Wind farm raises alarms about its viability
Commonwealth Wind says project cannot move forward without contract changes
STATE HOUSE NEWS SERVICE
A MAJOR OFFSHORE wind project in the Massachusetts pipeline “is no longer viable and would not be able to move forward” under the terms of contracts filed in May and now both developers behind the state’s next two offshore wind projects are asking state regulators to pause review of the contracts for one month amid price increases, supply shortages, and interest rate hikes.
Utility executives working with assistance from the Baker administration last year chose Avangrid’s roughly 1,200-megawatt Commonwealth Wind project and a 400 megawatt project from Mayflower Wind in the third round of offshore wind procurement to continue the state’s pursuit of establishing cleaner offshore wind power. Contracts, or power purchase agreements (PPAs), for the projects were filed with the Department of Public Utilities in May.
But last week, Commonwealth Wind filed a motion for a one-month delay in DPU’s review, telling the state that their project can no longer move forward as planned. A one-month freeze, the developer said, “would give the parties an opportunity to evaluate the current situation facing the project and potentially agree upon changes to the PPAs, along with other measures, that could allow the project to return to viability.”
Delays in building out the state’s offshore wind potential could have ripple effects on the state’s efforts to meet emission reduction targets and its bid to reduce dependence on natural gas in the production of electricity.
Commonwealth Wind’s brief highlights “cost saving measures, tax incentives under the newly enacted Inflation Reduction Act, an increase in the PPA prices, and improvements to project efficiencies” as the possible approaches to restoring their project to viability. The developer also said that it “remains fully committed to the project and to delivering cost-effective renewable energy from the project to the residents and businesses of Massachusetts in a manner that advances the purposes of [the state’s clean energy law] and the Commonwealth’s energy and climate policies.”
The Boston Globe reported last month that a top Avangrid executive told investors that the company expected Commonwealth Wind and Park City Wind (a project intended to provide power to Connecticut) to each be delayed by a year as they sought contract revisions. CEO Pedro Azagra said Commonwealth Wind is now expected to go live in 2028, the Globe reported.
Mayflower Wind, the other developer tapped last year to help Massachusetts plug into offshore wind power, on Thursday told the DPU that it supports the request from Commonwealth Wind but did not specifically say that its project is at risk.
“A one month suspension would enable the parties to consider potential approaches to help ensure these offshore wind projects are economic and financeable under the PPAs. That assurance is especially important in this case, because the projects are among the few first-mover offshore wind projects in the region. As such, they are critically important projects to the advancement of the Commonwealth’s public policy requirements,” Mayflower Wind wrote in its response to Commonwealth Wind’s filing.
Both developers said they want to use the one-month pause to further explore how the federal Inflation Reduction Act, which includes a slew of energy tax credits, could factor into their project finances.
Mayflower Wind said that the federal law “may provide tax incentives to the projects that could provide savings for Massachusetts customers” and that the company “agrees that the PPA parties should examine the economics and financeability of the respective projects and any opportunities to incorporate federal tax or other benefits into the analysis.”
Both developers are already connected to roughly 800 MW offshore wind projects for Massachusetts. Vineyard Wind I, projected as the first utility-scale offshore wind farm in the nation, is in the early stages of construction and is due to come online by the end of 2023. Avangrid Renewables owns half of that project. Mayflower Wind’s initial 804 megawatt project was originally expected to be up and running in 2025 but the company has asked the DPU to merge that project and its second 400 megawatt project to create a 1,200 megawatt wind farm coming online in 2028.