The Bureau of Ocean Energy Management (BOEM) has confirmed that it will indeed host an offshore wind lease auction for sites off the New Jersey coast sometime this fall.
According to BOEM, the auction contains nearly 344,000 acres that will be available for commercial wind energy leasing. BOEM intends to auction the wind energy area (WEA) in two land parcels: the south lease area (160,480 acres) and the north lease area (183,353 acres). The WEA begins about seven nautical miles off the coast of Atlantic City.
If fully developed, the New Jersey WEA may be able to support up to 3.4 GW of commercial wind generation – enough to power about 1.2 million homes.
However, prospective offshore wind developers say an offshore wind lease by itself is not meaningful unless it is combined with some sort of revenue mechanism. In New Jersey, for example, that would mean the use of offshore renewable energy certificates (ORECs).
The state has yet to formally implement the OREC legislation contained in the Offshore Wind Economic Development Act (OWEDA), which was signed into law by Gov. Chris Christie, R-N.J., in 2010.
‘We're in a holding pattern right now,’ explains Jeff Grybowski, CEO of Providence, R.I.-based offshore wind developer Deepwater Wind. ‘The driving factor is whether there is a power market for these projects in New Jersey.’Â
Grybowski notes that although the legislation for the ORECs has passed, a revenue mechanism, such as ORECs, has yet to be implemented. Theoretically, offshore wind developers could sign a power purchase agreement contract (PPA) with a utility. However, cost concerns have kept utilities from signing offshore wind PPAs – which is why offshore wind developers have so much hope for the state-based revenue mechanisms now in places such as Maryland and New Jersey.Â Â
‘The lease is not valuable unless there is a state policy supporting offshore wind,’ Grybowski says, adding that his firm has long been in favor of BOEM waiting until the state of New Jersey approves the OREC legislation. ‘Is there a market for offshore wind in New Jersey?’ he asks. ‘Right now, that's an unresolved question.’
ORECs are the preferred method that offshore wind developer Fishermen's Energy is planning to use to support the financing and construction of its Fishermen's Atlantic City wind farm, a $200 million demonstration project located in state waters three miles off the coast of Atlantic City. However, the New Jersey Board of Public Utilities (BPU) has consistently denied the offshore wind developer's application.
‘As a matter of public policy, it would be far preferable for BOEM and New Jersey to be closely coordinated,’ explains Chris Wissemann, Fishermen's CEO, noting that the forthcoming federal auction does not impact his state-based pilot project. ‘Ideally, a viable OREC mechanism should be put in place before a lease auction takes place.
‘Perhaps more than anyone, Fishermen's Energy can appreciate BOEM deciding that it can no longer wait for New Jersey's cooperation to proceed with leasing,’ he says. ‘Several years ago, New Jersey was in a position to be prioritized by BOEM but ceded that position when the BPU failed to implement OWEDA. BOEM's mandate is to initiate leases for energy projects. It simply can no longer wait for New Jersey.’