As New Jersey-based Fishermen's Energy awaits a New Jersey Board of Public Utilities (BPU) decision on whether it can use renewable energy certificates to finance its pilot project, the developer is also feverishly working to meet a Feb. 15 deadline to complete a U.S. Department of Energy (DOE) grant application.
Speaking on a conference call, Fishermen's CEO Chris Wissemann explains the developer must receive an affirmative response from the BPU to continue developing the offshore wind project.
‘We are nearing the end of the review process,’ Wissemann says, noting that Fishermen's completed oral arguments to the BPU on Dec. 20.
The BPU's approval would allow Fishermen's to use New Jersey's offshore renewable energy certificates (ORECs) as part of the Offshore Wind Energy Development Act (OWEDA) to support the financing and construction of the Fishermen's Atlantic Wind Farm, a $200 million demonstration project located three miles off the coast of Atlantic City, N.J.
According to Wissemann, the Fishermen's application has been under review by the BPU for more than 990 days. During the lengthy review process, the regulators raised questions on Fishermen's application, including its choice of turbine supplier XEMC and the impact to state ratepayers if federal tax credits and DOE grants do not materialize.
In July 2013, Fishermen's thought it had reached a deal with the New Jersey Division of Rate Counsel (DRC), which represents ratepayers in the setting of electricity rates. Although the DRC initially opposed the Fishermen's project, saying it was too costly, the two parties reached a settlement that featured a reduction in the wind farm's projected rates, thus lowering costs and lessening potential impact to ratepayers.
However, the BPU rejected the settlement agreement, fearing that New Jersey ratepayers would be unduly forced to shoulder too much risk if federal incentives were not included.
One encouraging aspect, Wissemann notes, is that the offshore wind project provides net economic benefits for New Jersey, a key requirement of New Jersey's OWEDA. According to the DRC, the wind farm will create $33 million in net benefits.
Admittedly, Fishermen's finds itself in uncharted waters, as no offshore wind developer has yet to receive financing under a state-run model based on ORECs like the one being tried in New Jersey and Maryland.
Each of the three U.S. offshore wind power purchase agreements signed to date has been executed under the traditional model, wherein a utility agrees to buy all – or a portion – of a project's output.
‘No one else has financed against this particular mechanism,’ Wissemann explains, noting that Maryland enacted similar OREC-based legislation in 2013.
Complicating matters is that the BPU has a new president. In January, Dianne Solomon replaced former president Robert Hanna. Therefore, Solomon may require additional time to familiarize herself with the Fishermen's case. Though she has little relevant experience, she has plenty of name recognition: She is the wife of former BPU president Lee Solomon, who was Hanna's predecessor.
A BPU decision is expected by June. An affirmative response would allow Fishermen's to begin construction and become operational in 2016, notes Wissemann.
The second – and equally important hurdle – for the developer is a selection by the DOE. In December 2012, the company was one of seven developers to receive a $4 million grant. The companies are now competing with each other to be one of three developers to receive $47 million for four years in the next round of federal grants. According to the DOE, selections will be based on siting, construction and installation for projects reaching commercial operation by 2017. Wissemann expects a decision from the DOE by June.
However, if the DOE does not select Fishermen's, it is doubtful that the project will get built.
‘We are relying on the DOE,’ Wissemann says, adding that if Fishermen's is not selected, ‘it would make the economics that much harder.’
