GOV. CHARLIE BAKER signaled a major shift in his thinking on offshore wind Wednesday, unveiling legislation that would entice developers to put down roots in Massachusetts by spending $750 million of federal funding on infrastructure improvements and removing price caps on procurements.
At a national offshore wind conference in Boston, Baker said he wanted to eliminate the price cap on offshore wind procurements, which requires each successive procurement to come in at a lower price than the preceding one. That measure has helped keep prices low during the first two procurements, but there is growing concern that the emphasis on low prices may be hindering the state’s efforts to build an onshore supply chain for the emerging offshore wind industry.
New York and New Jersey have attracted a lot of attention by signing contracts with offshore wind developers that put less emphasis on price and more on onshore manufacturing facilities for turbine foundations and other components.
Until now, Baker has been a champion of keeping prices down, believing that lower prices for green electricity are crucial in the effort to shift the transportation and building sectors away from fossil fuels and decarbonize the state’s economy. The most obvious example of the prioritization of price came in the state’s second offshore wind procurement, when the developer Mayflower Wind offered three pricing options – an absolute lowest price with minimal onshore development, a slightly higher price with more onshore development, and an even higher price with the most onshore development. Massachusetts selected the lowest-priced bid.
On Wednesday, Baker moved in the opposite direction, signaling that the state and its ratepayers may need to spend more to attract the onshore economic development accompanying the emerging offshore wind industry. All signs at the offshore wind conference at the Omni Seaport Hotel pointed to rapid growth in the industry, as US Secretary of the Interior Deb Haaland told the attendees that the Bureau of Ocean Energy Management may open up seven new offshore lease areas by 2025 in the Gulf of Maine, the New York Bight, the Gulf of Mexico, and off the coast of the central Atlantic states, the Carolinas, California, and Oregon.
Baker indicated he wants to see Massachusetts grab a share of the onshore supply chain supporting that emerging industry. He said he filed “game-changing legislation” that would funnel $750 million of available federal funds into a Clean Energy Investment Fund that would support the development of clean energy and clean energy jobs. That investment would be in addition to a proposal to spend another $100 million of federal aid on port infrastructure and improvements to better serve the offshore wind industry.
Baker also proposed doing away with the price cap on future procurements “to allow projects to offer greater investments in energy storage, reliability, and economic development,” according to the administration’s press release.
Baker said his shift in thinking reflects the facts on the ground. He said the price cap, passed in 2016, helped bring in two projects (Vineyard Wind and Mayflower Wind) with bids at record low prices, well below what had been predicted. But the governor said the state is now moving into a new phase, “to ensure Massachusetts retains its leading edge position in the offshore wind policy debate in the US by proposing to, among other things, remove the price cap on project proposals to ensure the projects have the flexibility to incorporate storage, improve reliability, and offer greater economic development.”
Baker also did an about face on who should run the procurement process in Massachusetts. Policymakers until now have allowed the state’s three private utilities to run that process with coordination from state officials, but Baker now wants to have his Department of Energy Resources handle the procurements while receiving advice from the utilities.
Baker’s proposal was greeted warmly by a key official in the House but not so warmly by his counterpart in the Senate.
Rep. Jeffrey Roy of Franklin, the House chair of the Legislature’s Telecommunications, Utilities, and Energy Committee, said he welcomed the governor’s legislation, which dovetails with many of the proposals being put forth in the House, where Speaker Ron Mariano is a big booster of offshore wind. Mariano and Roy have called for the elimination of the price cap and placing a much greater emphasis on economic development in the procurement process.
Previous procurements prioritized price over economic development (75-25) in awarding points in the selection process. That was upped to 70-30 in the current procurement for 1,600 megawatts, which is equal to the total purchased in the two previous procurements. But Roy thinks that’s still too low, and maybe should be raised to 50-50.
“There’s not enough economic development,” he said. “We’re losing economic development because of this fixation on price.”
He said the price cap made sense at the beginning of the process, when most people were uncertain how much offshore wind would cost. But now that the industry is starting to develop, the cap is no longer necessary, he said.
“Now it’s become a barrier,” he said, adding that the goal should be to green the state’s production of electricity while building a new industry in the state. “What could be better than getting a manufacturing facility setting up shop in Massachusetts?”
Sen. Michael Barrett of Lexington, the Senate chair of the committee, was much more circumspect in his remarks. He said Baker’s proposal for more investment in offshore wind appeared promising, but drew the line there.
“Let’s not miss the elephant in the room,” he said in a statement. “The big idea here is the complete abolition of legal checks on the cost of electricity generated by offshore wind. Legislators are being asked to terminate protection for the people who pay their electric bills every month, which is most of us. For the administration, this is a major policy change.”
“In terms of the cost of electricity per kilowatt hour, we pay some of the highest rates in the country,” Barrett continued. “Because of the climate crisis, we need to go all-electric with respect to both our cars and our heating systems, which means we need to boost our overall consumption of electricity in the teeth of our high per-unit costs. It’s a dicey time to bring up abolishing price constraints.”