Mayflower’s lowest-price offshore wind option selected

MAYFLOWER WIND WAS SELECTED as the winner of the state’s second offshore wind farm procurement with a proposal that the company said offered the lowest price and the least onshore investment of its three major offerings.

Few details about the price or the onshore investment were revealed, but Mayflower said in its original bid that the price would be “the lowest cost offshore wind energy ever in the US.” Mayflower is a joint venture of Shell New Energies and EDP Renewables.

The choice of the lowest-cost option is controversial because it touches on a sensitive policy issue. Officials on the South Coast have been pressing the Baker administration to focus more on onshore investment so that the state could begin to supply more and more of the supply chain for wind farms springing up along the coast. Gov. Charlie Baker is eager to see onshore industry develop, but he is wary of doing so at the cost of higher prices for power, which negatively affect customers and businesses across the state.

Mayflower laid out three options for a wind farm with a capacity of 804 megawatts. The first proposal, called “low cost energy,” offered the lowest price and some onshore investment. The second proposal, called “infrastructure and innovation,” offered a slightly higher price but promised more investment onshore. The third option, called “Massachusetts manufacturing,” offered the highest price but more onshore investment.

“Each of these proposals would provide the Commonwealth with the lowest price yet for US offshore wind,” Mayflower said in its bid. “Our projects are cost-effective and bring substantial economic development benefits, and the ability to enhance those benefits depending on the proposal selected.”

A press release issued by Mayflower on Wednesday said its low cost energy proposal will come in below the price of 8.4 cents a kilowatt hour, which was the winning bid on the state’s first offshore wind procurement. The press release said the proposal will also yield $3.7 billion in rate savings and lead to the creation of up to 10,000 offshore and onshore jobs in Massachusetts.

“Development of the Mayflower Wind project will contribute to the building of an offshore supply chain on the South Coast and across the Commonwealth, helping to launch a new, clean, safe, and innovative sector of our economy,” said John Hartnett, Mayflower’s president, in a statement.

Mayflower’s low price is another sign the offshore wind industry in the US is picking up steam. Many believed the price would go higher than the first procurement because a key federal investment tax credit is disappearing, but Mayflower officials said they are pursuing a strategy to tap the tax credit. They provided no details.

State officials declined to go into detail as to why the lowest price proposal was chosen over what appeared to be proposals with a low price with more onshore investment. But they said the winning proposal and its onshore economic benefits were scrutinized closely and were determined to have the best overall value. The actual choice of Mayflower was made by the state’s three major utilities, Eversource Energy, National Grid, and Unitil, while Baker administration officials participated in the evaluation process of the three companies’ proposals.

[CORRECTION: This story has been changed, at the request of the Baker administration, to make clear that the administration did not directly select Mayflower Wind.]

“This was an extremely strong bid,” said Kathleen Theoharides, the governor’s secretary of energy and environmental affairs.

It appears Mayflower was far and away the easy choice. The state’s press release said the company offered a lower price and greater economic development opportunities than the other two bidders – Vineyard Wind, the company that won the first offshore wind procurement, and Bay State Energy, which lost for the second time.

The three utilities that ran the procurement process voted unanimously for the Mayflower proposal, the first time that has happened on any of the state’s clean energy procurements. With unanimous support from the utilities, the administration did not have to take a formal role in the actual selection, although officials made clear they strongly supported the decision. The utilities are now charged with negotiating power purchase contracts with Mayflower Wind, which are expected to go to the Department of Public Utilities for approval in January.

In a statement, Baker hailed the procurement. “Offshore wind is an important component of our administration’s efforts to reduce greenhouse gas emissions and provide affordable energy options and we look forward to continuing to develop the Commonwealth’s emerging offshore wind industry in a sustainable manner that benefits all residents,” he said.

New Bedford Mayor Jon Mitchell issued a statement that congratulated Mayflower Wind but raised concerns about the proposal selection. “By selecting yet again the bid with the lowest hard-dollar investment commitments, the Commonwealth has clearly signaled a policy approach for securing industry investment that diverges sharply from those of our competitor states,” Mitchell said. “Although I disagree with this policy, the addition of Shell Oil and EDP Renewables to the Port of New Bedford is welcome news, and we will continue our work to establish Greater New Bedford as the East Coast leader in offshore wind through careful planning and marketing, along with our global leadership in commercial fishing.”

One concern looming on the horizon is federal approval for such projects. Vineyard Wind’s project is still stalled amid a larger environmental review by the Bureau of Ocean Energy Management. It’s unclear whether that review will be done in time to allow the project to move forward. State and company officials have said they need a decision by March.