Ocean Wind LLC, the developer of the state’s first offshore wind farm, has secured the rights to bring power ashore at the former Oyster Creek nuclear station, a move advocates say could reduce the project’s costs to connect to the region’s transmission system.
Ørsted, the owner of Ocean Wind, won approval from the New Jersey Board of Utilities this past June to build a 1,100-megawatt, $1.6 billion offshore-wind facility about 15 miles from the coast of Atlantic city.
The state agency last week approved Ocean Wind’s purchase of so-called capacity interconnection rights to bring the power from the wind farm to the nuclear power station in Lacey Township. Exelon, the former owner of the plant, gave its OK to the scheme.
The precise cost of the transmission grades and how much ratepayers will kick in are undecided. That’s because the exact nature of the improvements to the transmission system have not been determined, according to Cam Stoker, communications manager for Ørsted U.S. Offshore Wind.
Total costs in question
In a BPU order in June, the state said the company projected the costs of the transmission upgrades would run from $36 million to $130 million, but could go as high as $174 million. Those costs were not factored into the subsidy utility customers will pay to Ocean Wind.
Ocean Wind will pay the first $10 million of transmission costs. From there to $130 million, Ocean Wind will incur 70 percent of the costs with 30 percent recovered from ratepayers. From $130 million to $174 million, the costs will be split between the developer and ratepayers. After $174 million, ratepayers will pay 100 percent of the costs.
Both the BPU and New Jersey Division of Rate Counsel said securing interconnection rights at Oyster Creek, where existing transmission capacity already exists, is a good deal for ratepayers.
In a board order last week, the agency said obtaining the rights has the potential to “yield significant economic benefits for New Jersey ratepayers through lower transmission system upgrades.’’
Ocean Wind agreed. It estimated the difference between the cost of the rights at the price indicated and any remaining upgrade costs would be approximately $25 million less than the estimated upgrade costs without their purchase of those rights.
Rate Counsel Stefanie Brand said there is a good chance the formula and cost allocation will save money. “Overall, I think it will be cheaper for the ratepayer,’’ Brand said.
The board will still retain oversight of the “true-up’’ costs related to the final transmission expenses.
This is the first offshore-wind project, expected to be online in 2024, approved by the state, although it intends to hold further solicitations next year and 2022 to help achieve Gov. Phil Murphy’s goal of 3,500 megawatts of offshore-wind capacity by 2030.
The state has yet to decide whether to build an offshore wind-transmission backbone to wheel power among New Jersey and other states trying to build offshore wind farms.