Signaling a move to the “transmission first” strategy, New Jersey regulators voted Wednesday to ask PJM to conduct a competitive solicitation for upgrades to connect 6,400 MW of offshore wind to the regional grid.

The New Jersey Board of Public Utilities unanimously requested that PJM integrate the state’s OSW goals into the RTO’s Regional Transmission Expansion Plan (RTEP) process under the “state agreement approach” — making it the first state do so since the approach was approved by the FERC under Order 1000. PJM expects to open a competitive solicitation window in the first quarter of 2021.

The approach allows states to seek transmission solutions to meet public policy needs, with costs of the upgrades allocated to state ratepayers. (See PJM Dusts off ‘State Agreement’ Tx Approach.) However, state officials emphasized that the BPU’s agreement to execute a study agreement with PJM does not commit the state to paying anything.

“At the conclusion of the competitive solicitation window, expected in mid-2021, PJM will work with [BPU] staff to evaluate the submitted proposals. At that time, the board will be asked to determine whether any proposed transmission solutions will be selected through the state agreement approach,” explained Joseph DeLosa, BPU’s manager of regulatory affairs. “If the board decides no projects should be selected, the process will terminate without costs to ratepayers. Additionally, the board can terminate the ongoing study process or competitive solicitation at any time.”

Gov. Phil Murphy has set a goal of 7,500 MW of OSW by 2035, but the BPU’s request will not impact the state’s first project, awarded to Ørsted’s 1,100-MW Ocean Wind project, or its second solicitation, which is seeking 1,200 to 2,400 MW. Responses to the second solicitation will be accepted until Dec. 10, with an award expected in June 2021. (See New Jersey BPU OKs 2nd Offshore Wind Solicitation.)

For the first two projects, the BPU required generation developers to include transmission and connection to PJM in their proposals and to include the cost in the state’s Offshore Wind Renewable Energy Certificate funding mechanism.

Although the second solicitation requires developers to address how their interconnection design could support the state’s goals and how a proposed project would work with any future offshore transmission grid, developers were not required to coordinate in a shared approach.

The BPU acted based on information gathered at a technical conference in 2019 and the state’s Energy Master Plan, which concluded that “coordinating transmission from multiple projects may lead to considerable ratepayer savings, better environmental outcomes, better grid stability and may significantly reduce permitting risk.” (See NJ Unveils Plan for 100% Clean Energy by 2050.)

Officials have identified three “inter-related components” of an open-access offshore transmission facility:

• PJM Grid to Onshore Substations: This option would upgrade PJM’s onshore regional transmission system to accommodate the increased power flows from OSW facilities. OSW developers would continue to be responsible for getting the power from the lease areas to the newly constructed or existing onshore substations. Solutions could include coordinated onshore “power corridors” that would deliver electricity to existing high-voltage transmission.
• Onshore Substations to Offshore Collector Platforms: This option would solicit bids from transmission developers to permit and construct the beach crossings and connect the new or existing onshore substations to new offshore collector stations. This option could be selected in addition to the first option, with OSW developers responsible for interconnection to the offshore collector platforms.
• Offshore Transmission “Backbone”: This option would connect offshore collector stations to “network” multiple lease areas.

Based on a screening analysis to determine which substations were most suitable for a large injection of OSW, the BPU is asking PJM to develop needs for injecting 6,400 MW at four locations between 2028 and 2035:

• 900 MW at the 230-kV Cardiff substation in Southern New Jersey;
• 1,200 MW at the 230-kV Larrabee substation in Central New Jersey;
• 1,200 MW at the 500-kV Smithburg substation in Central New Jersey; and
• 3,100 MW at the 500-kV Deans substation in Northern New Jersey.

“While staff recommends that the board identify these as the most likely locations on the PJM system that will need reinforcement to accommodate 7,500 MW of offshore wind, staff also recommends that the board invite developers to propose particularly cost-effective alternatives that may still meet the state’s immediate policy goals, while deferring less cost-effective elements of the transmission expansion until a future transmission solicitation,” the order says.

