Can Your Business Benefit from New Jersey’s Commitment to Offshore Wind?

The New Jersey Board of Public Utilities voted unanimously to approve the state’s second offshore wind project, which is projected to produce 2,658 megawatts of energy...

New Jersey continues to solidify its commitment to offshore wind projects. On June 30, 2021, the New Jersey Board of Public Utilities voted unanimously to approve the state’s second offshore wind project, which is projected to produce 2,658 megawatts of energy.

New Jersey’s Commitment to Offshore Wind

“Today’s award, which is the nation’s largest combined award to date, further solidifies New Jersey as an offshore wind supply chain hub and leader in the offshore wind industry in the United States,” New Jersey Gov. Phil Murphy said in a press statement. The award was divided between two companies — Atlantic Shores Offshore Wind LLC, a partnership between Shell New Energies US and EDF Renewables North America; and Ørsted subsidiary Ocean Wind 2 LLC.

Both companies have committed to building new manufacturing facilities at the New Jersey Wind Port, as well as utilizing the foundation manufacturing facility at the Port of Paulsboro. Cumulatively, the projects are expected to create 7,000 full and or part-time jobs across the development, construction and operational phases of the projects.

As we have discussed in prior articles, wind power is a key component of Gov. Murphy’s Energy Master Plan, which established a goal of reaching 100 percent clean energy by 2050. In 2019, New Jersey awarded the largest single offshore wind solicitation in the country to Ørsted’s 1,100 MW Ocean Wind project, which will be built 15 miles off the coast of Atlantic City. The State’s efforts also include developing the NJ Wind Port in Salem County, establishing a WIND Institute to coordinate workforce development and research and development in offshore wind, and a $250 million investment in the Port of Paulsboro for turbine component manufacturing. According to the NJBPU, it anticipates opening a third offshore wind solicitation for at least 1,200 MW in 2022.

Amendments to the Offshore Wind Economic Development Tax Credit Program Rules

New Jersey is also working to attract businesses in the offshore wind industry. On June 9, 2021, the New Jersey Economic Development Authority (NJEDA) Board approved a series of amendments to the Offshore Wind Economic Development Tax Credit Program rules. The Offshore Wind Economic Development Tax Credit Program provides tax credits for capital investment in a qualified wind energy facility located in New Jersey, with the goal of fueling employment growth and offshore wind supply chain development through capital investment in land-based offshore wind industry projects.

The amendments to the Offshore Wind Economic Development Tax Credit Program rules reflect changes to the program as a result of the New Jersey Economic Recovery Act (ERA) of 2020, signed by Governor Phil Murphy on January 7, 2021. The most significant changes enacted by the ERA include modifying the period over which tax credits are paid out from 10 years to five years; revising the minimum number of new full-time jobs required to be eligible for the program from 300 to 150, and allowing for a project to ramp-up jobs over time; and expanding the eligible geography for the program from the seven southern counties to the entire state.

According to the NJEDA, the shorter pay-out timeframe is “better suited for an industry this is rapidly scaling up brand new operations to support wind farm projects across the U.S. East Coast.” The agency also noted that the amended rules recognize that offshore wind is a new industry by allowing a project to ramp up job creation over the first four years of a project.

Requirements of Offshore Wind Economic Development Tax Credit Program

To receive tax credits through the Offshore Wind Economic Development Tax Credit Program, a business must:

• Make or acquire capital investments totaling at least $50 million in a qualified wind energy facility. If the business is a tenant, the business must lease an area of the qualified wind energy facility that represents at least a $17.5 million capital investment in the facility.
• Create a minimum of 150 new full-time jobs over the four-year commitment period. A tenant may meet the employment requirements with other tenants at the qualified wind energy facility. A project that creates between 150 and 300 new full-time jobs will receive a prorated award compared to those that create 300 or more jobs.
• Demonstrate a net positive economic benefit to the State.

Limited by a net positive economic benefits test, the tax credits can equal up to 100 percent of the business’s qualified capital investments. The credits can be used against corporation business or insurance premiums tax. The calculation of new full-time employees may include select positions resulting from equipment supply coordination agreements with equipment manufacturers, suppliers, installers, and operators associated with the supply chain required to support the qualified wind energy facility.

Tenants in qualified wind energy facilities may also be eligible for tax credits if they occupy space in a qualified wind energy facility that proportionally represents at least $17.5 million of the capital investment in the facility. Tenants must also employ at least the minimum number of new, full-time employees in that facility.

Businesses must apply for the tax credits by July 1, 2025 and satisfy the capital investment and employment conditions for award of the credits by July 1, 2028.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.