NJ approves offshore wind funding mechanism, rejects demonstration project

On December 18, the New Jersey Board of Public Utilities took two actions affecting offshore wind: approving the state’s Offshore Wind Renewable Energy Certificate (OREC) funding mechanism, but rejecting a petition by Nautilus Offshore Wind, LLC to install a 25 MW offshore wind demonstration project in state waters off the coast of Atlantic City. Meanwhile, developers have formed a new joint venture to develop offshore wind in federal waters farther offshore New Jersey.

New Jersey Governor Phil Murphy has set a goal of 3.5 gigawatts of offshore wind capacity by 2030, and in May 2018 he signed into law a renewable energy bill codifying that goal into statute. On September 17, 2018, the NJBPU opened the nation’s largest single-state solicitation to date, seeking 1,100 megawatts of offshore wind. Applications will be accepted through December 28, 2018. Winning projects will be compensated through the OREC mechanism approved this week, which requires electric companies to buy defined quantities of ORECs from offshore wind developers, much like a traditional renewable portfolio standard mechanism.

Also on December 18, the BPU rejected a 25 megawatt demonstration project proposed by Nautilus (under development by EDF Renewables and Fishermen’s Energy). The Nautilus project would feature three turbines in state waters about 2.8 miles offshore Atlantic City. But the BPU found the Nautilus project did not demonstrate the economic and environmental benefits required under the Offshore Wind Economic Development Act for the state to commit ratepayer funds. In particular, the BPU found that Nautilus didn’t provide sufficient information to substantiate claimed economic benefits, and further that Nautilus demanded a price that was too high given the unsubstantiated benefits.

But offshore wind development may soon occur farther offshore New Jersey. On December 19, 2018, EDF Renewables North America and Shell New Energies US LLC announced the formation of a 50/50 joint venture, Atlantic Shores Offshore Wind, LLC to co-develop offshore wind generation in federal waters offshore New Jersey. The site is about 8 miles offshore Atlantic City. At issue is the 183,353-acrea OCS-0499 lease area, the rights to which were initially auctioned by the federal Bureau of Ocean Energy Management in 2015. That auction was won by Toto Holding Group subsidiary US Wind Inc., with a winning bid of $1,006,240.

More recent federal auctions for offshore wind site leasing rights have brought much higher winning bids -- for example, a December 2018 auction for sites offshore Massachusetts brought in about $135 million for each of three lease areas, totaling over $405 million in winning bids for about 390,000 acres.