Good morning and welcome to the weekly Monday edition of the New York & New Jersey Energy newsletter. We’ll take a look at the week ahead and look back on what you may have missed last week.
The state, led by Democratic Gov. Phil Murphy, decided it could become one of the greenest in the country with offshore wind as its main pillar. But Murphy’s ambitious plans to make New Jersey’s power supply carbon-free by 2035 collapsed days ago when the developer Ørsted canceled two of the state’s three offshore wind projects.
Now, if President Joe Biden ever wants to meet his energy goals for the nation, New York and other Northeastern states are going to have to pick up New Jersey’s slack. And New York — the bigger sibling, the one with more money, more power and more attention — is poised to snatch away factories and jobs that New Jersey hoped for.
“We’re certainly the state with the greatest ambition at this point,” said Fred Zalcman, director of the New York Offshore Wind Alliance, which advocates for the industry. New York has a lot riding on the success of offshore wind too. New efforts to save or replace at-risk projects the state has already approved are even more important after the New Jersey projects evaporated.
The money puts the Hudson River tunnel project on increasingly sure footing and, importantly, comes with word from Schumer that the federal government intends to pay for the vast majority of the $16 billion project, saving states billions. The tunnel project will connect New York and New Jersey and is a key part of a regional Gateway infrastructure program to improve passenger rail in the Northeast.
Schumer’s office also said the federal government is now committed to paying for “around 70 percent” of the project, leaving the rest to be split by New York and New Jersey. Previously, the federal government was expected to pick up about half the project’s cost.
Other rail money: President Joe Biden travels to Delaware today to announce $16.4 billion in grants for passenger rail along the Northeast Corridor, including $9 billion in fiscal 2022 and fiscal 2023 funds and $7.4 billion in future commitments of the FRA’s Federal State Partnership for Intercity Passenger Rail grant program, POLITICO’s Tanya Snyder reports.
Besides the money for the tunnel project, here are other projects getting funding in New Jersey and New York:
— $1.2 billion to rehab the East River Tunnel
— $300 million to rehab the Dock Bridge between Newark and Harrison
— $133 million for the Sawtooth Bridge replacement in Kearny
— $58 million for the Pelham Bay Bridge replacement
— $59 million to improve Newark Penn Station
A.C. LINE WORKERS STRIKE — Atlantic City Electric’s line workers went on strike over the weekend after months of failed negotiations between the company and International Brotherhood of Electrical Workers Local 210. The company said it has contingency plans in place so that service isn’t affected and to address emergencies.
IBEW officials accused Atlantic City Electric of raising rates while “dismantling our retirement, diminishing our healthcare, cutting back our workforce to squeeze every dollar they can out of us,” according to a letter posted on social media.
The company said its 400 or so line workers are compensated fairly, and the average line worker makes $177,326 annually, including overtime. “At this time, the Union is on strike and we remain open to bringing both parties together to reach an agreement,” the company said in a statement Sunday morning.
The possibility of a strike was not widely known. Once the strike happened, Assembly Speaker Craig Coughlin said in a statement that the union workers “deserve a fair contract.” — Ry Rivard
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Here’s what we’re watching this week:
TUESDAY
— Election Day in New Jersey with all 120 legislative seats on the ballot.
WEDNESDAY
— New Jersey Transit board meeting, 6 p.m.
— Gannett’s New York team: “How an upstate town famous for a Christmas classic film became NY’s dumping ground.”
— Local ballot measure: “Future of water system on the ballot in Salem election.”
— Sand dollars now at $1 billion.
MONEY IN THE AIR — POLITICO Ry Rivard: Ørsted, the Danish energy company that this week canceled plans to build two massive offshore wind farms in New Jersey, is moving to keep $300 million Gov. Phil Murphy says the company owes the state.
A company letter this week to state utility regulators is another sign of a high-stakes dispute brewing between Murphy and the company he was counting on to meet his clean energy goals. In the letter, Ørsted said the state Board of Public Utilities “has not issued a final approval” of a compliance filing the company made about the money. Ørsted appears to be readying an argument that the deal was therefore not cemented.
Murphy and his allies have tried to save face after Ørsted canceled the projects this week by saying at least the company would pay the state $300 million.
In response, BPU spokesperson Peter Peretzman said the agency “diligently reviewed” filings from the company in September and October. “NJBPU is evaluating Ørsted’s recent statements and correspondence, and will take any and all actions necessary to enforce its rights,” he said in a statement to POLITICO.
The state’s ratepayer watchdog also seems to see an open question about who gets the money. “In regards to whether Ørsted owes the state any money since it’s pulled out of the offshore wind project, it’s undetermined at this time,” said Brian Lipman, the head of the state Division of Rate Counsel.
$300 MILLION OR NOT — POLITICO’s Ry Rivard: New Jersey Gov. Phil Murphy’s administration is claiming victory in defeat after a Danish energy company pulled the plug on two major offshore wind projects in the state, the cornerstone of the Democratic governor’s clean energy agenda.
