Companies seeking to develop offshore wind farms in waters off New Jersey have accused the state’s energy regulator of disregarding a broad industry consensus on financing and of proposing an inadequate and unwieldy new funding model.
At a recent Board of Public Utilities (BPU) stakeholder meeting, Garden State Offshore Energy vice president, Rob Gibbs, criticised the latest proposal for a state-wide financial incentive scheme specifically designed to encourage offshore wind development.
The so-called "invoicing option", developed by consultancy Boston Pacific, proposes that electricity market operator PJM issue offshore renewable energy credits (ORECs) to developers. In turn, an OREC administrator would tell developers how much they should invoice suppliers in exchange for ORECs.
Until a funding mechanism is agreed no offshore wind off New Jersey is expected to be built, despite one project – Fishermen's Energy's 25MW Atlantic City development – having been granted a construction permit last year.
Speaking to “uåX˜äŠÊ˜·³Ç Offshore, Gibbs said the BPU is pushing the Boston Pacific option and disregarding significant work that a broad coalition of players put into a joint proposal completed a year and a half ago. This coalition agreed that the state should create a central clearinghouse into which ORECs would be deposited and suppliers would make payments.
The clearinghouse plan had one major problem, in that it did not protect funds destined for offshore wind operators from being siphoned off by state lawmakers for other purposes, acknowledges Gibbs. But the invoicing option creates more problems than it solves, he believes. First, it is unwieldy, since offshore wind operators would have to invoice all 100 or so of New Jersey’s energy suppliers. Offshore wind operators would also risk not being paid by some smaller energy companies, and therefore the invoicing option represents a credit risk.
Another critic of the invoicing-based finance mechanism is Jay Kooper, director of regulatory affairs at electricity supplier, Hess Corporation, and New Jersey chairman for the US Retail Energy Supply Association. He describes the Boston Pacific proposal as "as step backwards" because it would not allow retail energy suppliers to predict OREC costs, does not safeguard against pricing errors, and does not establish a system of alternative compliance payments. The latter is required by law, points out Kooper.
Both Gibbs and Kooper say they will propose alternatives during the BPU’s comment period, which ends 17 April.
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