The first proposed offshore wind farm on the Jersey coast will have to clear some new hurdles if the proposed 25-megawatt project is to become a reality.
Last Friday, the state essentially punted on whether to move forward with the Fishermen’s Energy, LLC project located 2.8 miles off Atlantic City, a step that could make it more difficult for the developer to retain crucial investment tax credits to make its offshore wind farm economically feasible.
To qualify for the tax credits, the developer must begin work on the project and spend at least $10 million by the end of the year, a goal described as still “doable,’’ by Chris Wissemann, chief executive officer of Fishermen’s Energy.
Nevertheless, the company was “very disappointed’’ by the unanimous decision of the New Jersey Board of Public Utilities, which rejected a proposed stipulation reached by the Division of Rate Counsel and the developer to allow the project to proceed. Such stipulations avert costly, time-consuming litigation in contested rate cases and are typically approved by the BPU, especially when Rate Counsel signs on. The latter represents the interests of ratepayers in utility cases.
The fact that Rate Counsel and Fishermen’s Energy managed to reach a stipulation is significant, given that the former wasof the project. It had previously argued that the offshore wind farm failed to meet a net economic benefit for the state, a key goal the project must meet in order to qualify for ratepayer subsidies.
The Rate Counsel eventually agreed that Fishermen's Energy had overcome that obstacle when the latter convinced the office that it would be able to obtain $100 million in federal incentives -- through U.S. Department of Energy grants and tax incentives -- drive down the cost of the project to ratepayers.
In rejecting the stipulation, BPU commissioners expressed questions about the financial integrity of the project. They particularly opposed a provision in the settlement to saddle ratepayers with another $19.2 million in costs, above and beyond what they will pay for the electricity produced by the wind farm, if the projected federal incentives fall short of expectations.
“The risks should not be on the ratepayer,’’ said BPU Commissioner Jeanne Fox.
The cost of developing offshore wind farms -- which provide a much cleaner source of electricity, but at a steeper cost than conventional power plants -- is increasingly a controversial issue in New Jersey, especially among business interests who worry it will spike energy prices in a state with already high energy costs.
Fishermen’s Energy’s proposed stipulation set the price for the electricity produced by its $180 million project at $187 for each so-called Offshore Renewable Energy Certificates (OREC), which is higher than what consumers are paying for electricity from solar systems these days. Those costs were recently in the $120-to-$130 range, according to the BPU staff.
In a press release issued shortly after the meeting, Fishermen’s Energy downplayed the potential impact on consumers, saying that the cost to typical residential customers would amount to less than what they pay for a cup of coffee over the course of year.
What happens next is uncertain. It is possible Rate Counsel and Fishermen’s Energy could amend the stipulation to address the BPU’s concerns. If not, a rate case overseen by BPU President Bob Hanna is likely to start sometime later this summer. The agency is trying to take steps to make that proceeding less arduous by establishing a record so that every issue in the case is not litigated.
Even if that occurs, the state also needs toto say how the OREC program will work. Until it does, no offshore wind farm will move forward, according to developers.
All of this has made clean energy advocates suspicious of just how committed the Christie administration is to its oft-stated proclamations of making New Jersey the hub of a new and robust green energy sector. The Fishermen’s Energy project, described as a pilot, was submitted to the BPU in 2011, a year after the Legislature and Christie administration adopted a new law to promote offshore wind development along the Jersey coast.
“It looks like they [the BPU] are deliberately trying to come up with ways to delay or sabotage this projects and others,’’ said Jeff Tittel, director of the Sierra Club, a strategy motivated primarily by Gov. Chris Christie’s national presidential ambitions. Offshore wind is unpopular with some segments of the Republican conservative party.
BPU commissioners argued otherwise. “There’s a number of loose ends here,’’ said BPU Commissioner Joseph Fiordaliso, one of two Democrats on the agency. “That should not be interpreted as a lack of support for offshore wind.’’