SUNRISE WIND REBID PROSPECT: The Ørsted earnings call also had some detail on the company’s plans for the 924 MW Sunrise Wind project contracted with NYSERDA. “We currently see a rebate as the most attractive path forward for Sunrise Wind,” Ørsted CEO Mads Nipper said Wednesday. He noted that Sunrise Wind sought an adjusted price of about $140/MWh for offshore wind credits. That’s lower than what NYSERDA provisionally awarded on average to developers last week at $145/MWh, before inflation adjustments included in the contracts. Nipper estimated a 50 percent likelihood of success in securing a higher price for the project, down from 75 percent before the New York petition decision.
Termination penalty: Nipper said the cost to cancel Sunrise Wind at this stage in development would be about $423 million, reflecting commitments to suppliers in addition to any penalties from NYSERDA. That’s not what Ørsted plans as it will instead seek to re-bid and called the cost to cancel the NYSERDA contract “small numbers.”
Mystery contamination: “Through our continued development of the project, we assess that the project can be determined as brownfield,” said Nipper. That qualifies the project for an additional 10 percent investment tax credit. The federal definition under the Inflation Reduction Act as real property “the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” It is not clear where the contaminated site is — although it is likely along the onshore cable route or related developments on Long Island — and company officials did not provide additional information. — Marie J. French
ZOOM OUT — POLITICO’s Kelsey Tamborrino, Marie J. French, Ry Rivard and Gloria Gonzalez: The economic travails burdening Joe Biden’s presidency are threatening to put his climate goals out of reach.
A Danish developer’s decision to tank two giant New Jersey wind projects is just the latest sign that higher costs, driven by rising interest rates and continued supply-chain woes, are posing an unexpected obstacle to the clean-energy projects that hold the key to Biden’s legacy — despite $369 billion in promised federal aid from his signature climate law.
Days earlier, Ford postponed production plans on a massive new electric vehicle battery plant in Kentucky while General Motors reduced the number of EVs it plans to build in the coming year, as both companies reported financial losses amid slumping demand from consumers.
And in Puerto Rico, the government-owned utility had to pony up an additional $700 million, on top of an initial $4.6 billion, to ensure 11 solar projects could move forward.
The vast majority of clean energy projects spurred by the federal aid are still likely to go forward, industry officials and some state energy leaders say, with some advocacy groups estimating they will create hundreds of thousands of permanent or indirect jobs. But the economic headwinds are dampening the initial wave of optimism that followed last year’s passage of the Inflation Reduction Act — posing problems both for Biden’s reelection message and for his goal of slashing the nation’s greenhouse gas pollution.
ØRSTED KILLS NEW JERSEY PROJECTS — POLITICO’s Ry Rivard: Ørsted, the company that Democrats up and down the Eastern Seaboard have been counting on to build offshore wind farms, is pulling the plug on two of its largest projects, a setback for President Joe Biden’s clean energy goal. The Danish energy company said Tuesday night that it was killing plans to build a pair of wind farms in New Jersey.
The decision dents Biden’s climate change plans and also dashes New Jersey Gov. Phil Murphy’s hopes of his state being a clean energy leader before he leaves office in 2026. It also comes a week before legislative elections in New Jersey, where Democrats are trying to hold their majorities in the face of Republican attacks over wind power.
NEXTERA (MAYBE) NIXES NEW YORK PROJECTS: Last week, a publicly-traded company with one of the largest portfolios of awarded NYSERDA contracts told investors it was “removing” 800 megawatts of New York projects from its “backlog.” The company’s presentation slides describe projects in the “backlog” as those with executed power purchase agreements or “assets with expected long-term agreements including power hedging and/or the sale of environmental attributes.”
The decision was made “following an adverse decision by the New York Public Service Commission two weeks ago,” said Kirk Crews, NextEra Energy, Inc.’s chief financial officer. “We are optimistic that these projects will ultimately move forward, but are removing them from backlog for now.” A spokesperson for NextEra declined to answer any questions about whether removing them from the “backlog” means the company plans to cancel its NYSERDA contracts or say anything beyond what officials relayed on the earnings call. The decision is one of the most tangible signs yet of the blow the PSC’s decision might deal to New York’s renewable targets and private sector investment in support of those goals.
NextEra holds NYSERDA contracts for seven under-development solar projects totalling 930 megawatts, awarded from solicitations in 2017, 2018 and 2019. All except one — the 180 megawatt North Side in St. Lawrence County, which was the first renewable project rejected by the state’s siting board under Article 10 — has secured a state permit and they’ve also all signed interconnection agreements with the New York Independent System Operator. At least two of the NextEra projects have received notices to proceed with construction: the 50 MW East Point and 90 MW High River projects. The removal of just 800 MWs from the company’s backlog suggests it may complete those under-construction projects given their advanced stage and expected in-service dates in the coming months. — Marie J. French
CLOSER THAN THEY SEEM — POLITICO’s Ry Rivard: Despite tensions among the region’s political leaders over cross-state transportation issues and taxes, the connections between New York City and its suburbs, including in New Jersey, are as strong if not stronger than ever, a new report finds. The Regional Plan Association, a nonprofit focused on the tri-state region, found that even the pandemic and all its associated changes have not upended the fundamentals that bind the region together.
The report, shared with POLITICO ahead of its release later today, aims to temper some of the tension over congestion pricing, funding for the Gateway project and fights over where workers should pay taxes that have fueled New York-New Jersey divisions in the past several years. It also suggests transit will remain vital as New York has closed its transit funding gaps but New Jersey has not.
