Avangrid’s Kimmell says wind farm needs ‘very modest’ price increase
Haddad calls price negotiations ‘bump in the road’
AVANGRID’S KEN Kimmell said his company can get its Commonwealth Wind project back on track with “a very modest increase” in the price state ratepayers would pay for the electricity.
Appearing on The Codcast, Kimmell, Avangrid’s vice president of offshore wind development, said the company bid the current price in September 2021 and affirmed it in May, but circumstances have changed.
“It’s facing a headwind, no pun intended,” Kimmell said of the 1,200 megawatt project. “We have the worst inflation in 40 years. We have the Russian invasion of Ukraine that has wreaked havoc on global commodities like steel, which obviously we use for these wind turbines. And we have a Federal Reserve that has raised interest rates five times in the last year. … The sum of all that has raised hundreds of millions of dollars of costs to this project and the current contract price is insufficient to cover those costs. The project now has what’s called negative present value.”
Avangrid has asked the Department of Public Utilities to give the company a month to work out new terms with the state’s utilities, but the utilities are balking and elected officials are taking a wait-and-see attitude.
Kimmell ticked off all the benefits of Commonwealth Wind, including enough electricity to power 750,000 homes and cut carbon emissions by 2.3 million tons a year. Kimmell said the wind farm would also create 11,000 jobs, spur redevelopment of the port in Salem, and lead to a new factory making subsea cable in Somerset.
“All of those benefits we can have, but first we have to solve the problem with this purchase price,” he said.
It’s unusual to have a public bid process and then revise the bid after the fact, but Kimmell said the state is not legally required to rebid the project. He said a rebid would not be wise, because projects being bid now are coming in at much higher prices (even after a “modest” price increase) and the state needs the power quickly to meet its emission goals.
“We all agree the climate crisis can’t wait,” he said.
Kimmell said the company is doing everything it can to keep the price increase small, tapping into a new federal tax credit, taking advantage of the economics of scale of building two wind farms (Commonwealth and Park City) at once, and delaying the purchase of turbines as long as possible to secure bigger and more efficient ones. He said the ultimate price will be higher but should remain within the state’s price cap, which requires the project to come in at a lower price than the previous one.
“We are going to do our very best to honor the price cap and, even though it has been legislatively abolished going forward, we’re going to work within that price cap for the price increase we are requesting,” he said. “Ratepayers will save under the original contract. They’ll save under the amended contract.”
Rep. Patricia Haddad of Somerset, whose community is counting on offshore wind to help the community recover from the loss of a coal-fired power plant, said regulators should be flexible so communities like hers can see some benefit from the offshore wind industry.
“I think it’s just a bump in the road,” she said of the current price negotiations. “We all need to look at this as it’s a brand new industry. There’s no way we could have anticipated any of these hurdles or any of these bumps in the road. I, too, am disappointed with the utilities because instead of saying no, I would want them to say ‘how can we get over this little hurdle.’”
Kimmell said the president of one of the utilities, Eversource, recently sent a letter to President Biden raising concerns about the adequacy of power supplies in New England this winter. Kimmell said Commonwealth Wind and offshore wind in general could eventually be part of the answer to Eversource’s concerns.
“This is a path forward to solve the problem they’re acutely aware of, which is we don’t want brownouts and blackouts in New England,” Kimmell said.
Kimmell said he is not disappointed Attorney General Maura Healey and the Baker administration have largely ignored Avangrid’s request to the Department of Public Utilities for more time to revise Avangrid’s power contract with the state’s utilities.
“She’s doing exactly what you’d expect a public servant to do at this point, which is to keep an open mind,” Kimmell said of Healey. “We’re going to be presenting our numbers and our data. What I interpreted from her filing was that they haven’t taken a stance on this one way or the other, which is perfectly appropriate. They need to hear our numbers. They need to ask good questions. They’re there to protect ratepayers and they should.”