New Jersey’s far-reaching offshore wind plans face a series of challenges in 2023 as the first project undergoes permit scrutiny and the state launches a third coastal wind solicitation amid questions about whether it can handle the rapid development of an industry from scratch.
The advance of OSW projects represents just one facet of the state’s clean energy policy as it works to meet Gov. Phil Murphy’s aggressive goal of zero emissions by 2050. Other key events in the coming months will include the launch of a permanent community solar program and public discussion of how to stimulate the development of heavy-duty electric vehicle chargers, which will be essential for the state’s plan to put more non-fossil fuel heavy trucks on the road.
Transportation is the state’s largest carbon-emitting sector, producing 42% of the state’s greenhouse gases. And the progress of the state’s efforts to cut carbon emissions from the third largest sector — buildings — will likely be a prominent issue this year too, as Murphy’s administration seeks to regain its footing on what turned out to be a controversial policy of replacing fossil fuels with alternatives, mainly electricity.
The state Department of Environmental Protection (DEP) says it is still seeking ways to cut building emissions after the agency — in rules published Jan. 3 — dropped a prohibition on the installation of fossil fuel water and heating boilers after 2025, amid vigorous business and union opposition. (See NJ Backs off Ban on Commercial-size Fossil Fuel Boilers.)
Wind Expansion Planned
OSW will likely represent the most intense of the state’s clean energy efforts, however, as it seeks not only to build its own industry but also to become a regional player. The state’s Board of Public Utilities (BPU) is hoping its first project, the 1,100-MW Ocean Wind 1, will advance rapidly through 2023 and be ready to go online in late 2024.
Construction has not begun on the project, one of three approved by the BPU including the 1,148-MW Ocean Wind 2 and 1,510-MW Atlantic Shores approved in 2019. The BPU’s third solicitation, planned for early 2023, could dramatically accelerate expansion of the wind sector, with the agency planning to approve projects of between 1.2 GW and 4 GW in capacity, and perhaps more.
If that process unfolds as planned, New Jersey could have OSW projects totaling more than 7.5 GW in the pipeline by mid-2023, close to the state’s 2035 target set before Murphy last year increased the goal to 11 GW by 2040.
Some observers, most notably the New Jersey Division of Rate Counsel, and opponents of the projects have suggested that the state move at a slower place so that the success of the early projects can be evaluated before putting more into the pipeline.
“Now may be the time to be conservative in making larger awards, given the fact that times are uncertain and challenging for all large energy investments,” Brian O. Lipman, director of the division, told a hearing on the third solicitation proposal last month.
Those concerns are partly fueled by rising costs facing all parts of the economy. Cost pressures have been highlighted by developer Ørsted as a potential problem, and Public Service Enterprise Group (NYSE:PEG) CEO Ralph LaRossa in October told investors and analysts that the company is mulling whether to continue its 25% ownership of Ocean Wind 1.
Whether the state can proceed at such a rapid pace will also depend on the progress of Ocean Wind 1 in the coming months, which could smooth the way for succeeding projects.
The BPU in September granted Ørsted an easement that would enable the project to run cables through Ocean City on the Jersey Shore and is now evaluating a second request for an easement through land owned by Cape May County. The board’s decision is expected in the coming months. (See NJ BPU Approves Easement Plan for 1st OSW Project.)
The two easement requests rely on a 2021 state law that allows the BPU to override local government rules if a transmission project is “reasonably necessary” to complete an OSW project. Public hearings on both requests featured vigorous opposition from local residents who say the law disenfranchises local government, whose lawyers have told the BPU they expect the law to be challenged in court.
The project also awaits a DEP decision on the first five of 13 permits needed to advance. The federal government’s permitting dashboard estimates that the federal environmental review and permitting process will be completed in July.
Supporting Infrastructure
New Jersey is also pursuing an aggressive plan to develop a supply chain, manufacturing and service industry to support its own OSW projects and others along the East Coast.
A key element is the development of a wind port in South Jersey, for which the state has committed investments of $478.2 million, the New Jersey Economic Development Authority (EDA) said in November, as it outlined plans to float bonds for additional funding. (See NJ Backs $20 Million Spend on Tx Link for Offshore Wind Port.)
Located in Salem County, the New Jersey Wind Port will include a 30-acre marshalling area for component assembly and staging; a dedicated, overland, heavy-haul transportation corridor; and a heavy-lift wharf with a dedicated delivery berth and an installation berth that can accommodate jack-up vessels. With construction underway, the EDA hopes to complete the first phase by 2024.
The EDA last year also announced plans to hire a consultant to develop a world-class offshore wind research and development testing facility. (See NJ Plans ‘Flagship’ R&D Innovation Center for Wind.)
