Wind farm developer seeks to reopen power contract
The Baker administration is in a bind on offshore wind.
The state desperately needs the power from proposed wind farms off the coast, but the largest of those wind farms now says the contract price it agreed to in April and affirmed in May is no longer sufficient to build out the project.
Commonwealth Wind blames the war in Ukraine, the runup in interest rates, supply chain constraints, and inflation for dramatically increasing the cost of the project. Without a bump up in the price, “the project is no longer viable and would not be able to move forward,” the company said in a filing with the Department of Public Utilities.
The company, owned by Avangrid Renewables, asked the DPU for a one-month delay in approving the contract to allow for time to negotiate what is essentially a new contract. Mayflower Wind, which says it is facing similar challenges with its own wind farm, has seconded the call for a one-month delay.
The situation represents yet another setback in the state’s pursuit of green, renewable energy. First it was the Trump administration’s wariness of offshore wind, which led to delays of almost two years. Then it was the state of Maine balking at a transmission line carrying hydro-electric power from Quebec into New England. And now it’s fallout from a war in Ukraine and a struggling economy. All these delays are jeopardizing the state’s ability to reduce its reliance on natural gas in producing electricity and lower greenhouse gas emissions.
Commonwealth Wind insists the price adjustments it needs are not significant. “The project, even with a modest increase in the power purchase agreement price needed to achieve viability, will continue to be cost-effective, to reduce ratepayer bills, and to insulate ratepayers from the kinds of price spikes the Commonwealth is currently experiencing due to natural gas cost increases,” the company said.
The wind developer also says a short delay won’t push back the commercial operation date of 2028, which is soon enough to help the state meet its 2030 goal of reducing greenhouse gas emissions 50 percent below 1990 levels.
It’s not clear what the DPU will do. The power is needed, but can wind farms be allowed to just renegotiate contracts worth $9.5 billion they agreed to just months ago? Should the bid process start all over again?
Vineyard Wind, which is currently scheduled to come online in January 2024, isn’t balking at its contract terms.
The office of Attorney General Maura Healey, who is running for governor, is signaling that it is going to oppose any change in the contracts. One key factor is the recently passed Inflation Reduction Act, which passed Congress after the power purchase agreements were negotiated. It contains significant, beefed-up tax credits that could dramatically lower wind farm costs.
Commonwealth Wind, however, says it needs time to assess the potential benefits of the Inflation Reduction Act. It also says it believes any benefits are “not anticipated to make the project economic absent other changes to the power purchase agreements.”
One expert witness hired by Healey’s office said in testimony filed with the DPU that the contract provides protection for electric ratepayers against all sorts of unforeseen situations, including difficulty in financing the project, construction delays, and “procurement of equipment and materials and availability of construction labor and possible delays associated with the supply chain for equipment and materials.”
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