Power & Pipes

FERC, CFTC, and State Energy Law Developments

The New Jersey Board of Public Utilities (BPU) approved the nation’s largest single-state offshore wind solicitation in the United States on September 17, 2018, with an Order opening up an application window for the solicitation of 1,100 megawatts (MW) of offshore wind capacity. Stakeholders anticipate additional procurements in light of the BPU’s announcement that it intends to solicit an additional 2,400 MW, in two tranches of 1,200 MW, by 2022.

The first application window closed on December 28, 2018. Three applications were submitted to the BPU. Successful applicants in the current procurement will receive state subsidies in the form of Offshore Wind Renewable Energy Credits (ORECs). To be eligible for BPU approval, applicants will need to demonstrate that, among other things, their project (i) will have a positive net in-state economic and environmental benefit; (ii) will have a “reasonable ratepayer impact;” and (iii) is likely to be constructed on time and on budget.

While there is no guarantee that any proposed project will ultimately receive BPU approval, there is recognition by the BPU and stakeholders that the construction of any utility-scale offshore wind project will require a network of suppliers and a labor workforce that, at this time, is not in place in New Jersey. This is significant since a project needs to be under construction in 2019 to be eligible to receive the federal investment tax credit.

In late 2018, the BPU’s Offshore Wind Strategic Plan Team convened a forum to address the supply and workforce needs of the nascent offshore wind industry. Participants included Joseph Fiordaliso, president of the BPU; Tim Sullivan, CEO of the New Jersey Economic Development Authority (EDA); and Anne Marie McShea, the BPU Offshore Wind Program administrator. Several likely OREC applicants also participated in the program to discuss their specific supply and labor needs.

Mr. Fiordaliso stated that Governor Phil Murphy’s administration intends for the state to become the center of the US offshore wind industry and emphasized the Murphy administration’s hope that offshore wind will help minimize and mitigate the effects of climate change.

Mr. Sullivan also touted the economic benefits that utility-scale offshore wind projects are expected to bring to New Jersey. The solicitation of 3,500 MW over four years is anticipated to not only secure offshore wind energy capacity for New Jersey, but also attract investments in manufacturing facilities, lead to the creation of offshore wind research and development centers, and result in the creation of thousands of well-paying long-term jobs. Mr. Sullivan also indicated that EDA and the New Jersey Department of Labor are in discussions with offshore wind developers to address how to create workforce training programs that will support the development and construction of offshore wind projects. EDA is also providing tax incentives to companies making capital investments in the state of $50 million or more and that will employ over 300 people.

New Jersey, however, is one of several states along the eastern seaboard pursuing the development of offshore wind projects. Massachusetts, New York, and Maryland are all in the process of either soliciting or developing large-scale offshore wind projects, and each state hopes to become a hub for research and development and manufacturing for the industry. The Murphy administration believes there will be a “first-mover advantage” in attracting ancillary industry investments by soliciting large-scale projects in the short term, and hopes New Jersey will become a central base for offshore wind construction in states to the north and south. A key issue that New Jersey will need to address is what ports will be available to the offshore wind industry and what investments, if any, the state is willing to make to ready the ports for industry use. Leading contenders at this point appear to be Paulsboro in Gloucester County and the Naval Weapons Station Earle in Monmouth County, but the state has not indicated what public funding may be available for necessary upgrades.

This issue and others will likely be addressed in the BPU’s Offshore Wind Strategic Plan, which may be released in the coming months. Several public stakeholder meetings are planned prior to the plan’s release. The BPU conducted multiple generic stakeholder meetings in December and is planning to hold issue-specific stakeholder meetings in early 2019.