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Inflation could add billions to offshore wind price tag, NJ Rate Counsel says

Asbury Park Press|Amanda Oglesby|January 13, 2023
New JerseyOffshore WindElectricity Prices

The Division of Rate Counsel, which fights to keep energy prices low for consumers, is taking issue with a provision in the state's third effort to bolster offshore wind power. The latest solicitation includes the option to increase prices for ORECs, or Offshore Wind Renewable Energy Certificates, up to 15% in response to inflation. The Rate Counsel says the provision could potentially thrust billions in extra costs for clean energy onto consumers who are already squeezed by inflation.


  • A New Jersey government advocate group says inflation could drive up the price of offshore wind projects by billions of dollars.
  • The NJ Rate Counsel says a current offshore wind proposal would pass more of that cost onto consumers.
  • Wind advocates say the cost of not fighting climate change is greater.

Inflation, worker shortages and decades-high interest rates could cost New Jersey residents billions of dollars in extra costs for offshore wind energy, unless state officials drive a harder bargain over the next project, according to the New Jersey Division of Rate Counsel, a group that represents the state's electricity customers.

The Division of Rate Counsel, which fights to keep energy prices low for consumers, is taking issue with a …

... more [truncated due to possible copyright]
  • A New Jersey government advocate group says inflation could drive up the price of offshore wind projects by billions of dollars.
  • The NJ Rate Counsel says a current offshore wind proposal would pass more of that cost onto consumers.
  • Wind advocates say the cost of not fighting climate change is greater.

Inflation, worker shortages and decades-high interest rates could cost New Jersey residents billions of dollars in extra costs for offshore wind energy, unless state officials drive a harder bargain over the next project, according to the New Jersey Division of Rate Counsel, a group that represents the state's electricity customers.

The Division of Rate Counsel, which fights to keep energy prices low for consumers, is taking issue with a provision in the state's third effort to bolster offshore wind power. The latest solicitation includes the option to increase prices for ORECs, or Offshore Wind Renewable Energy Certificates, up to 15% in response to inflation.

The Rate Counsel says the provision could potentially thrust billions in extra costs for clean energy onto consumers who are already squeezed by inflation.

"Costs for everything from bread to aspirin are up," the Counsel wrote Wednesday in a statement to the Board of Public Utilities about the third wind farm solicitation. "Ratepayers simply cannot afford drastically higher electric bills particularly if such bill increases are driven by attempts to insulate OSW (offshore wind) developers from the same risks that New Jersey households and small businesses face."

Several offshore wind projects have been approved off New Jersey's coast: Ocean Wind and Ocean Wind 2 by Denmark-based Ørsted and another project to the north by Atlantic Shore Offshore Wind.

The New Jersey Board of Public Utilities' third offshore wind solicitation is seeking a wind development proposal that would generate between 1,200 megawatts to 4,000 megawatts of energy. For the first time, the BPU solicitation includes a provision that allows the price of ORECs to be raised to adjust to inflation.

ORECs help support offshore wind development by paying a premium for electricity that is generated by renewable means. The credits also work to partially insulate developers from major fluctuations in the price of electricity.

For example, offshore wind developer Ørsted expects to earn ORECs, worth $83.4 per one megawatt-hour of energy produced, at its Ocean Wind 2 project off Atlantic City in 2029. The project will have the capacity to produce 1,148 megawatts of energy — about enough to power 500,000 New Jersey homes, according to the company's website.

The OREC price will increase 2% per year, according to the Denmark-based company.

As a result of the project, the average New Jersey resident will pay about $1.28 more per month on a residential electric bill, according to New Jersey Board of Public Utilities documents.

Similarly, Atlantic Shores Offshore Wind, a project to be built off Long Beach Island, will earn ORECs worth $86.62 per one megawatt-hour in the first year of operation (2028), according to the BPU. The 1.5-gigawatt project will have enough power to energize 700,000 homes, according to the wind farm developer.

Average residential electricity customers can expect their bills to rise about $2.21 per month as a result of the project, according to the Board of Public Utilities. OREC prices will similarly rise each year.

Had those projects had a provision in their contracts that allowed ORECs to increase by 15% in response to inflation, electricity customers could have — in theory — had to pay nearly $5 billion more in electricity costs over 20 years, according to the Rate Counsel.

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New Jersey's Energy Master Plan sets a goal of moving the state to 100% carbon-free energy sources by 2050. As part of that initiative, Gov. Phil Murphy ordered that by 2040, 11,000 megawatts of the state's electricity come from offshore wind farms.

If high level of greenhouse gases are emitted into Earth's atmosphere, Rutgers University scientists predict sea level along New Jersey's coast could rise as much as 2.6 feet over its 2000 level by the year 2050. However, minimizing greenhouse gas emissions globally lowers that prediction to less than foot of sea level rise over the same time frame.

State Sen. Bob Smith, a Democrat who chairs the Senate's Environment and Energy Committee, said New Jersey residents cannot afford to wait any longer to move away from carbon-polluting power sources.

On Thursday at Rutgers University in Piscataway, where Smith met with students, staff and members of the press during a symposium on offshore wind energy, he called for support of New Jersey's burgeoning wind industry and upgrades to the state's aging power grid.

"The problem if we don't do anything, is that every day is precious," he told reporters after addressing the conference. "We're in a bad spot… We've got to get serious about our energy policy."

Responding to the Rate Counsel's cost estimates for OREC inflation increases, Smith said that not adopting offshore wind would be more costly. He cited Superstorm Sandy's $65 billion in property damages and how the remnants of Hurricane Ida killed 29 people in New jersey.

"You have the fate of humanity on one side of the ledger," he said. "We're in deep trouble now. But (without wind energy), we're going to be in a much deeper trouble."

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Source:https://www.app.com/story/new…

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