N.J. legislature approves tax measure that offshore wind developers say is critical to success

New Jersey lawmakers narrowly approved a controversial bill Friday that would allow offshore wind developers to take advantage of federal tax credits that an existing state law prohibits them from accessing.

Gov. Phil Murphy, a Democrat, has made offshore wind a key part of his energy strategy and is expected sign the legislation.

The bill’s passage came the same day Murphy signed a $54.3 billion budget that boosts spending 7% over last year.

The bill was contentious among offshore wind opponents because money from the tax credits was originally set to be returned to the state’s energy consumers. Many of the opponents are aligned with GOP lawmakers and activists who claim offshore wind surveying and other activity has contributed to recent whale deaths, despite scientists and the National Oceanic and Atmospheric Administration saying there is no link.

The affirmative vote by both the Assembly and Senate, where there was more pushback, was well received by wind proponents.

“This bill puts offshore wind on a fairer playing field with the nuke and fossil fuel industries which we keep throwing billions at,” said David Pringle, an environmental activist with Clean Water Action. “Offshore wind is New Jersey’s single best contribution to tackling the climate crisis.”

At issue were credits created under the Inflation Reduction Act of 2022. The act allows for a tax credit up to 30% for offshore wind projects that begin construction before Jan. 1, 2026. Credits were also created under the 2020 Stimulus Act.

But a New Jersey law, passed before those acts, states that any such credits must be returned to ratepayers and not used by offshore wind developers. No other state has that requirement. Offshore wind manufacturers say they need the credits because material, labor and borrowing costs skyrocketed dramatically following the pandemic.

New Jersey officials, who had hoped to make the state a manufacturing and supply chain hub for offshore wind in the Mid-Atlantic, feared other states that allowed the tax credit were luring manufacturers away. The state has invested about $1 billion in offshore wind, including a facility at the Paulsboro Marine Terminal to build the giant foundations, and a staging and potential manufacturing facility known as the New Jersey Wind Port in Salem County. Both are located off the Delaware River for easy shipping access.

Lee Laurendeau, CEO of EEW American Offshore Structures, the company working with global wind developer Orsted to make the foundations, known as monopiles, told The Inquirer in a recent interview that he foresaw a precarious situation for the industry if the tax credits were not allowed.

» READ MORE: At 3 million pounds, the first foundation for New Jersey wind is complete but its maker sees trouble ahead

EEW is set to make 98 monopiles for the first set of wind turbines to be installed off the New Jersey coast for Orsted’s Ocean Wind I project, which would have capacity to produce 1,100 megawatts of electricity, or enough energy to power 500,000 homes annually. Orsted is expected to begin producing power by late 2024 or early 2025.

EEW also has an order for 103 monopiles from Atlantic Shores, a joint venture between Shell New Energies and EDF-RE Offshore Development, in another project approved by the state. That 1,500-megawatt wind farm off Atlantic City would power 700,000 homes.

Both Orsted and Atlantic Shores say they need the monopiles.

Offshore wind developers say they need the capital freed by the tax credits to construct buildings, take loans, and hire more people as planned to make parts.

Larendeau at EEW, for example, said the tax-credit issue threatened the company’s planned $300 million expansion in Paulsboro, where up to 1,000 workers could eventually be hired. EEW says it needs the tax credits to make the expansion financially workable.

Finding support for the bill, which passed the Assembly, was not so easy in the Senate.

Earlier Friday, the bill received 20 “yes” votes in the Senate — one short of the amount needed to pass. Democrats, who control both chambers of the Legislature, tried again later in the day. The measure passed late in the afternoon 21-14.

“When Orsted received approval to build Ocean Wind 1, they agreed to apply for and return to ratepayers any federal tax incentives that might become available to offset the higher costs that ratepayers are paying today for the development of wind energy,” Sen. Edward Durr, a Gloucester County Republican, told the Associated Press. “Despite the deal they signed, Orsted is realizing that wind farm projects don’t make economic sense without major government subsidies, so now they’re looking for a huge handout at the expense of New Jersey utility customers. We shouldn’t give it to them.”

Republicans say the energy produced by the wind farms will lead to higher rates.

The Associated Press also reported that amendments added to the bill earlier last week require Orsted to post a $200 million guarantee with the state and prepare a report on the financial viability, possible environmental impacts and likelihood of finishing the project on time. Orsted estimates the value of the credit would be 20 cents per month, or $2.40 per year per ratepayer, but did not estimate the company’s total anticipated benefit. Durr put it at up to $1 billion.