The BPU in October put in place another major support block for the offshore sector, approving $1.07 billion for transmission upgrades to deliver 6,400 MW of offshore wind generation to the PJM grid. Central to the proposal is the construction of a new substation adjacent to FirstEnergy’s Jersey Central Power and Light’s Larrabee substation in Central Jersey, which is onshore and near the coast. That will be accompanied by a series of smaller upgrades to the transmission system. (See NJ BPU OKs $1.07B OSW Transmission Expansion.)
The BPU picked the projects from among 80 proposals submitted by 13 developers in response to a solicitation issued by PJM that was notable for its use of the State Agreement Approach set out under FERC Order 1000.
Still to be determined, however, is an infrastructure system to bring the offshore energy to the shore. The BPU expects that work to be designed and built as part of the projects picked in the third solicitation.
Grid Worries
Concerns about the ability of New Jersey’s grid to handle the extra load from a dramatic increase in clean energy generation are expected to continue in 2023, reflecting similar discussions about infrastructure weakness across the nation.
“My greatest fear is that one morning, we’re going to wake up and … have no place to plug in our renewable energy,” BPU President Joseph L. Fiordaliso told a Nov. 9 board meeting after the agency approved receipt of a grid modernization study prepared by consultant Guidehouse Inc. Fiordaliso made the same comment on several occasions in 2022.
Solar developers told state legislators in May that the grid is so old and its capacity so limited that new solar projects can’t be connected in certain areas of the state, a weakness that is stifling solar expansion. The developers spoke in support of a bill (S431) that would establish a fixed “grid modernization” fee structure to cover the cost of upgrading the grid. The bill passed the state Senate in June but has not advanced in the Assembly.
A similar concern centered on the PJM Interconnection’s inability to connect new projects, and the lengthy delays in getting it done, which were frequently cited by New Jersey regulators and solar developers looking to build projects in the state.
Solar Advance
Aside from those difficulties, the state solar sector pushed ahead in 2022, reaching 4.2 GW of installed capacity in November, according to the latest BPU figures available. That was driven by the installation of 387,358 kW of capacity in the first 11 months of the year, the fastest addition of new capacity since 2019, the figures show.
The capacity of projects in the pipeline, 709,716 kW, is well below the 1,668,061 KW of 2021, which was inflated by developers rushing to get projects admitted in a soon-to-close incentive program. But the pipeline is stronger than the 532,749 kW reported in 2020, BPU figures show.
The new capacity was driven, in part, by the state’s pilot community solar program, and BPU officials in August celebrated the completion of the first project under the program’s second phase — a 500-kW community solar project covering six roofs in Neptune Township. After developers complained in 2021 about the slow pace to execute the second phase, the BPU announced plans for a permanent program, which will begin in 2023 and is expected to award 150 MW of capacity a year. (See Slow Progress of NJ Community Solar Pilot Draws Fire.)
Still, developers had installed only 20 community solar projects in the state by November, totaling 43,961 kW, less than one-fifth the 240 MW of capacity awarded in the two phases of the program. And while the program has proven popular with developers, the BPU is cautious about making a dramatic increase. In November, a BPU representative urged state legislators not to approve a bill that would triple the size of the planned permanent community solar program to 500 MW a year, expressing concern that the grid and developers would not be able to handle the sudden increase.
State officials believe the pace of other types of solar installations will accelerate after the December approval of rules for the Competitive Solar Incentive (CSI) program, which will determine incentive levels for grid-scale solar projects through competitive solicitations. Developing such projects in the state was difficult and rare in the past. (See NJ BPU Approves Rules for Grid Solar Program.)
The CSI program is the second part of the BPU’s Solar Successor Incentive (SuSI) program, which reshaped the state’s incentive system, a response, in part, to criticism that previous programs were too generous. Under the first part of SuSI, the Administratively Determined Incentive (ADI) program, incentives are set by the BPU.
But developers now say the incentives are too low, and although the state has hit its target of 150 MW of net metered residential installations, it is far short of the target for non-residential projects and those installed on brownfield, infill or landfill sites.
That is especially true given the shipping constraints and supply chain issues affecting the industry, which have increased commercial installation costs by 15% since the start of 2021, Scott Elias, director of Mid-Atlantic state affairs for the Solar Energy Industries Association, told the BPU in December.
EV Development
New Jersey also reshaped its strategy in 2022 to accelerate the uptake of EVs. The BPU launched the third phase of its Charge Up New Jersey EV subsidy with a reduction in the maximum incentive from $5,000 to $4,000 after available funds were exhausted in the first two phases. (See NJ Cuts Incentives for New Phase of EV Promotion.)
The state also allocated an extra $46.6 million to expand an incentive program for the purchase of electric trucks and for the first time allowed incentives for Class 7 and Class 8 trucks, the largest on the road and some of the largest polluters. Previously the program funded the purchases of Class 2 to Class 6 trucks only.
Seeking to remove diesel buses from the road, state legislators approved a three-year, $45 million program to test electric buses in 18 school districts, where performance would be evaluated and data on costs, maintenance, fuel and bus speed and movements would be collected and submitted to the DEP.
