Offshore Wind Developer Wants to Renegotiate New Jersey Energy Plan

TRENTON — The company planning to build New Jersey’s first offshore wind project off the coast of Atlantic City wants to renegotiate the terms of its electricity contract with the state Public Utilities Commission.

Atlantic Shores Offshore Wind has resubmitted a proposal to build two adjacent power projects that would generate 2,800 megawatts of electricity for New Jersey customers. The company says the projects could power up to 1 million homes.

“Our proposal expands and strengthens existing strategic partnerships while growing our portfolio of economic development initiatives across the Garden State,” Atlantic Shores CEO Joris Veldhoven said in a press release. “Working with our host community partners, we aim to continue to secure critical supply chain investments that will create good-paying union jobs, support local workforce development and contribute to economic prosperity across New Jersey.”

Offshore wind experts and critics had predicted Atlantic Shores would relist its projects, which would be located about 9 miles offshore, south of Long Beach Island. The utility board approved an energy deal with Atlantic Shores for its Project 1 in the summer of 2021, before post-pandemic inflation and high interest rates drove up labor, steel and construction costs.

In the years since the agreement came into force, disruptions in the global supply chain for parts and materials have also contributed to costly delays to construction projects around the world.

Last fall, Danish offshore wind developer Ørsted announced it would halt all work on two of its energy projects off the coast of New Jersey due to inflation, high interest rates and supply chain issues.

The rebidding projects allowed government officials and offshore wind developers elsewhere to renegotiate the prices of ORECs, or offshore wind renewable energy certificates. Offshore developers earn one OREC for each megawatt-hour of electricity generated by wind turbines.

Each New Jersey OREC price is set in a contract between the state Public Utilities Board and the wind developer and is calculated based on federal and state tax credits, operating costs and the impact on electricity customers, among other factors.

Earlier this year, offshore wind developers and the New York State Research and Development Authority renegotiated contract details and pricing for two offshore wind projects: Empire Wind 1 and Sunrise Wind. The projects were originally approved in 2019, but New York officials said the renegotiations were driven by “macroeconomic and inflationary challenges that have impacted the renewable energy sector.”

“This is the result of something that is frankly not unique to offshore wind, but … any major infrastructure projects are suffering in the post-COVID-19 economy,” said Kris Ohleth, executive director of the Special Initiative on Offshore Wind, an organization that provides objective guidance and expertise to the nation’s new and expanding offshore wind sector.

She added that due to the high costs of building offshore wind farms — over $2 billion per project — high interest rates are the main reasons why developers renegotiate prices.

“Even a half-percent increase in interest rates could be really problematic,” Ohleth said. “Quite frankly, any project that was funded or … received an OREC award between 2019 and 2022 is really going to be grappling with a lot of the same challenges.”

Related: New Jersey taxpayers could pay billions more if Atlantic Shores Wind is allowed to rebid

Critics of New Jersey’s Atlantic Shores projects fear higher costs will be passed on to electricity customers if the Public Utilities Board approves the company’s new proposal.

Earlier this year, elected officials from eight cities — Long Beach Township, Beach Haven, Ship Bottom, Barnegat Light, Surf City, Harvey Cedars, Brigantine and Ventnor City — urged the board to reject any attempt by Atlantic Shores to renegotiate the original agreement.

Atlantic Shores’ current Project 1 contract has an OREC price lower than two New Jersey wind projects approved earlier this year. In 2021, Atlantic Shores was awarded an OREC price starting at $86.62 per megawatt-hour for the first year of a 20-year contract, increasing by 2.5% annually, according to Board of Public Utilities documents. By comparison, Attentive Energy Two agreed this year to an OREC price of $131 per megawatt-hour for the first year of the project with 3% each year thereafter. Leading Light Wind will receive an OREC price of $112.50 per megawatt-hour for the first year, with a 2.5% increase each year thereafter.

Related: Six offshore wind turbine sites planned for Barnegat Light draw crowds to Toms River

Atlantic Shore’s Project 1 would increase electricity prices by about $2.21 per month (in 2023 dollars) for the average homeowner under the current contract, compared to an estimated $3.13 for Attentive Energy Two and $3.71 for Leading Light Wind, according to Public Utilities Board documents.

It is not yet known whether the Board of Public Utilities will accept Atlantic Shores’ rebid proposal. The board’s decision is expected by the end of this year.

Attentive Energy LLC announced this week that the company has submitted a project proposal to its board of directors that would complement the Attentive Energy 2 project.

The Public Services Authority received offers in the fourth tender for the construction of offshore wind farms.

Amanda Oglesby is an Ocean County education and environmentalist who has been with the Press for more than 15 years. Contact her at @OglesbyAPP, [email protected] or 732-557-5701.