N.J. Awards Grant for First Offshore Wind Project

By MARA LEMOS STEIN and MARK PETERS

New Jersey regulators Friday selected Garden State Offshore Energy to develop the state's first offshore wind farm, in a move to spark development of a clean power source that has met resistance in other states.
Garden State Offshore Energy, a joint venture between a unit of Public Service Enterprise Group Inc. and wind-power developer Deepwater Wind, was selected by the state Board of Public Utilities from five firms vying for state support and a grant of up to $19 million. The state program provides aid for up to 350 megawatts, or enough continuous power for about 125,000 homes.
Garden State Offshore's proposal to keep the turbines far from the shore, combined with the technology and financial strength of the firm helped it prevail, said Chris Brown, Deepwater's chief executive officer.
"The beauty of our proposal is that it preserves the beauty of the New Jersey shore," Nelson Garcez, vice president, PSEG Renewable Generation, said.
The project is slated to include 96 turbines that would be between 16 miles and 20 miles off the coast. The joint venture will take only $4 million of the $19 million grant offered by New Jersey, Mr. Brown said.
The losing bidders included Bluewater Wind, a subsidiary of Australia's Babcock & Brown Ltd., Fishermen's Energy of New Jersey LLC -- a collective of fishermen from the state's southern coast -- Environmental Technologies LLC and Occidental Development & Equities LLC.
State officials in New Jersey see strong potential in offshore wind generation, which could become one of the largest sources to meet its renewable-energy goals. A 2004 study cited by developers estimates 24,000 megawatts of potential wind power exist off New Jersey's coast.
Offshore wind development has faced opposition, with a lengthy battle over a wind farm off Cape Cod, Mass., among the best-known examples. But as demand for renewable energy grows, New Jersey and other states are trying to promote projects because of their potential scale.
Firms vying for the New Jersey grant are involved in similar efforts in nearby states.
Bluewater, based in Hoboken, N.J., won the race to develop offshore wind farm in Delaware, the first project to win state support in the U.S. The $1 billion-plus project will be built 11.5 miles off the coast of Rehoboth Beach in Delaware and its capacity could reach up to 600 megawatts.
Deepwater Wind, also of Hoboken, is fresh from winning the right to develop a 385 megawatt wind project off Rhode Island's coast that will supply 15% of the state's power.
Deepwater was formed in May after the acquisition of offshore wind assets from Winergy Power LLC and First Wind Holdings Inc. Its main shareholders are multibillion-dollar New York-based alternative-asset management firm D.E. Shaw & Co., Dwight Anderson's Ospraie Management, a New York-based hedge fund that focuses on commodities and energy, and First Wind. First Wind is backed by private-equity firm Madison Dearborn Partners and the private-equity arm of D.E. Shaw.
Having a utility such as PSEG as a partner has "been very helpful" in the process, said Bryan Martin, a managing director at D.E. Shaw, in an interview earlier this week.
The other proposals would have placed projects closer to shore. Fishermen's Energy of New Jersey LLC of Cape May, N.J., proposed building an offshore wind farm in two phases, with the first phase being much smaller and serving as a test case.
The other bidders, Environmental Technologies and Occidental Development, submitted very short proposals, with few details, according to people who have reviewed the proposals.
New Jersey is making a strong push toward clean energy and its Renewable Portfolio Standard is one of the most aggressive in the U.S. It requires electricity providers to generate up to 22.5% of power from renewable sources by 2021. It offers a full exemption from the state's 7% sales tax for all solar- and wind-energy equipment. Power generated by the offshore wind farm won't necessarily be cheaper to the consumer.
Deepwater's Mr. Brown said it was too early to discuss electricity rates as the project won't be operational for at least four years, but he said he expects the price "to be competitive."
Winning the bid positions Deepwater as the major developer of offshore wind projects in the U.S. Northeast. Next in its sights is New York, as the state evaluates the benefits of exploiting its wind resources. "That's part of our regional strategy," Mr. Brown said.
Write to Mara Lemos Stein at mara.lemos-stein@dowjones.com and Mark Peters at mark.peters@dowjones.com