Updated: New Jersey's offshore wind goals up in the air after project rejection

New Hampshire, USA -- New Jersey's Board of Public Utilities (BPU) has given a thumbs-down to a long-proposed offshore wind project near Atlantic City, casting doubt on the project's future as it seeks crucial funding from the Department of Energy

-- and bringing into question the state's commitment to exploring its big untapped offshore energy resource. [Updated with info from the BPU proceedings transcript, and comments from Fishermen Energy's CEO Chris Wissemann.]

Three years ago the state declared to develop more than a gigawatt of offshore wind by 2020 through the Offshore Wind Economic Development Act. Yet the BPU has been curiously slow to evaluate and decide on the first thrust toward that goal: Fishermen Energy's Atlantic City Wind Farm (FACW), a proposed 25-MW pilot project roughly three miles off the coastline of Atlantic City, originally aimed to be installed by 2015 with BPU as the power purchaser. It's been three years since FACW was put before the BPU for what was supposed to be a 180-day review, illustrating what local reports call a lack of motivation and maybe even ulterior political motives to deny support. Hearings last fall were postponed until late December with the BPU finally issuing a negative staff recommendation. A FACW spokesperson claims that the group's repeated requests to meet with BPU since then have not been answered, despite previous urgings from BPU leadership to pursue settlement negotiations.

The BPU's official order won't be posted online for about a week, according to a BPU spokesperson, but we received a transcript of the proceedings which reveals some interesting positions. One criticism claims there was no English-translated financials for the project's Chinese partner XEMC, which Deputy Attorney General Marisa Slaten called a "lack of transparency" that "not only demonstrates a lack of good faith, but it inhibited our ability to independently assess whether the company had demonstrated financial integrity." (Fishermen's counters that simply isn't true, that an English version has been in the official record for some time.) The unanimous 4-0 vote did have some dissension, though; Commissioner Jeanne Fox noted the rules don't distinguish between smaller and larger projects, which thus must be judged with the same standards however unfairly, most especially costs vs. benefits.

Responding to BPU's decision, Fishermen's Energy CEO Chris Wissemann explained that everything stems from a "misinterpretation" of what the price of power will be: FACW says it's $199.17/MWh for an offshore wind renewable energy certificate (OREC), while the BPU based its arguments on a much higher $263/MWh without any federal grants and incentives (i.e. the investment tax credit and Department of Energy funding, more on that later). Using the smaller number — which FACW has committed to keeping, even at risk of its own profitability — the "net benefits" to New Jersey amount to about $33 million, and that's without less tangible proposed economic benefits such as tourism. Individual utilities in the state wouldn't be in a position to sign long-term offtake agreements with FACW by themselves, and BPU has oversight over any power offtake agreement in the state anyway. The key to making FACW work is the proposed OREC structure, having wholesalers pay into an account so pricing is spread across the state "so it's only pennies to any individual," Wissemann said. Outside of that "there isn't really another structure that works in New Jersey."

Of the six U.S. offshore wind pilot projects being developed (a seventh in Maine was pulled off the table by developer Statoil), all competing for further funding from the DOE, FACW arguably has the most headstart and momentum of any of them, having in hand completed permits, interconnection agreements, site leases, right of way, budgets, geophysical/geotechnical work, etc. Each is pursuing new technologies to help improve the viability of U.S. offshore wind energy, from foundation to turbines to sensors; FACW is pursuing bottom-mounted foundations and installation techniques to mitigate environmental impacts, and both unique floating LIDAR and land-based scanning LIDAR. All the projects met a mid-February application deadline for the DOE's next round of offshore wind project funding. Final project briefings will happen in early April, with the DOE's downselect decision expected sometime in mid-May, which will cull the list to three projects that will each receive roughly another $47 million.

Almost certainly, all of these projects need that DOE funding to move onward. In an early-February press-call update, Wissemann acknowledged that obtaining more DOE funding would be "really vital" and "hard to replace," and not obtaining it would make FACW's economics "more difficult to be investible." A FACW spokesperson confirmed that FACW had requested an extension to the BPU's decision until after the DOE downselect, but that request was denied immediately prior to the BPU's broader verdict.

So what happens next? The immediate next options would be to file a motion for reconsideration or an official appeal, according to the FACW spokesperson. The former might be faster, but it is entirely up to the BPU whether to act on it or not. An appeal through the appellate courts might take a year or two to work through the system, and if found in favor of FACW would end up back with BPU.

Fishermen's Energy also has been exploring projects in other states, including North Carolina, Virginia, and Maryland -- and Maryland, Wissemann noted, has been "very impressive" in its activity over the past few months to put together an OREC mechanism, lay out an offshore sit bidding process, getting regular updates with stakeholders. Ironically, Maryland's OREC pricing mechanism uses FACW's proposal as a model, which New Jersey has failed to adopt for two years, he added.

FACW has continued to line up support: eventually it reached compromises with the state's Division of Rate Counsel, which BPU also rejected citing concerns about costs and the project's overall viability, and days ago FACW secured more support from the Great Atlantic City Chamber of Commerce and the Atlantic County Freeholders. Without the BPU's support in the near term, it's unclear what FACW's offtaker options are. The BPU's denial likely won't help, and probably hurts, FACW's case with the DOE downselect. In either case, the future of offshore wind energy in New Jersey seems to be up in the air. The BPU's decision "sends a really clear message" to developers, Wissemann warned: "New Jersey really is not serious about offshore wind."

http://www.renewableenergyworld.com/rea/news/article/2014/03/new-jerseys-offshore-wind-goals-up-in-the-air-after-project-rejection