Congress included a one-year extension of the wind energy investment tax credit in its last-minute fiscal cliff legislation. The extension means offshore wind projects that begin construction this year will be eligible for an award equal to 30 percent of the project's cost.
That's good news for Cape May-based Fishermen's Energy, which plans to build a 25-megawatt demonstration wind farm three miles off the coast of Atlantic City. The project last month was awarded a $4 million Department of Energy grant, with the potential for more federal funding in future years.
Chris Wissemann, Fishermen's CEO, said his company plans to begin construction onshore later this year, and offshore in 2014, which would qualify it for the tax credit. But Wissemann said that can only happen if the New Jersey Board of Public Utilities moves forward with implementation of the offshore renewable energy credit program, or OREC, which was created by legislation in 2010.
"Provided that the OREC is approved on its current schedule — in the first half of the year — it would be no problem" to meet the Dec. 31 start-of-construction deadline, he said. "We're really in the advanced stages of design and negotiation. It's literally ready to go."
New Jersey's OREC program would provide production-based, ratepayer-funded payments to offshore wind companies, so no payment would change hands until the project is operational sometime next year.
Fishermen's has already applied to the program and asked for a certain payment price from the state, an amount Wissemann said is made significantly lower by the federal assistance the project is slated to receive.
"What that basically means is that New Jersey's got the ability to get basically all of the benefits of offshore wind at a significantly reduced cost," he said.
But he said the OREC portion is critical to the project's viability, as it will allow the company to close on the project financing.
However, there's no guarantee the BPU will act on schedule. In November, Senate President Stephen Sweeney (D-West Deptford) accused the BPU of dragging its heels on the implementation of the program. Things also could be complicated by the nomination last month of BPU President Robert M. Hanna to serve on the state's Supreme Court, creating a potential vacancy at the top of the agency.
But Wissemann said the OREC program ought to be a priority, because the success of his project will have impacts far beyond Fishermen's. He said banks want to see the OREC mechanism operate successfully before they'll be willing to finance the much-larger and costlier wind farms that ultimately would make a major dent in the state's renewable energy goals.
"Bankers have said … they couldn't finance a billion-dollar project without this mechanism being proven," Wissemann said. "That becomes a real obstacle to building an industry in New Jersey."
Fishermen's demonstration project provides the perfect opportunity to demonstrate the OREC mechanism, he said. The project could also help make New Jersey the epicenter for wind energy in United States, a status that could potentially bring hundreds of jobs through wind energy suppliers and contractors.