an event sponsored by NJ Spotlight last month, however, even Bruno agreed the first projects to move forward in New Jersey are likely to combine both transmission and generation. That outcome is driven largely by the need to begin building the projects by next July in order to qualify for federal tax credits that will drive down the projects’ costs to ratepayers.
Those tax credits are anticipated to lower the cost of the projects to ratepayers by about 20 percent.