This past August, New Jersey Governor Chris Christie signed the "Offshore Wind Economic Development Act" (the "Offshore Wind Act"), which creates an offshore renewable energy credit ("OREC") that a qualified offshore wind project can earn for each megawatt-hour of offshore wind produced, much like the successful solar renewable energy certificates under the Solar Act. The New Jersey Board of Public Utilities (the "BPU") would require each provider that sells electricity to retail customers in New Jersey to ensure that the electricity sold includes at least a minimum percentage of offshore wind energy as set by the BPU following the approval of a qualified offshore wind project. While the statewide OREC target will be determined by the BPU based on projected offshore wind energy production for any given year, the goal of the Offshore Wind Act is to initially support the generation capacity of 1,100 megawatts from offshore wind projects.
The Offshore Wind Act further authorizes New Jersey's Economic Development Authority (the "EDA") to provide grants and other forms of financial assistance from New Jersey's Global Warming Solutions Fund to develop qualified offshore wind projects and to provide financial assistance to manufacturers of equipment associated with qualified offshore wind projects. In addition, the EDA can also provide credits equal to 100 percent of a business' investment towards a qualified wind energy facility that is located within an "eligible wind energy zone."
A qualified wind energy facility means buildings, including port improvements, and machinery and equipment used in the manufacturing, assembly, development or administration of component parts that support the development and operation of a qualified offshore wind project and that are located in a wind energy zone. The term "wind energy zone" refers to property located within either the Paulsboro Marine Terminal or the Camden Marine Terminal, both of which are located in New Jersey's South Port District. Recognizing the geographical limitations to this definition, legislation has been introduced that proposes to amend the definition of a wind energy zone to include the port district of the Port Authority of New York and New Jersey.
Last month, the BPU proposed new unofficial rules to codify the new statutory requirements enacted through the Offshore Wind Act (the "Rules"). The Rules are designed to provide predictability and more certainty for the financing of offshore wind by establishing an application process and framework under which the BPU will consider and approve applications for qualified offshore renewable facilities and ORECs. In addition to the application procedures, the Rules include the need for an escrow account, the ability for the BPU to designate the application window, and the ability for the BPU to impose appropriate conditions upon any OREC grant.
Perhaps the most notable portion of the application is its requirement that the applicant propose an OREC pricing method and schedule for the BPU's consideration. Allowing for developers to set the OREC price for each specific project, while simultaneously having the BPU mandate an open-book inspection process in order to prevent excess profits (and thus protect utilities), provides economic certainty to both those who lend to, and those who build, offshore projects. This process is intended to allow for developers and lenders to overcome uncertain economics by offering utilities the possibility of a long-term, fixed-price power purchase agreement.