Lawmakers walk tightrope on wind power contracts
Back penalties for defaults, but seek to preserve competition
THE LEGISLATURE’S ENERGY experts say it makes sense to penalize CommonWealth Wind and Mayflower Wind if they default on their recently approved power purchase contracts, but the lawmakers don’t want the penalties to include a ban on participation in an upcoming offshore wind procurement.
The House and Senate chairs of the Legislature’s Utilities, Telecommunications, and Energy Committee say the state needs to walk a fine line between penalizing the companies but not penalizing itself.
The Department of Public Utilities on December 30 approved power purchase contracts between the state’s three utilities and Commonwealth Wind and Mayflower Wind. Avangrid, the developer behind Commonwealth Wind, said it couldn’t finance its project with the existing terms, and Mayflower, a joint venture of Shell Energy Ventures and Ocean Winds, said it faces a similar predicament.
Appearing on The Codcast, Sen. Michael Barrett of Lexington and Rep. Jeffrey Roy of Franklin said they were sympathetic to the challenges the wind farm developers are facing, including rising inflation and interest rates, supply chain difficulties, and the war in Ukraine.
“The world is a different place,” Barrett said. “The war in Ukraine could not have been anticipated. The impact on natural gas prices in Europe and the attraction of LNG toward Europe and away from New England which relies on LNG [liquefied natural gas] for winter heating could not have been entirely anticipated. Supply chain disruptions are real.”
But Barrett said state policymakers also face a challenge. “On the one hand, you don’t want to let these developers exploit you and cite these recent trends in order to get a better deal. But you also have to acknowledge that some things truly are unprecedented. What I’m interested in is preserving competition for the next round,” he said.
“So even though you’re upset about Mayflower and Avangrid, you could probably find a way forward that looks something like this,” Barrett said. “First of all, you might want to impose a money penalty on Avangrid if it chooses truly to default and step back from performing a contract that they’ve signed. You may want to impose a similar money penalty on Mayflower. That’s separate, though, from deciding whether or not to bar them from competing in the next round. You may want to assess points against their bid in the next round. But, fundamentally, you want to keep as many of these offshore developers in the race as you can.”
Four wind farm developers hold offshore wind leases off the coast of Massachusetts. Only Avangrid and Mayflower have landed contracts so far to build out wind farms in their lease areas,, with Orsted and Equinor currently choosing to pursue projects in other lease areas they own off the coast of other states.
Roy said he agrees with Barrett’s analysis. “We don’t need companies making promises they can’t keep, but we do need to get robust renewable energy,” Roy said. “I’m all for moving forward and working with these companies so we can do that and achieve our goal.”
Roy is concerned about losing the economic benefits associated with the Avangrid bid — a cable manufacturing plant at Brayton Point in Somerset and a buildout of the Salem waterfront to accommodate offshore wind – but he predicts these investments will happen eventually because they are needed to service the emerging offshore wind industry.
“If Avangrid doesn’t proceed with its project, there’s going to be another company behind them that will do it,” he said.
Roy and Barrett touched on a number of other topics:
– The Democratic lawmakers don’t expect the state’s energy strategy to change dramatically under Gov. Maura Healey, but they said her appointment of a cabinet-level climate chief signals a change in tone.
“I do expect she is going to raise the bar a bit,” Roy said. Barrett said he had some serious policy differences with the Baker administration, and those may ease with Healey. “You are going to see us singing from the same hymn book more often,” he predicted.
– Healey is calling for doubling the state’s wind power target from 5,600 megawatts to 11,200 megawatts. The two lawmakers welcome the higher goal, but say it must be accompanied by a change in the way clean energy is procured.
Barrett would like to see procurements involving multiple states and procurements pitting various types of clean energy – offshore wind, onshore wind, solar, hydro, etc. — against each other to keep pricing competitive.
Both lawmakers like the recent decision by the Baker administration to have Massachusetts ratepayers take a 40 percent stake in a proposed onshore wind farm in Maine. “It’s a great example of regional cooperation,” Roy said.
Roy would also like to see Massachusetts ratepayers take a stake in the Millstone nuclear power plants in Connecticut. “Hopefully with the next administration perhaps that issue can be revisited,” Roy said.