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PSEG subsidiary contemplates bigger stake in offshore wind

A wind farm owned by Orsted and Deepwater

A wind farm owned by Orsted and Deepwater off Block Island, R.I., seen in 2016. Credit: Newsday/Mark Harrington

PSEG Long Island’s sister power company is contemplating a second major offshore wind initiative with Danish energy giant, Orsted, in which it could acquire a stake in a massive New Jersey project, even as the company works to help implement separate Orsted wind farms for the South Fork and New York State.

PSEG Power announced last week that it had begun to seek approvals and analyze the prospect of acquiring a 25% stake in a 1,100-megawatt offshore wind farm for New Jersey called Ocean Wind. PSEG Power already had already been working to support the project. And it has a partnership with Orsted predecessor Deepwater Wind for a separate project in waters off New Jersey south of the planned Ocean Wind farm.

Deepwater Wind is the company that successfully bid for an originally 90-megawatt wind farm off the coast of Rhode Island and Massachusetts that will provide energy to the South Fork. The project was later expanded to 130 megawatts. PSEG Long Island’s power markets group provided the analysis that led to the recommendation of that project, which LIPA’s board approved in January 2017, after nods from town governments in East Hampton and Southampton.

The South Fork project was originally billed as one that sought alternatives to a costly, conventional transmission project of new cables and substations. In the end, LIPA opted to move ahead with both the $513 million cable enhancement project and a series of power measures, including two giant storage batteries and the $2 billion wind farm.

In responses to questions from Newsday, PSEG Power said the power subsidiary and the Long Island utility operator will avoid any conflicts. The companies have “measures in place to observe separation protocols” between its Long Island utility management business and the power division that may take a stake with Orsted in the New Jersey wind farm.

PSEG supported Orsted in its bid for the Ocean Energy project, the company said, and “remain partners” in the separate Garden State Offshore Energy project for which they have been awarded a federal lease area but no state contract, as yet, to supply energy.

The company’s partnerships are not expected to extend to Orsted’s large interest in New York projects, PSEG said. In addition to the South Fork project, Orsted this summer also won a contract to supply New York State with 880 megawatts of offshore wind power by 2024. Power from that project is expected to provide energy to the Long Island grid at Holtsville, possibly from a landing site at Smith Point, Brookhaven Town has suggested. LIPA could take up to 90 megawatts of energy from the state contract, officials said.

The prospect of taking a stake in Orsted projects in New York State is “not under discussion,” PSEG said.

The state Public Service Commission, in a statement, said New York rules restricting ownership of power plants apply only to the investor-owned utilities, not public authorities such as LIPA. Further, the agency said, PSEG’s sister company’s stake in Ocean Wind “would not be a factor for consideration since the generation project is in New Jersey, not New York.”

Other New York State utilities would face difficulties in contemplating such a measure, given restrictions on co-ownership of power plants and electric utilities. PSEG declined to discuss the restriction but noted it has a separate subsidiary called PSEG Power New York that owns 750-megawatt gas-fired power plant in upstate Bethlehem. Another PSEG subsidiary called PSEG Solar Source in 2017 acquired a 10.6-megawatt commercial solar farm in West Babylon.

New Jersey state law will prevent energy produced by the jointly owned Ocean Wind project from being sold in New York. New Jersey’s Offshore Wind Economic Development Act “requires that the energy from any offshore wind project earning (offshore wind energy credits) in New Jersey be sold in New Jersey,” PSEG said.

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