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Fiscal headwinds challenge offshore projects

NJ Spotlight |Tom Johnson|November 16, 2022
New JerseyTaxes & SubsidiesOffshore WindElectricity Prices
The offshore wind industry is facing new scrutiny as some initial proposals to build big wind farms off coastal waters are running into unforeseen fiscal challenges ...“The dirty secret of offshore wind is the economics don’t make sense,’’ said Mike Makarski, a spokesman for Affordable Energy of New Jersey, an organization that has been a persistent critic of the Murphy administration’s plan to shift to 100% clean energy by mid-century. ...“The returns on our U.S. projects, including Ocean Wind I (the first approved New Jersey offshore wind farm), are not where we want them to be,’’ said Ørsted’s CEO Mads Nipper, but he added the company remains committed to those projects.

Developers question financial viability as Murphy boosts goals for offshore electricity
 
The offshore wind industry is facing new scrutiny as some initial proposals to build big wind farms off coastal waters are running into unforeseen fiscal challenges driven by high inflation, rising interest rates and continued constraints in the supply chain.
 
Those factors have led one company to ask to renegotiate its contract to build a 1,200-megawatt offshore wind farm in Massachusetts, a bid so far rejected by regulators there. They have also spurred Public Service Enterprise Group to reconsider its 25% investment in Ørsted’s 1,100-MW project to be built 15 miles off the Atlantic City coast.
 
Whether those issues are significant enough to slow …
... more [truncated due to possible copyright]
Developers question financial viability as Murphy boosts goals for offshore electricity
 
The offshore wind industry is facing new scrutiny as some initial proposals to build big wind farms off coastal waters are running into unforeseen fiscal challenges driven by high inflation, rising interest rates and continued constraints in the supply chain.
 
Those factors have led one company to ask to renegotiate its contract to build a 1,200-megawatt offshore wind farm in Massachusetts, a bid so far rejected by regulators there. They have also spurred Public Service Enterprise Group to reconsider its 25% investment in Ørsted’s 1,100-MW project to be built 15 miles off the Atlantic City coast.
 
Whether those issues are significant enough to slow New Jersey’s aggressive push to be a leader in the emerging industry remains to be seen, but there are critics who hope it does.
 
“The dirty secret of offshore wind is the economics don’t make sense,’’ said Mike Makarski, a spokesman for Affordable Energy of New Jersey, an organization that has been a persistent critic of the Murphy administration’s plan to shift to 100% clean energy by mid-century.
 
In New Jersey, Ørsted’s chief executive officer acknowledged that fiscal issues are affecting his Commonwealth Wind project during the company’s recent earnings call.
 
“The returns on our U.S. projects, including Ocean Wind I (the first approved New Jersey offshore wind farm), are not where we want them to be,’’ said CEO Mads Nipper, but he added the company remains committed to those projects.
 
Ørsted, PSEG and the New Jersey Board of Public Utilities have discussed the status of the Ocean Wind project, according to Joseph Fiordaliso, president of the BPU, the state agency overseeing the offshore wind initiative.
 
“Nothing is in jeopardy,’’ he said, making a statement about the potential setbacks at an unrelated BPU meeting earlier this month. “We all want to work it out. We will work it out.’’
 
Questions about Murphy’s target
 
Earlier this year, Gov. Phil Murphy raised the state’s goal for electricity produced by offshore wind from 7,500 MW by 2035 to 11,000 MW by 2040. There are no offshore wind farms operating in New Jersey and Ocean Wind I is not projected to generate power until the middle of this decade.
 
To date, much of the opposition to offshore wind has focused on its impact on consumer utility bills, which will help subsidize the cost of building the wind farms. For a residential customer, that will run about $1.46 more each month in the first year, but escalating by more than 2% each year. For industrial customers, it would mean an average monthly bill up by $110 in the first year.
 
“When you set unrealistic goals and unreal deadlines, you end up making decisions that are costly,’’ said Ray Cantor, vice president of public affairs for the New Jersey Business & Industry Association.
 
Others disputed the effect of the financial problems affecting the offshore wind sector. “There is a lot of enthusiasm in the blue states, especially in the Northeast, for offshore wind. That hasn’t changed,’’ said Paul Patterson, an energy analyst at Glenrock Associates in New York.
 
“The question is, will there be any backlash over the cost, but it doesn’t seem to be a determinative issue at this time,’’ Patterson added.
 
That could change, Makarksi said. “If they (the developers) come back to renegotiate, it is going to be a policy or litigation disaster,’’ he said.
 
But offshore wind advocates noted these types of setbacks are common for an emerging new industry.
 
“It always is hardest to go first,’’ said Doug O’Malley, director of Environment New Jersey.  “The road forward is not always a straight path. There will be bumps in the road. Offshore wind is huge in Europe. Offshore wind will happen in New Jersey.’’

Source:https://www.njspotlightnews.o…

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