The Murphy Administration has touted offshore wind as a green technology that will power New Jersey’s economy. It will, if you believe the hype, create new manufacturing centers and thousands of high-paying jobs for New Jerseyans.
And everyone will get a pony, well, a unicorn, too.
In a July 19 letter to the editor published in the Wall Street Journal, former Board of Public Utilities Commissioner Bob Gordon claimed that the state legislature had to pass legislation allowing Ørsted, the Danish government-owned company developing Ocean Wind, to keep the investment tax credits it will now receive, courtesy of the Inflation Reduction Act, so that New Jersey will keep “thousands of new jobs and billions in new investment, which would have gone elsewhere.” What the good Commissioner omitted was that each job will cost taxpayers and New Jersey ratepayers millions of dollars, and most of those jobs won’t go to New Jerseyans.
According to the Ocean Wind Construction and Operations Plan (COP), which Ørsted filed in May of this year, the project will create an estimated 1,000 jobs over the two-year construction period and another 69 operation and maintenance jobs for the remainder of its 25-year lifespan. All told, the COP estimates the project will create 5,880 job-years. (A job-year is economist-speak for one full-time equivalent job for one year.)
In a previous column, I estimated the investment tax credit US taxpayers will hand over to Ørsted and the Danish government: around $2.5 billion, based on an estimate of how much it will cost to construct the 1,100 megawatt project. That’s $2.5 billion that was supposed to be returned to New Jersey ratepayers before the Legislature voted to give the money to Ørsted instead.
Ørsted also will collect a production tax credit during the project’s first 10 years of operation for every MWh it generates. Currently, the PTC is $26 per megawatt-hour. It increases each year with inflation. Ørsted claims Ocean Wind will generate around 4.5 – 5.0 million MWh every year, which means a PTC of $130 million. Total PTC payments: $1.3 billion for the first ten years, even before accounting for inflation. Add in the $2.5 billion ITC payment, and the tax credits total $3.8 billion.
But the subsidies don’t end there. In 2026, Ocean Wind’s expected first full year of operation, New Jersey ratepayers will be forced to pay $100/MWh for the electricity generated. The price will increase 2% annually. By comparison, the average wholesale price of power in New Jersey through the first six months of this year was around $30/MWh. If we assume wholesale prices double to $60/MWh by 2026 and then increase at the same rate as the contract the BPU approved for the project, ratepayers will pay Ørsted an extra $4.2 billion for the electricity generated over the 20-year contract term.
So, the total subsidy for those 5,880 job years will come in around $8.0 billion, almost $1.4 million for each job-year. In other words, each year taxpayers and ratepayers will pay $1.4 million for every full-time construction and maintenance worker hired by Ørsted. That’s equivalent to $700/hour.
Maybe you should ask Governor Murphy for a raise.
It gets worse. First, most of those jobs won’t even go to New Jerseyans. Ørsted will import most of the workers to assemble the wind turbines. No new manufacturing facilities for wind turbines or their components have even been announced, much less constructed. And Ørsted won’t be using the new wind staging port on the Delaware River – far from where Ocean Wind will be built – which cost New Jersey taxpayers $500 million.
Second, the thousands of jobs former Commissioner Gordon boasts about ignores the jobs that will be lost because of Ocean Wind. Offshore wind will destroy the livelihoods of hundreds of commercial fishermen and damage the seafood processing industry. And the higher electric rates New Jerseyans will be forced to pay will inflict damage on individuals, who will have less money to spend on everything else, and businesses, who will have to raise their prices or leave the state.
How many jobs will be lost? Based on research I did years ago, each million-dollar increase in electricity costs results in a loss of around 13 job-years. So, $4.2 billion in higher electricity costs translates to around 44,000 fewer job-years for New Jerseyans. Over the 20-year contract life, that’s over 2,000 full-time jobs each year.
Because of higher costs, some offshore wind projects are being canceled, including several Ørsted was planning to develop. Perhaps New Jerseyans will get lucky and the same fate will befall Ocean Wind.
As for me, I expect the BPU to rubber-stamp even higher contract prices for Ørsted, ratepayers be damned. After all, who is more important: ratepayers or the governor’s wealthy friends?
