BPU Moves Forward with Offshore Wind Financing Rules

The Board of Public Utilities (BPU) sent to be published the Financial Mechanism for offshore wind, the OREC Financing Rules. These rules will set up a process to fund offshore wind developers for projects built off New Jersey’s coast. Governor Murphy’s Executive Order No. 8 sets a goal of providing 3,500 megawatts of offshore wind by 2030 with the first 1,100 megawatts implemented as soon as possible.

Offshore wind off our coast could feasibly power 1.2 million homes with clean energy. New Jersey has enough potential of offshore wind to meet 1/3 of our electrical needs. We can grow our economy and create jobs while protecting our environment.

“Finally, after eight years of delay, the BPUE has proposed rules for financial mechanism for offshore wind. This the first major step going forward in making offshore wind a reality. These OREC rules should have been in place by 2011. Not having these rules in place has been one of the major impediments to funding, therefore building, offshore wind. Now that we have these rules, the BPU can better determine which projects are better than others and should move forward,” said Jeff Tittel, Director of the New Jersey Sierra Club. “Hopefully, if these rules get approved, we can move forward with jobs, renewable energy, and capital investments.”

Last week, the BPU hosted a public hearing to gather input on a Straw Proposal concerning the OREC funding mechanism. They provided a list of nine questions to help facilitate the solicitation of the first 1,100 megawatts of offshore wind. In response to those questions, we believe that the BPU should put out an RFP or solicitation as soon as possible for the initial 1,100 MW. After the solicitation for the first 1,100 MW is established, we should send out for the rest as soon as possible, allowing as many companies to compete as desire to do so in an open and transparent process.

“We are concerned because the BPU voted to approve these rules before the public had a chance to see them before the stakeholder process has been closed. We don’t know how thorough or effective the rules are. These rules are only a framework and must be filled in. They could end up being filler rather than substance. We need to get the rules done in time for wind developers can qualify for federal tax credits and put in solicitations,” said Jeff Tittel. “We don’t know what’s in the rules and whether they’re similar to the 2013 draft rules or entirely different. This means the rule proposals leave more questions than answers.”

During their stakeholder meeting, the BPU also sought information on making the process more financially viable and we believe they can do this by allowing long-term contracts between wind providers and utilities. Looking at net benefits, we must include health and environmental benefits of producing a third of our electricity from a non-polluting source. This could end up facilitating the closure of polluting plants, creating a stronger net benefit to our environment and economy. This is especially important because New Jersey is especially vulnerable to sea level rise and health-related problems from air pollution. We do not need to spend any more time on meetings, we need to get the rules and regulations in place and start building.

“We don’t know if the net benefits will include environmental or health impacts, or what the total costs will be. We need to know what the return to ratepayers will be as well. The rules allow for developers to come in and apply for ORECs, but we don’t know which standards will be considered when analyzing costs and benefits of the proposals. It allows them to include transmission costs, but we don’t know if third parties may apply for transmission separately. We know the rules require ORECs to discount any federal tax exemptions from the price, but we don’t know how they’re going to set the OREC or judge what the costs should be,” said Jeff Tittel.

Governor Christie and his administration have failed to fully implement the Offshore Wind Energy Development Act (OWEDA), which was signed in 2010. It was supposed to establish a funding mechanism for offshore wind, to jump start the manufacturing of wind turbines in our state, and to develop windmills off our coast. Since it passed, OWEDA implementation projects like Fishermen’s Energy have been on hold because the Christie Administration has blocked the creation of a funding mechanism.

“Under Christie, there’s been a delay on offshore wind because these rules didn’t exist and wind developers could not borrow capital to build these projects. This is because without insurance of a funding mechanism, it’s difficult to borrow money from financial institutions. Now, we can work towards our current goal of 1100 MW and hopefully get the process going for 3500 MW of offshore wind by 2030. These projects will take years to build so we need to get the finances, studies, impacts assessments done now,” said Jeff Tittel.

Wind energy is renewable, clean, and thousands creates jobs. The East Coast, with its large metropolitan areas and dense suburbs is hungry for jobs, investment and energy. Offshore wind not only creates jobs in installing, operating, and maintaining wind turbines but the OWEDA also calls for investment in manufacturing wind turbines.  This would create jobs rebuilding the Paulsboro Port, building factories, manufacturing the steel for the turbines, and assembling and transporting the windmills.  Jobs would also be created building the substations and electric connections to serve the windmills. As we continue to rebuild our coast in the wake of multiple storm events we need to invest in clean, renewable energy sources that do not contribute to climate change.

“Offshore wind is the most reliable and cost-effective form of offshore power. It can provide electricity and jobs to places where it’s needed most. Other states, such as Rhode Island, have gotten the jobs and economic advantages of wind while NJ has fallen behind. We need to get the finances, studies, impact assessments in place now to jumpstart the manufacturing of wind turbines in our state, and to develop windmills off our coast. Every day of talk is another day of more greenhouses and lost jobs. We have a climate crisis, we have to move quickly,” said Jeff Tittel, Director of the New Jersey Sierra Club. “We need to see what’s in these BPU wind financing rules and work together to make them as efficient a possible so we can jumpstart New Jersey’s wind market. Unless we get these rules completed, we’ll be only spinning our wheels, not turbines.”