Updated: Thursday, March 8, 2018, 9:46 AM
ATLANTIC CITY — After building New Jersey’s only wind-energy complex here in 2005, Paul J. Gallagher teamed up with a group of commercial fishermen on an even more ambitious project: building the nation’s first offshore wind farm within sight of the city’s famous Boardwalk.
Fishermen’s Energy LLC spent millions of dollars to obtain permits to build a demonstration project in state waters three miles off Atlantic City. But Gov. Chris Christie, concerned about the high costs of offshore wind, declined to create the rules needed to get the industry off the ground. Fishermen’s closed its office last year and let go its staff after a $47 million federal grant expired.
“Last year was hard,” said Gallagher, 67, Fishermen’s chief operating officer. “We just slowed to a crawl and cut a lot of expenses.”
The political winds have shifted in New Jersey, and Gov. Murphy’s inauguration in January has dramatically revived prospects for the state’s offshore wind industry, which advocates hope could supply up to a third of the state’s power by 2030.
The new governor signed an executive order directing the New Jersey Board of Public Utilities to restart the process to create the rules governing the offshore wind market, which was authorized under the state’s landmark 2010 Offshore Wind Economic Development Act but stalled under Christie.
Gallagher has returned to the public circuit, selling Fishermen’s as the only fully permitted shovel-ready offshore project in New Jersey, though it lost the title as America’s first offshore commercial project to a Rhode Island wind farm in 2016.
“We’re maybe the only offshore project in the United States that can be built in the next 24 months,” Gallagher said.
New Jersey, formerly a front-runner in a race to develop industrial-scale offshore wind, has reentered the competition just as the business appears to be picking up momentum.
Spurred by European developers, who have installed more than 17,000 megawatts of offshore wind, the cost of wind power has declined in the last decade. Each individual wind turbine, with giant rotor blades exceeding 500 feet in diameter, can now produce more than 8 MW of electricity, enough to power 100 Nissan Leafs, or double the output of a decade ago.
New York, Massachusetts, and Maryland have moved ahead on solicitations to buy power from wind producers that have obtained leases in Atlantic federal waters. The U.S. Bureau of Ocean Energy Management, which administers federal waters more than three miles offshore, has awarded more than a dozen leases, including two sites off South Jersey and another off the mouth of Delaware Bay.
New Jersey, under an optimistic scenario, could devise market rules and solicit offers from producers for 1,100 MW of generation by the end of this year. After undergoing environmental reviews, including potential impacts on birds and marine life, the state’s first large-scale wind farm could be producing by 2023. Murphy has proposed authorizing 3,500 MW of offshore wind by 2030, enough to supply about a third of the state’s electricity needs.
“Even though all that time was lost, New Jersey is still very much in the game,” said Stephanie McClellan, director of the University of Delaware’s Special Initiative on Offshore Wind. “It can surge ahead and play a leadership role in the industry.”
The states that move first will get a jump on developing the port facilities to construct and maintain offshore wind farms. Ports such as Paulsboro, across from Philadelphia International Airport, are positioning themselves as wind-energy hubs for assembling offshore structures. But McClellan said the economic benefits, including tens of thousands of expected jobs, are likely to be widespread. “There will be a lot for everybody,” she said.
The Atlantic Ocean in the Northeast is attractive for offshore wind. The outer continental shelf is relatively shallow, under 100 feet in depth, allowing for installation of support structures fixed to the seabed. The federal lease areas are near expensive power markets, making it easier for offshore wind to compete with conventional generation.
“The entire Eastern Seaboard has very good conditions,” said Thomas Brostrom, president of North American operations for the Danish wind-producer Orsted, which acquired a 250-square-mile lease off South Jersey in 2015. “It has strong, constant winds and shallow water depth. The areas are also close to populated areas — very close to demand or load centers.”
Some Northeastern states are also more politically receptive to climate-change initiatives, which are driving the clean-energy market. “New Jersey needs to get to 100 percent renewable energy, and we won’t do it without offshore wind,” said Jeff Tittel, the director of the New Jersey Sierra Club.
But the high cost of offshore wind remains a point of contention. Christie sided with skeptics, including large industrial users, who complained that an offshore wind mandate will only make New Jersey’s expensive electric rates even more costly.