DeLosa said the 6,400 MW cited in Wednesday’s order is “reflective of some uncertainty with the outstanding second solicitation. We’re not sure where it’s coming ashore yet because that window is currently open. So, we need to plan for the full 7,500 MW, inclusive of both the first and second solicitations.”

Cost Allocation

The BPU’s move to the “transmission first” model — in which large-scale transmission facilities are built for anticipated generation — is intended to achieve economies of scale.

But staff acknowledged concerns that a coordinated transmission solution could increase commercial risk on generation developers by making their projects dependent on transmission constructed by third parties. The board “will have to address concerns regarding transfer of commercial risk between transmission and generation developers prior to approving a final coordinated transmission solution,” it said.

“Staff encourages entities bidding into the RTEP process to consider how their submitted cost caps and other binding obligations may relate to interconnection of qualified offshore wind generation developers. … Innovative proposals to address the commercial risks associated with delays in the construction of transmission facilities, on the one hand, or delays associated with construction of the offshore wind generators, on the other, should also be pursued.”

Use of the state agreement approach also raises thorny cost allocation issues, as speakers told FERC during a technical conference last month. They said cost allocation rules don’t properly assign costs to parties that will benefit from the additional offshore and onshore transmission that will be required for states to meet their clean energy goals and OSW targets. (See FERC Pushed to Change Tx Rules for OSW.)

BPU General Counsel Abe Silverman said the board’s action “is going to start a process where we go in and make a series of FERC filings with PJM” laying out cost allocation responsibilities.

“If … other states join and we end up with a regional grid, I think everybody is better off because that makes for more clean energy coming onto the grid and helps share the costs,” he said at a press conference alongside PJM officials after the board meeting. “But that is a much longer-term process.”

Ken Seiler, PJM’s vice president of planning, called integrating New Jersey’s public policy needs a “significant milestone” for the RTO’s transmission planning process, which has traditionally focused on reliability. “It’s very exciting to have generation to the east. We’re traditionally a west-to-east flow type of system. … This is going to increase the reliability as well as the resilience for the PJM grid.”

Asim Haque, PJM’s vice president of state and member services, said the RTO is also working with its other coastal states on their OSW plans.

“PJM is not only working with individual states, but it’s also working collectively with the coastal states as well to try and determine, similarly, what the best possible options are for the advancement of offshore wind individually and collectively. … That work will continue. We are going to continue to have those discussions with our coastal states.”

‘Exciting Stuff’

“This is exciting stuff. It’s not sexy like seeing a turbine out there [in the ocean], but it’s getting us positioned well,” BPU President Joseph Fiordaliso said at the board meeting, adding that “PJM has been tremendously helpful throughout this process.

“In the past, I have been critical of PJM. But PJM has done a wonderful job and, under new leadership, has really stepped up to the plate to be more than helpful to the states,” he said, referring to CEO Manu Asthana, who joined the RTO in January.

Commissioner Dianne Solomon sounded a caution, noting that the state has not quantified the cost of the transmission.

“I would be remiss if I didn’t point out that in the past, [PJM has] had a spotty record in evaluating transmission solutions that were least-cost for the state of New Jersey,” she said.

Solomon also expressed concern about the costs of other programs the BPU has initiated to meet its goal of 100% clean energy by 2050. “It’s not only wind, but we have a new energy-efficiency program; [electric vehicle] deployment; solar, wind and nuclear subsidies; [and] building electrification, not to mention … the cost to maintain and upgrade our existing infrastructure. So, at a time when our state faces an unprecedented financial crisis, and many residents are struggling to pay utility bills, it’s imperative that we as economic regulators do a comprehensive analysis of all these components.”

“Let’s be happy today and optimistic that we’re all moving in the right direction,” Fiordaliso responded. “If the 98% of those scientists are just a little bit right, we have very few alternatives here in trying to mitigate the effects of climate change. … I’m not going to be around to see the dastardly effect of climate change. But my grandchildren are going to be.”

Fiordaliso demurred when asked whether the BPU’s recent collaboration with PJM on transmission had any impact on its deliberations over whether to leave the RTO’s capacity market over the expanded minimum offer price rule.

“We haven’t fully completed that investigation yet,” he said. “It’s big step and one we want to get right.”