DONG, Eversource form Bay State Wind

DONG ENERGY, one of three companies vying for offshore wind contracts from Massachusetts, on Tuesday announced a 50-50 partnership with Eversource Energy, a well-connected regional utility that has crafted similar arrangements with hydroelectric and natural gas pipeline companies.

The offshore wind partnership is calling itself Bay State Wind. DONG, a Danish company, has a federal lease for a 300-square-mile section of ocean about 20 miles off of Martha’s Vineyard. DONG and two other companies with leases, Deepwater Wind and OffshoreMW, are expected to bid on offshore wind power contracts this coming summer. The contracting process was set in motion by an energy bill approved by the Legislature this past summer.

Dong’s partnership with Eversource is intriguing on a number of fronts. Eversource in the past has not been a big fan of offshore wind. The Patrick administration in February 2012 forced Eversource to sign a power purchase contract with Cape Wind in order to win state approval for a corporate merger. Eversource’s chairman at the time, Tom May, thought Cape Wind power was too expensive and torpedoed the wind farm project in January 2015 when Cape Wind had difficulty completing its financing and failed to meet a contract deadline.

“The big thing that’s changed is there’s a clear legislative process to do this that requires a competitive process where we will bid into a solicitation,” said Lee Olivier, executive vice president of strategy and business development at Eversource. He also said the new project will be much farther offshore than Cape Wind and use more modern, cost-efficient technology.

With a number of power plants expected to shut down over the next few years, Olivier said the Bay State Wind project can help offset the loss of power supply. “Does it really make sense to rebuild all that with gas-fired generation?” Olivier asked.

The legislation signed into law in August authorizes Eversource and National Grid to negotiate the power contracts for offshore wind, which means one arm of Eversource will be sitting in judgment on a proposal submitted by another arm of the company. The same situation arises with the state’s upcoming procurement of hydroelectricity from Canada. Eversource will be choosing among proposals that include one from Hydro-Quebec and Eversource.

Olivier said Eversource is careful to avoid conflicts. “The way it works is there is a clear code of conduct, a separation between supply and sell sides of the company,” he said. “We have been successful in maintaining that to make sure the process is transparent and auditable and the customer always gets the best deal. “ (He noted Eversource helped select projects  in a recent three-state energy solicitation and Eversource’s Hydro-Quebec project was not chosen.)

Eversource’s partnership with Dong comes on the heels of its partnership with Hydro-Quebec and its part-ownership with Spectra Energy and National Grid of a company seeking to build a natural gas pipeline into the region. Olivier said the deals do not violate state laws barring a utility from getting into the power generation business.

“If you look at these other ventures we have, whether it’s Spectra or Hydro-Quebec, they’re all on the unregulated side of the business,” he said. “There’s clear separation from the regulated part of the business. “

Caroline Pretyman, a spokewoman for Eversource, said in an email that the company will be in full compliance with the law. “Our interest in Bay State Wind will be owned by an unregulated affiliated company, not the regulated public utility subsidiary,” she said. “Under the 1996 Massachusetts Restructuring Act, utility companies in Massachusetts are permitted to own or invest in generating assets, as long as such assets or investments are held in unregulated affiliates, not in the regulated electric company. “

Thomas Brostrom, general manager of DONG in the United States, said his company has partnered with other firms on offshore wind projects in the past on a case-by-case basis.  “We felt, coming in as an international company, that teaming up with a strong local partner has a lot of benefits here,” he said.

In addition to its expertise in power transmission and distribution, Eversource is also a powerful political player on Beacon Hill. The company has powerful connections in the Legislature, particularly the House, and it also has strong ties to the Baker administration.

Olivier said the current plan is for a transmission line to run from the offshore wind farm to Somerset, where it would interconnect with the regional power grid. With the Brayton Point power plant and Pilgrim Station going offline in the next few years, Olivier said there will be a lot of excess capacity there. Somerset is also the home of Rep. Patricia Haddad, the House leader who was the architect of the offshore wind legislation that passed this summer.

Brostrom said a request for proposals for offshore wind power is expected to be released in June and an initial supplier will probably be chosen several months later. He said permitting would probably not be completed until 2019 or 2020. He estimated wind farm construction would take one year, possibly two, so electricity would not start flowing until 2021 or 2022.