"Given the way New Jersey structured its market, the commitment it’s made, that’s probably the brightest spot of the industry," DaPrato said.
He notes that New Jersey’s governor, Republican Chris Christie, is a surprising champion for subsidies for renewable energy, which have taken criticism from the political right.
In Delaware, NRG Energy said two weeks ago it will terminate its offshore wind power purchase agreement with Delmarva Power on Dec. 27, if a buyer for its Bluewater Wind division does not step forward. That would kill its plan for a wind farm off the coast of Rehoboth Beach.
Economic conditions, as well as uncertain federal subsidies, were NRG’s reasons for ending its commitment to the project, which would be 13 miles off the Delaware coast.
Power from offshore wind turbines typically costs more than most other forms of energy, renewable or otherwise. With the price of natural gas — a major fuel for old-school electricity — having fallen unexpectedly in recent years, it’s enlarged the premium between traditional and renewable power.
That made it harder for Bluewater to find a buyer for more of its power, which would have allowed it to build more turbines, and make more money.
But in New Jersey, Christie signed into law the Offshore Wind Economic Development Act in August 2010, which is intended to circumvent this problem.
The law directs the Board of Public Utilities to require power sold in the state to include 1,100 megawatts of offshore wind generation — five times more than than the Delaware Bluewater project.
It will cover the power purchased by PSEG, Atlantic City Electric, Orange & Rockland, and Jersey Central Power & Light.
The board will set a power purchase price for offshore wind energy projects, but only after a cost-benefit test that takes into account the impact on electricity rates, the economy and job creation, and the environment.
The details of the New Jersey program, which have yet to be rolled out, are crucial, DaPrato said. A big factor, he said, will be whether the federal government chooses to maintain tax credits for wind farm developers.
If they don’t, New Jersey’s ratepayers would need to take on that additional burden, he said.
The first project to go through New Jersey’s process under the temporary rules is Fishermen’s Energy’s planned five-turbine wind farm in state waters, just off the coast of Atlantic City. Building in state waters would get around a complex federal permitting and leasing process.
The 25-megawatt wind energy project is scheduled to be constructed in 2013. Fishermen’s President Daniel Cohen said his project is not contingent upon the federal tax credits getting renewed, although if they aren’t, the cost will be higher.
But even if the per-megawatt price is higher, the small size of his project will mean only a minor impact on customer bills, he said.
"Ultimately, offshore wind power will become efficacious as you’re able to build larger projects and bring the cost down. But you’ve got to begin somewhere," Cohen said.
Greg Reinert, spokesman for the Board of Public Utilities, said the final rules are expected to be adopted in February, after which other developers will consider their applications for projects in federal waters.
"Everybody’s just kind of waiting to see how it will roll out," Reinert said.
The developers, and power companies, will be watching what alternative compliance penalty the board sets, said Michel Di Capua, head of research for North America at Bloomberg New Energy Finance.
If that penalty is low, it could be less expensive for power suppliers to pay it and not actually buy wind power, he said. If it’s high, it makes the wind power more attractive, he said.
Di Capua’s colleague, analyst Amy Grace, said offshore wind is appealing to East Coast governors who want their states to reap the jobs that will come with building the first generation of U.S. offshore wind farms.
The setup in New Jersey is more effective for offshore wind than the ones in other states, including Delaware, she said.
"There has to be some reason why someone’s going to pay twice the price for an offshore wind farm, compared to what they can get onshore," she said.
But she added, "It’s a little puzzling for me. I would never have expected Chris Christie to be the first mover on this."
Many conservatives have been outspoken against any form of subsidies for renewable energy — and many supported Christie for president. The Republican decided against running earlier this year.
Christie’s office did not return calls seeking comment. Christie’s long-term energy plan, released about a month ago, reaffirms the state’s commitment to offshore wind energy, but also emphasizes the cost-benefit test, in light of the nation’s economic slump.
Despite the momentum in New Jersey, some prominent offshore wind farm developers have backed off there recently. In pausing its offshore wind operations, NRG also stopped its work in New Jersey.
And PSEG plans to keep its offshore wind plans on a slow simmer, said Paul Rosengren, that utility’s communications director.
"Certainly offshore wind energy has shown to have a fair amount of challenges," Rosengren said.
The New Jersey model encourages offshore wind power, but the state’s requirements for moving ahead with it is "a high bar that gets higher when electric prices drop," he said.
"We’re still exploring, we’re still looking, trying to move the project forward without making major commitments," Rosengren said, noting PSEG is still participating in the state offshore wind process along with everyone else.
But there are other suitors. Eleven companies answered a federal request this summer for requests to lease ocean tracts off of New Jersey to build renewable energy projects. The Bureau of Ocean Energy Management, Regulation and Enforcement is still considering these requests.
Aaron Nathans, www.delawareonline.com
