Finally, Major Movement on Governor’s Promises for Offshore Wind

Tom Johnson | June 24, 2019 | Energy & Environment
Approval for a $1.6B wind farm 15 miles off Atlantic City readies state to become significant participant in the sector

Credit: Zoltan Tasi/Unsplash
Offshore wind
With Friday’s largest ever award for offshore-wind capacity to Ørsted’s Ocean Wind project, New Jersey signaled it will be a major, if not dominant, player in the sector rapidly developing along the Eastern Seaboard.

The selection of the $1.6 billion, 1,100-megawatt project about 15 miles off the coast of Atlantic City is significant in not only being the largest single offshore-wind project ever awarded in this country, but also its cost came in lower than many expected.

Ørsted’s Ocean Wind project established a first-year price of $98.10 per megawatt hour for the subsidy provided by ratepayers, dubbed an OREC (offshore renewable energy certificate). That compares with an OREC offered in Maryland, priced at $170 for a wind project there, and less expensive than a project in Massachusetts.

For New Jersey ratepayers, however, the actual cost paid will be far less — $46.46 MWh — when the energy and capacity revenue produced by the wind farm is refunded to utility customers. It means the estimated monthly impact will be an increase of $1.46 for residential, $13.05 for commercial, and $110.10 for industrial customers, according to the state Board of Public Utilities, which approved the project on Friday.

Cost is less than anticipated

“That is very low; I am surprised,’’ said Lyle Rawlings, founder of Advanced Solar Products, a firm that has been involved in setting New Jersey’s agenda to have 100 percent clean energy by 2050. “It’s excellent for ratepayers in moving toward a renewable energy future.

It also could be important in moving forward on other solicitations for offshore wind in New Jersey with the next one involving 1,200 MW scheduled for next year, and then another 1,200 MW in 2022. Gov. Phil Murphy has set a goal of 3,500 MW of offshore-wind capacity by 2030.

“Today’s historic announcement will revolutionize the offshore wind industry here in New Jersey and along the entire East Coast,’’ said Murphy in an announcement from his press office. “This award is a monumental step in making New Jersey a global leader in offshore wind development and deployment.’’

Liz Burdock, CEO and president of the Business Network for Offshore Wind, said the action by New Jersey will accelerate the development of the supply chain and begin the process of bringing offshore-wind manufacturing to New Jersey and the rest of the country.

Thomas Brostrøm, CEO of Ørsted US Offshore Wind
Thomas Brostrøm, CEO of Ørsted US Offshore Wind, agreed. “Wind will ensure that the state and its residents not only benefit from clean renewable power, but that they reap the rewards of being an early mover at scale in the offshore wind industry as it grows in the U.S.,’’ he said.

The Ocean Wind project, being developed with support from PSEG, the owner of the state’s largest utility, is projected to create 15,000 jobs and generate $1.17 billion in economic development for New Jersey, according to BPU president Joseph Fiordaliso. “I think New Jersey wound up in a very good place as far as price is concerned,’’ he said, following the unanimous vote.

One factor in that result is the board’s approval affords the developer sufficient time to qualify for federal tax incentives, due to expire at the end of the year. The tax credits shave approximately 12 percent off the project cost.

In reviewing the applications from three developers, the BPU staff concluded four proposals — some involving multiple developers and larger than projected initial capacity of 1,110 MW — merited consideration based on meeting all the law’s criteria.

All involved Ørsted to one extent or the other, but two involved Ørsted paired with EDF Renewables/New Shell Energies (one proposal was for expanding the capacity to 1,200 MW); and another with Ørsted /Equinor (also for 1,200 MW capacity).

An unusual twist

In an unusual twist, the BPU staff did not recommend to the commissioners any of the four proposals — at least publicly. At least one BPU commissioner, Bob Gordon, said he initially wanted to award projects to multiple developers to promote a competitive sector, but was convinced the Ørsted project has the highest likelihood of success — given the company’s long experience in the sector.

Other commissioners said the company’s application offered the strongest contribution to combating climate change and did so at the lowest reasonable cost and risk.

The project is expected to begin construction in two years and be online in 2024, according to officials. Upon completion, it is expected to provide power to a half-million homes in New Jersey.

Ørsted is committed to building a range of other projects along the Eastern Seaboard, including in Maryland (120 MW); Long Island (130 MW); and Rhode Island and Connecticut (704 MW). Those projects could come on line as early as 2022 and 2023.

Clean-energy advocates praised the decision, after being frustrated that little action had been taken on pushing offshore wind forward during the eight years of former Gov. Chris Christie. In those intervening years, however, the cost of offshore wind has dropped dramatically, like many other renewable energy technologies, offering customers a cheaper transition to a clean-energy future.

Yet, big questions have yet to be answered, including who will build the transmission necessary to bring power from the offshore-wind farms to the public in urban areas where it is most needed. This initial project probably will involve Ørsted teaming with PSEG’s utility to do the transmission work.

The federal government is exploring building an offshore-wind backbone transmission system, a course some BPU commissioners might favor. Gordon said he hopes that option is pursued.