Whether NJ bolts regional power grid could depend on offshore wind — and Biden rules

Source: By TOM JOHNSON, NJ Spotlight • Posted: Tuesday, December 1, 2020

Critics of proposal for state to leave PJM power grid say Biden administration would be much more favorable than Trump administration to state’s clean-energy policies

Credit: (AP Photo/Ed Reinke) File photo

New Jersey’s first offshore wind project may not begin providing power until mid-decade, a factor that could have implications for whether the state decides to bolt from the PJM Interconnection, the nation’s largest power grid.

In an earnings call earlier this fall, Henrik Poulsen, CEO of Ørsted, indicated the completion of the company’s 1,100-megawatt offshore wind farm 17 miles off the coast from Atlantic City may not occur in 2024, as originally anticipated, because of delays with the federal Bureau of Ocean Energy Management’s permitting process.

If so, the impact of controversial changes in federal policies — which critics say undermine the state’s goal of promoting clean-energy sources like offshore wind — could be less harmful than many advocates initially feared.

The federal policies would largely decide what type of power plants are selected to deliver electricity to customers. Because of those projections, offshore wind resources are likely not to be compensated for providing capacity — the power needed to keep lights on — in the regional market. But, if those impacts are not apparent until mid-decade or later, the viability of offshore wind resources might not be affected, at least in the short term.

The issue is perhaps the most contentious facing policymakers in the energy sector: how the state ensures its clean-energy policies remain on track and how it goes about buying power for customers. It involves using ratepayer subsidies to promote a range of clean-energy resources, including solar energy, offshore wind, energy efficiency, and nuclear power plants. Those options seemed to be undermined by new federal policies initiated by the Federal Energy Regulatory Commission.

In response, the New Jersey Board of Public Utilities last spring started exploring the option of exiting the PJM Interconnection power grid as a way to continue pursuing its goal of 100% reliance on clean energy by 2050. After eight months of debate, however, that option has received an icy response from many in the energy sector, as well as from consumer advocates, most of whom want to stay in PJM because it is a competitive market that delivers lower prices to customers.

That view is contested by proponents of the exit plan, who argue the state should leave the capacity market overseen by PJM. It’s a view mostly advanced by the Public Service Enterprise Group/Exelon, owners of three nuclear power plants in South Jersey. They argue the state should set up its own system of buying power, an option they claim could save consumers hundreds of millions of dollars a year.

New rules under Biden administration?

Critics of the proposal to leave the PJM capacity market argue a new Biden administration in Washington will be much more favorable to clean-energy policies than the Trump administration and the state should work to change the prior administration’s policies, viewed by many as favoring fossil fuel interests.

“A change in presidential administrations will likely result in a change of federal policy toward clean energy resources,’’ said New Jersey Division of Rate Counsel Director Stefanie Brand in comments submitted on the issue.

These changes could lead to a reversal of some of those policies at both the Federal Energy Regulatory Commission and PJM, which have come under criticism from other states that, like New Jersey, are moving to adopt stronger clean-energy programs.

Calpine, a major energy supplier relying on natural gas, agreed. “Certainly, it is fair to expect the attitude towards renewable energy resources is likely to be more favorable than it has been during the previous four years,’’ it commented in a submission to the Board of Public Utilities.

Others argued the option pushed by PSEG, dubbed the Fixed Resource Requirement (FRR), was in the past deemed by state regulators unsuitable for New Jersey, a state where competitive markets for buying power already exist.

In previous court filings, the Board of Public Utilities argued the so-called FRR “was not a realistic option for New Jersey,’’ according to the Retail Energy Suppliers Association, a group representing independent energy suppliers in the state’s deregulated energy marketplace. The Division of Rate Counsel also advanced the same arguments — dismissed by the Federal Energy Regulatory Commission and a federal appeals court.

In other comments, the Independent Market Monitor for PJM argued that PSEG provided no credible reason for New Jersey to abandon the competitive market run by the grid operator.

Steven Goldenberg, an attorney representing large energy users, agreed. He said there is a broad consensus among the sector that the financial risks associated with the new federal policies are “minimal, and may be mitigated through other, far less draconian measures.’’