The state has approved a second interconnection agreement to bring power ashore from the Ocean Wind LLC offshore wind farm — this time at the former B.L. England coal plant in northern Cape May County.
The New Jersey Board of Public Utilities quickly approved the interconnection agreement at a meeting Friday, saying the proposal is in the best interests of ratepayers and is expected to reduce the risks of higher costs for transmission system upgrades.
The Ocean Wind project is the first offshore wind farm to be approved by New Jersey, which hopes to build a robust sector off the coast by 2035. The $1.6 billion project, located about 15 miles off Atlantic City, calls for building 1,100 megawatts of capacity.
Last September, the BPU approved a different interconnection agreement for Ocean Wind to bring power ashore at the now closed Oyster Creek nuclear power plant. That agreement is still in place.
Keeping its options open
Asked why Ørsted, the owner of Ocean Wind, decided to purchase a second interconnection along the Jersey Shore, Lauren Burm, a spokeswoman, replied, “we need to keep all of our options open. We have not made a definitive decision on interconnection.’’
Ørsted, one of the world’s biggest developers of offshore wind, is well-situated to become a major, if not dominant, player in the increasingly competitive offshore wind sector in New Jersey. Besides operating the nation’s first offshore wind farm, the Danish company holds leases for hundreds of thousands of acres off the Jersey coast.
Where and how to bring the power from offshore wind farms ashore is one of the biggest unanswered questions about the sector. The cost will be borne by utility customers, but just how much they will end up paying is uncertain. Last year, the company told the BPU the transmission upgrades would run from $36 million to $130 million, but could go as high as $174 million.
Sliding scale for transmission costs
Under the interconnection agreement reached with the board last year on Oyster Creek, Ocean Wind will pay the first $10 million of transmission costs. From there to $130 million, Ocean Wind will pay 70% of the costs with ratepayers picking up 30%. From $130 million to $174 million, the costs will be split between developers and customers. After $174 million, ratepayers are on the hook. Those allocation costs are in the B.L. England agreement.
In the latest BPU order, Ocean Wind told the agency the difference between the purchase of the B.L. England capacity-interconnection rights is expected to reduce transmission upgrade costs by $35 million, compared with the company not purchasing those rights. The projected savings include the cost of buying interconnection rights both at B.L. England and at Oyster Creek.
The state has been exploring different options on how to bring power onshore to customers from offshore wind farms. In the short term, developers want to hook up with the power grid serving the region.
For some, Ørsted’s move to line up multiple interconnection options is an indication of how offshore wind development in New Jersey may be ready to take off.
“It shows that offshore wind is viable in New Jersey, and it is only going to get larger and larger,’’ said Jeff Tittel, director of the New Jersey Sierra Club.
“It’s a big leg up,’’ agreed Doug O’Malley, director of Environment New Jersey. “Locking in B.L. England and Oyster Creek gets them a lot closer to completing the offshore wind puzzle. The offshore wind industry is poised to catapult into reality,’’ he said.
Gabriel Martinez, another spokesman for Ørsted, said the steps taken by the company “are critical to move the state’s first offshore wind forward in its development.’’