Political ambitions in N.J. seen as helping to derail pilot project off Atlantic City

Source: Colin Sullivan, E&E reporter • Posted: Tuesday, March 18, 2014

This week could be a crucial one for the offshore wind industry in New Jersey.The state body with oversight on offshore wind in state waters, the Board of Public Utilities, is expected to hold a public meeting Wednesday during which a proposed 25-megawatt wind farm off Atlantic City will be discussed. An actual vote on the project is possible.That’s the simple part. More complicated is whether the board will get behind the blueprint from developer Fishermen’s Energy, which is also vying for a $49 million “phase 2” Energy Department grant to help demonstrate the market readiness of offshore wind.

To supporters of the wind farm, the situation is complicated because it is caught up in Garden State politics and, some say, Gov. Chris Christie’s presidential aspirations. To staff at the board, the issue is less complex: They argue the project as presented so far, including a proposed financing arrangement, could leave the state covering a hefty bill.

Christie as recently as 2010 was hailed by the environmental community for his support of offshore wind. He signed a state bill into law that year called the Offshore Wind Economic Development Act that was supposed to establish the state as an early actor on the technology.

Upon signing the law in August 2010, Christie’s office issued a press release in which the Republican governor called the industry “critical to our state’s manufacturing and technology future” and pledged to become a “national leader in the windpower movement.” Also on the table was the state’s energy master plan, which called for 1,100 MW of offshore wind by 2020.

Fast-forward to 2014, past decisions like Christie’s to exit an electricity carbon trading program in the Northeast, and it looks as if the administration might be singing a different tune.

According to environmentalists and industry sources, Christie has performed an about-face on wind that will likely result in the $200 million Fishermen’s project losing out on state permits. All this while other nascent East Coast wind projects, in Virginia, Rhode Island, Maryland and Massachusetts, move ahead.

Dan DeRosa at Environment New Jersey calls the area in question off the coast of Atlantic City “the highest wind potential of the entire East Coast.” He claims Christie through the BPU is trying to kill the Fishermen’s project for political reasons: Namely, he wants the GOP nomination for the White House in 2016, which means burnishing conservative credentials and not cozying up to renewable energy subsidies.

“Christie and BPU are dragging their feet,” he said. “It’s as clear as day.”

Financial hurdles

At issue on the technical level is an agreement wrought by Fishermen’s and the New Jersey Rate Counsel, which represents consumer interests before the board, on how the wind project would be compensated through the state’s offshore wind renewable energy certificate program, or OREC. Long story short, the BPU’s staff opposes that agreement, saying it’s not likely to benefit ratepayers and could mean New Jersey taxpayers cover the tab if the DOE grant falls through.

That tab, according to BPU staff, could be about $187 million if outside financing falls through. Staff members have argued in board documents that because federal grants are not certain, the project would pose technical and economic risks as proposed.

A spokesman at the BPU said this does not mean staff members there oppose the project outright, as has been reported by other news outlets. The spokesman added that it is not the BPU’s obligation to develop a financing mechanism for offshore wind under the 2010 law, as some have suggested, nor is it required to approve any single project.

“I’m not going to comment on something that’s not in the act,” said J. Gregory Reinert, the board’s communications director, in reference to the OREC rules.

This comes as a surprise to those watching the process who insist that is precisely what the law mandated: that the BPU figure out how to incentivize the onset of wind technology. They say the financing agreement wrought by the Rate Counsel and the company was a fair deal for the state and executes work that the board has failed to complete.

“We had great hope there for quite some time,” said Vanessa Pierce, Eastern regional director of the Sierra Club’s Beyond Coal campaign. “But his board can’t or won’t get their act together to issue the financial rules so the industry knows what the financial game will look like.”

Doug O’Malley, director of Environment New Jersey, suspects the opposition is coming from the top down, noting that staff members at the BPU who were more favorable on wind have turned over. He thinks politics is to blame, not the substance of Fishermen’s application or the cost of the turbines.

O’Malley said he has been left “scratching his head” at what he called deliberate paralysis.

“New Jersey is closing in on four years after the passage of the offshore wind bill with little action,” he said. “The ratepayer has signed off on the proposal, it would help jump-start the industry.”

O’Malley added: “I’m not going to get into the head of the governor, but without a doubt Governor Christie is not doing his job. He’s taking into considerations outside the New Jersey public.”

Reinert refused to comment on such criticism, while the governor’s press office did not return a call seeking comment.

Left in the lurch

The Rate Counsel’s last statement on the issue came in July 2013, when the office took issue with BPU staff’s contention that the attempted Fishermen’s financing arrangement was inconsistent with the 2010 offshore wind law.

Stefanie Brand, director of the Rate Counsel, said the BPU was leaving Fishermen’s in the lurch even though the proposed OREC level is “low” and 40 percent less than what the developer requested. She also said the state agency was jeopardizing the company’s grant status.

“The stipulation provides even greater protections than required by the statute and presents terms as favorable to ratepayers as possible while still allowing the applicant to finance the project through private capital,” Brand wrote.

Brand added that the BPU staff position “would render project financing virtually impossible for most applicants and is not mandated by the statutory language. It is a tortured reading of the statute that would effectively preclude the development of offshore wind.”

Fishermen’s CEO Chris Wissemann, meanwhile, has insisted that the project meets the requirements needed for state permits. A decision on the DOE grant is expected in mid-May, so the company at this point would prefer it if the BPU not rule until the feds do.

A spokeswoman at the company said the BPU did not inform Fishermen’s that its case was up for public discussion this week, so she did not expect a positive result.

‘Peak resource’ gets caught in process

Catherine Bowes, senior manager for the National Wildlife Federation’s climate and energy program, said the dynamic was unfortunate for New Jersey because the Interior Department is moving ahead fairly rapidly at this point with leases up and down the Eastern Seaboard. She said Christie had placed himself in a position to lead on the issue but then backed off.

“Offshore wind is very different from onshore wind, it’s a peak resource,” she said. “There’s real value there, particularly for markets like New York and New Jersey, to have an energy source that’s really blowing when you need it.”

Bowes added that she views the BPU stalemate — if it is a stalemate — as “a real challenge” for developers looking for clear regulatory signals following the 2010 law. She said Interior has done excellent work on leases so the state agency needs to help with rules that “mesh in a way that can make the numbers work.”

“In New Jersey, we’re seeing an example of when the processes are not running smoothly,” she said. “It would be very helpful for the state to move its incentive program forward.”

All that said, a BPU staff brief on the matter makes it clear: Experts there appear unconvinced the federal money will materialize to the extent Fishermen’s expects.

“In fact, nothing in the record supports [Fishermen’s] claim that it will take on this risk since no financial documentation or plans exist to show how [the federal funds] have been absorbed into the project … [or] the effect on the project” if it does not receive the federal grants it expects.

The document went on to say the BPU’s staff believes Fishermen’s “has failed to show that its project meets the net benefits test prescribed” in the 2010 offshore wind law.

An industry source who asked not to be identified said Christie was shooting his state in the foot because early actors stand to attract turbine and parts manufacturing to their state. And for what? The source sees White House ambition behind all of it.

“He was supportive of offshore wind before he pulled the state out of [the Regional Greenhouse Gas Initiative],” this source said. “He was supportive before he decided he wanted to run for president.”

“New Jersey was in a leadership role,” the source added. “They should have been first.”