NJ regulators reject offshore wind project

The New Jersey Board of Public Utilities has voted against extending ratepayer subsidies to an offshore wind project proposed by developer Fishermen's Energy, challenging the project's financial viability.

The New Jersey coast near Atlantic City, seen from above.

Back in 2011, Fishermen's Energy proposed a 25-megawatt offshore wind pilot project to be located off Atlantic City.  The developer applied to the Board of Public Utilities for ratepayer support under New Jersey's Offshore Wind Economic Development Act of 2010.  That law directed the Board of Public Utilities to develop a program to require utilities to source a percentage of the electricity they sell in New Jersey from one or more qualified offshore wind projects.  To track energy from offshore wind, the law envisioned the creation of offshore renewable energy certificates, or ORECs, that could be sold by qualified offshore wind projects to the load-serving utilities.  The concept was that given the relatively high costs and uncertainty of offshore wind, no project could be financed or built without a steady revenue stream from OREC sales.

But the New Jersey project appeared to stall before the Board.  Charged with creating the OREC program and evaluating whether the Fishermen's Energy project could qualify to produce ORECs, the Board was faced with serious technical tasks.  As the regulatory process for the Fishermen's Energy project lengthened -- ultimately stretching to over 1,000 days -- Board staff raised concerns over the financial viability of the project, as well as over the impact of the requested subsidy to ratepayer costs.  Despite trimming the project's estimated costs to $188 million, these concerns remained, leading Board staff to recommend denial of Fishermen's Energy's request for OREC certification.
  
Yesterday, the Board of Public Utilities rejected Fishermen’s Energy’s proposal by a unanimous 4-0 decision.  While the Board's formal written order has not yet been released, expect it to explain the Board's reasoning in more detail when it surfaces next week.  In the meantime, Fishermen’s Energy is undoubtedly considering its options, which may include dropping the project, appealing the Board's rejection, or finding alternative ways to de-risk and finance the project.

NJ tweaks solar energy law

New Jersey Governor Chris Christie has signed into law a bill designed to support the Garden State's solar energy industry.  The bill, which amends New Jersey's electric renewable portfolio standard, is hoped to remedy a perceived oversupply in the state market for solar renewable energy certificates, or SRECs.

Under New Jersey law, electric public utilities are required to source a specified portion of their power from solar electric generating facilities.  This solar-produced power is represented by SRECs, a tradable commodity issued by the New Jersey Board of Public Utilities to generators for each megawatt hour of solar energy they generate from grid-connected facilities.

Solar photovoltaic panels on the roof of Gallagher's Auto Parts, in Patten, Maine.

New Jersey's renewable portfolio standard requires utilities need to procure a specified amount of SRECs.  When the law first took effect, New Jersey had a shortage of eligible installed solar generation compared to this legislative demand, so SREC prices were high -- over $600 per MWh.  These prices were a significant incentive to develop solar capacity.  New Jersey installed more solar capacity in the first quarter of 2012 than any other state, and led the nation in solar installations on commercial and industrial properties in 2011. Today there are over 16,000 solar installations throughout the state, totaling over 800 MW in installed solar capacity.  Another 600 MW of solar capacity is in various stages of installation.

As New Jersey experienced significant growth in solar capacity, SREC supplies grew to the point where they exceeded the level of utility demand required by the renewable portfolio standard.  SREC prices fell below $200 on spot markets.  These low prices hurt solar developers and other stakeholders whose financing is reliant on REC sales and assumed higher prices.

The bill signed into law this week, "An Act concerning certain electric customer metering and solar renewable portfolio standards requirements and amending P.L.1999, c.23" (available as Senate Bill 1925 and Assembly Bill 2966), is designed to fix this problem.  It increases the amount of solar energy utilities must buy in the near-term.  As of June 1, 2013, the state’s solar energy mix will change from a fixed megawatt-hour requirement to a percentage-based requirement.  In proximate years, the change will represent an increase over the current solar carve-out; over time, it will return to the currently-planned arc of solar requirements.

The exact effect of the new law on SREC markets remains to be seen.  With a short-term increase in SREC demand, prices may rise, leading more projects to come online.  Will the short-term accelerated increase in demand lead to long-term price support, more development, both - or neither?

NJ-PA transmission line challenged

A New Jersey court is considering a challenge by environmental activists to a proposed high-voltage transmission line connecting Pennsylvania and New Jersey.

Proposed by PPL Electric Utilities and Public Service Electric and Gas Co., the Susquehanna-Roseland line would run 145 miles from PPL's Susquehanna substation near Berwick, Pennsylvania to Roseland, New Jersey.  The route, which is nearly finalized, would cross three units of land managed by the National Park Service: the Delaware Water Gap National Recreation Area, the Middle Delaware National Scenic and Recreational River and National Recreation Water Trail, and the Appalachian National Scenic Trail. 

The Susquehanna-Roseland project has received the approval of the New Jersey Board of Public Utilities, as well as federal support in the form of an expedited permitting process.  Regional grid operator PJM Interconnection, LLC has also said that the line is essential to improving reliability and reducing transmission line congestion in the region.

At the same time, the line has drawn opposition from environmental groups and others.  The Sierra Club and other organizations have challenged the line as continuing a "reliance on toxic fossil fuels by shipping coal-fired power into New Jersey." Instead, the Sierra Club calls for increased use of demand response, energy efficiency and renewable energy to meet peak energy demands.  Other have challenged the project's proposed route through National Park Service lands, including widening some existing transmission corridors and associated road-building activity.

This past Wednesday, the Appellate Division of the Superior Court of New Jersey heard oral argument over whether the New Jersey Board of Public Utilities' approval of the project was valid.  Among the challenges raised was whether the BPU fully considered non-transmission alternatives to the line, such as demand response and energy efficiency.

While the court process concludes, the utility proponents believe that construction should not be affected by the lawsuits.  The line is expected to be placed in service by summer 2015.