[ad_1]
Anything involving tax credits causes confusion.
Anything involving offshore wind seemingly creates controversy and conspiracy theories.
And anything that appears to be connected to a bill getting pushed through the Legislature at the last minute creates a sense that something isn’t right — and that someone is trying to pull something over on the good people of New Jersey.
Which leads us to S4019/A5651, the offshore wind bill, as some are calling it. A bill that is scheduled to be voted on Friday.
First, the background: Under the current agreement between Ørsted and the New Jersey Board of Public Utilities — agreed upon in 2019, when Ocean Wind 1 was approved — Ørsted was to give the value of all federal tax credits it received back to ratepayers.
At the time, the federal government had a program in which developers could get a 12% credit on their costs. Ørsted built those credits into the cost of their bid.
Since then, due to inflationary pressures, the federal government has increased those credits to 30%.
Ørsted would like to take the value of the additional tax credits and invest it in other projects in the state — the company said it would be worth hundreds of millions, offsetting some (but not all) of its increased costs.
If it maintains the original agreement, Ørsted feels the value of the additional credits would be worth less than a quarter a month to ratepayers. Not a significant number, by any measure.
The offshore wind bill would give Ørsted the ability to use the value of the additional credits for the Ocean Wind 1 project and its investments.
It’s confusing. We get it. And, when you throw in the fact that it involves the industry/tax credits/last-minute legislation, it’s fair to feel something is amiss.
In an effort to bring clarity, we spoke with Maddy Urbish, the well-respected head of government affairs and market strategy in New Jersey at Ørsted.
But, before we get to the Q&A portion of the interview, know this: No matter what happens with the legislation, ratepayers in New Jersey will not see their bill go up — and Ørsted has not received a single dollar from the state to date.
Urbish, in a 30-minute interview with ROI-NJ, addressed both of those issues and more. With that, a look at the conversation, edited for space and clarity.
ROI-NJ: Let’s start big picture: Why do you feel the federal government increased its tax credits — and what would this bill do?
Maddy Urbish: The federal government has made additional incentives available to help the offshore wind industry due to the economic climate. This legislation would allow the state’s first offshore wind project, OceanWind 1, to be able to access and retain these newly available federal tax incentives.
This bill recognizes the significant macroeconomic changes that have taken place since June of 2019, when the project was awarded — and the real pressures that have been placed on the offshore wind industry, as well as many other capital infrastructure industries.
And it’s taking advantage of an opportunity that the federal government has made available to respond to some of those cost increases and pressures and, in doing so, is able to allow projects to find other opportunities to cover increased costs, without costing the ratepayers a cent more.
ROI: I see where this can be a slippery slope. Taking anything away from ratepayers raises an eyebrow. Tell us what Ørsted will do if the bill goes through?
MU: As part of this legislation, Ørsted is committed to putting an additional $200 million toward in-state investments, particularly aimed at some of the port infrastructure that we’re looking at, the EEW monopile facility in Paulsboro, building out the second phase there.
That has a huge ripple effect economically. EEW has contracted with over 250 local businesses in New Jersey, and not just in and around the Paulsboro area, but up and down the state.
I think everyone knows we’re very invested in the state. Obviously, we have this first project, which is a major initiative, but our operations and maintenance facility is well under construction in Atlantic City. We have our office in Newark. We haven’t begun construction on the project itself and we have over 400 full-time employees working on it. We’re really committed.
So, in terms of economic benefits that support the state, broadly putting them toward these types of investments is a very meaningful way to ensure that those federal tax dollars are actually coming back to support the state.
ROI: If Ørsted is willing to invest an additional $200 million, these increased tax credits must have incredible value.
MU: I can say, with a high degree of certainty, that we’re looking at hundreds of millions of dollars. The U.S. Treasury Department still has to issue its final guidance, determining what investments are eligible. Not every dollar we spend on this project is necessarily eligible for the tax credit.
But, based on draft guidance that the Treasury Department has put out, we anticipate it’s going to be in the hundreds of millions of dollars, which allows for these types of investments.
I want to be clear: The value of these credits is going to go toward investments that we are making, and that we have committed to make, if we’re able to retain these tax credits. And I also want to be clear, it does not cover the actual cost increases that we’ve seen — but, it is meaningful. And it does help.
ROI: But … the ratepayers. You know that’s the counterargument. What say you?
MU: We hear that, and we understand that. There’s been a lot of focus on protections for ratepayers, and we believe strongly in them. This OREC model provides a protection for ratepayers by entering into a fixed-price model with the project. Ratepayers will get clean energy at a fixed price. And that price does not change, no matter what the cost of building the project is. You don’t get that from a lot of energy sources.
If we passed them back to the ratepayers, based on our calculations, it would be about 20 cents a month, or $2.40 over the course of the year. So, while we understand that finding savings for ratepayers is really important, we also know that the impact that having these tax incentive values would have in the aggregate for the project — to then be able to support the investments that we’re making, actually have a much more meaningful impact from an economic standpoint.
ROI: This sounds like it makes sense. Do other states agree? Are these tax credits going back to the ratepayers in other states?
MU: The provision to give all of the value of the credits to ratepayers doesn’t apply in New York, Connecticut, Rhode Island or Massachusetts or Virginia.
The only other state that was somewhat similar to New Jersey until recently was Maryland. It used to have it statute that required sharing the value of those incentives between the process and ratepayers. In April, as part of the Power Act, Maryland amended their statute to allow their first projects to be able to retain those tax credits.
So, New Jersey is now the only state that specifically doesn’t allow its projects to use federal tax incentives to support its projects.
ROI: We get it. But … a deal’s a deal, some would say. Ørsted looks as if it wants to go back on what it put in its original bid, which won it the project in 2019.
MU: I’ve heard this argument — that the company made a commitment and now it is trying to go back on its commitment. And I will say that we did agree to the terms with the BPU about sharing the value back in 2019. We have been clear about that. But, also, the world has drastically changed since 2019.
I think in terms of showing the ability to be successful and resilient — whether it’s a business, a government or an individual family — the ability to adapt to the changing circumstances in the world around them and the economy around them is key.
The government, at the state level and at the federal level, have made very specific changes to adjust to the way the world is now post-COVID. The Inflation Reduction Act is an example of that.
Maryland, changing its statute, is an example of adapting to the changing circumstances and trying to do so in really smart ways that don’t hurt people’s pocketbooks at the end of the day.
ROI: The vote on this bill is supposed to be Friday. The same day the Legislature will vote on the budget. And, in theory, the last day of the session. Why is it so important to get this done now, as opposed to waiting until the fall?
MU: We’re really at an inflection point in terms of timing. There is a huge sense of urgency because we’re ready to get started on construction. We anticipate getting our federal approvals in the coming months and breaking ground on the onshore component of this project this fall.
We’ve already spent quite a bit of money on this project and we’re at the point where we’re full steam ahead. The dollars are going out the door. So, having certainty on the ability to capture the value of those federal credits prior to moving forward with the project on the construction side is really important.
ROI: There are a lot of moving parts here. We can see why there’s confusion. We’ll give you the final word: Sum up the need for this bill in one sentence.
MU: It’s an opportunity to intelligently adapt to the changing world, still achieve the goals that the state has and do so without increasing costs for ratepayers.
[ad_2]
Source_link