The U.S. Energy Information Administration last year estimated that the “levelized” cost of offshore power installed in 2022 will be $146 a megawatt hour, including tax credits, compared with $67 per MWh for solar and $57 per MWh for a combined-cycle natural gas plant, the most common new conventional power source. Ratepayers would be asked to subsidize the higher cost for renewable power.
A bill before the New Jersey Legislature to support nuclear energy would cap the cost of renewable-energy subsidies after 2020 at 5 percent of the average residential electric bill, which clean-energy advocates say is insufficient. “It feels like these rate caps could kneecap the offshore wind industry,” said Doug O’Malley, state director of Environment New Jersey.
The cost to consumers is one of the complications that will confront the Board of Public Utilities, which on Feb. 28 moved ahead on Murphy’s order to implement the 2010 offshore wind act. The outcome of the BPU’s rule-making process could have profound implications on the state’s energy strategy, and its impact on consumers.
“What will this electricity cost, how will it merge into the market, how will it affect ratepayers, and at what point does it become self-sustaining away from subsidies?” asked Assemblyman John J. Burzichelli, a Paulsboro Democrat. “There are real policy issues.”
The big industry players are busy trying to influence the framework that will govern New Jersey’s offshore wind market.
Wind-farm developers last month were instrumental in nixing a legislative proposal that would have required offshore producers to deliver their power to the grid through a unified transmission system. That would have favored a system promoted by Atlantic Grid Development LLC, the Google-backed venture that aims to build New Jersey Energy Link, a multi-state offshore transmission line that would tie together several wind farms.
“If we invest $1 billion into a wind farm, we need to know we have the ability to get our product to market and actually sell the product,” said Clint Plummer, vice president for development for Deepwater Wind, which holds a 150-square-mile lease off Delaware Bay. Deepwater also built the nation’s first offshore wind project in Block Island, R.I.
Wind-power producers are expanding their presence in Trenton as well as in other Atlantic states.
US Wind Inc., a subsidiary of the Italian energy and construction giant Toto Holdings SpA, has a 286-square-mile lease off New Jersey but appears to be primarily focused on developing its two leases in Maryland.
Orsted, previously known as DONG Energy, acquired the Ocean Wind lease in New Jersey in 2015 from RES Americas.
“Right now we are building up a strong team in the U.S. and in New Jersey,” said Orsted’s Brostrom, whose company established North American headquarters in Boston.
Orsted, the world leader in wind power with 23 offshore projects in Europe and seven more under construction, also has a Massachusetts subsidiary, Bay State Wind, with a lease about 15 miles south of Martha’s Vineyard. Like the New Jersey lease, it can accommodate up to 2,000 MW of power.
“Right now you need to build an industry from scratch in the U.S., ” said Brostrom. “Obviously, you can use European components, but over time, you want to try to move from Europe to the U.S. to reduce transportation costs.”
The industry’s target is to develop 7,000 to 10,000 MW of Atlantic offshore production by 2030, sufficient to establish a domestic supply chain and employ about 40,000 people, according to a recent study by the Clean Energy States Alliance.
As offshore wind proposals advance, they also are likely to rouse opposition. One now-canceled project in Nantucket Sound within view of Cape Cod and Martha’s Vineyard had famously united the Kennedy and Koch families in opposition. Ocean City, Md., is pushing state officials to force wind farms 26 miles offshore, out of view, which energy developers say will kill the industry.
The tiny Fishermen’s project in Atlantic City, at up to 25 MW, will make no attempt to hide its presence. The project developers say the novelty of four to five turbines just a few miles off the Boardwalk would actually attract tourists to the city.
“They will be pretty visible,” said Gallagher, stretching his hands wide as he stood on the beach at Tennessee Avenue, under which Fishermen’s Energy owns an easement to run its transmission cable. “They will be close to shore.”
The Fishermen’s project may face other obstacles.
Tittel, the New Jersey Sierra Club leader, believes New Jersey should bypass the smaller Fishermen’s project. “Fishermen’s may come back, but I kind of hope not,” he said. “We should be spending our time and resources on getting the big projects going.”
But O’Malley of Environment New Jersey said the Fishermen’s project, born and bred in New Jersey, can put the Garden State on the wind-energy map. “The value of having a demonstration project is not insignificant,” he said.
Read full story: Wind energy eyes restart in N.J. with Gov. Phil Murphy in office