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Ørsted’s Plan for Wind in NJ Promises to Aid Economic Development

Danish developer could bring German manufacturer of turbine foundations to Paulsboro, one way it can deliver economic-development benefits to help create green-energy sector

offshore substation
Credit: Ørsted

One of the reasons the BPU awarded Ørsted the state’s first offshore-wind farm last month was the promise of economic-development benefits. The Danish developer may already be delivering on that promise, designating Paulsboro as the New Jersey fabrication facility for a German manufacturer of wind-turbine foundations.

This could well be the first step in creating a robust, new green-energy sector in New Jersey. That benefit is often touted by advocates of offshore wind, but has yet to be realized.

One of the reasons the Board of Public Utilities gave the green light to Ørsted’s Ocean Wind project, is that the board believed the 1,100-megawatt wind farm 15 miles off Atlantic City provides the best economic-development benefits to the state of any of the three applicants.

One of those benefits cited by the agency in a memorandum of understanding (MOU) Ørsted signed with EEW, a German monopile foundation manufacturer, is to locate its facility in Paulsboro. Offshore-wind turbines are mounted on such foundations.

Making NJ the hub

Bringing offshore-wind manufacturers to New Jersey is key to the Murphy administration’s priority of establishing the state as a hub of the supply chain for the rapidly growing sector up and down the Eastern Seaboard.

“Ocean Wind’s economic development plans were the most detailed and offered the most economic benefits to the state,’’ according to a board order. “Longer term, the foundation fabrication facility may be enlarged in its scope of activities as the Atlantic coast offshore-wind industry grows, which would foster further economic benefits in jobs and related supply-chain manufacturing and service activities in New Jersey.’’

“If that gets built, it will be great for New Jersey,’’ said Stefanie Brand, director of the New Jersey Division of Rate Counsel, which intervened in the offshore-wind solicitation proceeding.

More than $200 million already has been invested to upgrade the port of Paulsboro, a decision advocates hope will make it one of the likely choices to host offshore-wind supply-chain segments.

Details are skimpy

Ørsted’s 444-page application presumably provides more details about its plans for the manufacturing facility, but much of it is redacted, including not only details about the facility, but also a whole range of other pertinent information, including wind turbines, location of assembly, costs, wind-energy assessments, and even net carbon emission reductions from building the wind farm.

The application emphasizes the scale of the project is the key to lowering cost to utility customers, who will ultimately foot the bills. “The ability to spread these costs over a larger wind farm will result in a lower cost-per-megawatt-hour to the ratepayer,’’ it said.

In the first year, the cost to ratepayers under a subsidy they will pay on their utility bill is $98.10 per megawatt hour. It will rise to $148.68 per year by 2045, with a levelized price of $116.82 averaged over the 20 years of the contract, according to the BPU.

“I think the prices are okay,’’ said Brand, who represents ratepayer interests in the case. “We had our consultant look at it and he thought it was reasonable.’’ The increases amount to 2 percent a year, or basically accounting for inflation, she said.

Under rules adopted by the BPU, the costs to ratepayers will be offset somewhat ($46.46 per megawatt-hour) when the energy and capacity revenue produced by the wind farm is refunded to ratepayers.

“Ørsted was clearly the most competitive bidder,’’ said Doug O’Malley, director of Environment New Jersey. “The price was much lower than many had anticipated.’’

BPU declines to divulge

In fact, the BPU’s order stated it was not the lowest price for ORECs submitted by other companies. When asked what the lowest price was, the BPU declined to say which offshore wind developer submitted the lowest bid.

But BPU’s order makes clear the agency decided to go with Ørsted’s bid for its economic-development benefits and its belief that the Danish developer could best control costs that would be incurred for necessary transmission upgrades on land to deliver wind power to customers.

Ørsted estimated its transmission upgrades would range between $36 million and $130 million, with a worst-case scenario of $174 million. The board found those costs might be reduced by selling rights to move other offshore wind generation on land to where it interconnects with on-land transmission, presumably either the retired Oyster Creek nuclear plant or the B.L. England plant in Ocean and Cape May counties, respectively.

No decision has been made where those interconnections will occur, according to state officials and Ørsted.

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