Offshore Wind Hits Early Turbulence: Who Will Bring the Power Ashore?

Source: By TOM JOHNSON, NJ Spotlight • Posted: Tuesday, July 24, 2018

Battle erupts over who will deploy lucrative transmission lines to reach customers, pitting wind developers against transmission companies

Before New Jersey approves any projects for offshore wind farms along its coast, the state must decide who will build the transmission lines that bring the power to customers.

It is shaping up to be a bruising battle, pitting the developers vying to build wind turbines offshore against a pair of companies that want to deploy the underwater power lines from the farms to shore and customers who will use the electricity.

The issue surfaced yesterday as state regulatory officials sought input on how it should go about buying power from the offshore wind developers it hopes will achieve the Murphy administration’s clean-energy goals.

The state has set a target of 3,500 megawatts of offshore wind by 2030, with an initial goal of 1,100 megawatts. So far, four offshore wind developers are vying to build the farms at locations up and down the coast.

Transferring power from farm to shore

A major unanswered question remains who will build the high-voltage power lines from the offshore facilities to locations on land that will direct the electricity to the customers who need it.

The dispute raises a wide range of issues, ranging from what option is the best for the environment, and which is more cost-effective, offering the best opportunity to lower the cost for customers, who will ultimately pay for the power.

But the biggest issue is who gets to build the lucrative power lines, which by some estimates could run into the hundreds of millions of dollars. According to some industry experts, developing 3,500 megawatts of offshore wind capacity could run as much as $7 billion.

“With all the other costs that we are going to see, we have to be mindful of the ratepayers,’’ said Robert Gibbs, director of government and regulatory affairs for Direct Energy, referring to plans by the state to ramp up reliance on solar energy, provide subsidies to nuclear power, and make other investments in the power grid.

Letting transmission developers do the job

If transmission developers are allowed to compete in the process, it will lower costs to ratepayers and minimize impacts on the ocean, according to Clarke Bruno, president of transmission for Anbaric. Under current law, only offshore wind developers can build the power lines to customers.

Martian MelnykMarkian Melnyk, president of Atlantic Grid Development LLC

“It is the key to competition,’’ agreed Markian Melnyk, president of Atlantic Grid Development LLC, which is seeking to build an offshore-wind backbone to connect wind farms and bring power where it is needed.

But the offshore wind developers, including those who have secured leases to build farms offshore, argued otherwise.

Ørsted, vying to build a project off Atlantic City, said it does not want to have its wind farm held hostage to a third-party developer. That happened in Germany, where the developer had to wait two years for a connection to land, said Fred Zalcman, head of government affairs in North America. “We’re not willing to take that risk,’’ he said.

Deepwater Wind, the only developer of an operating offshore wind farm in the United States, in Rhode Island, agreed. The company owns a lease to build a farm off Cape May.

Beyond the transmission dispute, developers, environmentalists, and others urged the state to move quickly on seeking applications by the end of this year. They fear if it takes too much time, developers will not be able to qualify for a federal tax-investment credit that expires at the end of 2019.

The credit is valued roughly at 12 percent of the project costs, said Abby Watson of Siemans Gamesa. It has the potential to save customers hundreds of millions of dollars, she said.

The state Board of Public Utilities is moving on several fronts to fast track its efforts to establish offshore wind. It also is developing a funding mechanism to pay offshore wind developers to build the farms, a step that is critical to line up financing from Wall Street for the projects.