AVANGRID PULLED OUT of a major Massachusetts offshore wind procurement at the final stage on Friday, saying its previously negotiated power purchase contract was no longer adequate to secure financing for the project given current economic conditions.

The company said it intends to resubmit the project with new pricing requirements when the state begins its next offshore wind procurement in April.

The decision is potentially a major blow to the state’s clean energy efforts and is likely to trigger a debate on Beacon Hill about whether inflation adjusters need to be incorporated going forward with future offshore wind procurements. New York and New Jersey are moving down that path now.

Avangrid raised alarms about the changing economic conditions over the last couple months, and insisted its 1,200-megawatt project could not gain financing without what it described as a modest increase in its power purchase price.

But its pleas for the parties to renegotiate the terms fell on deaf ears at the state’s three major utilities, which negotiated contrarts with Avangrid, and at the Department of Public Utilities, which was preparing to give the contract final approval.

Kim Harriman, a senior vice president at Avangrid for state, government affairs, and corporate communication, said the last straw came recently when she said Joseph Nolan, the president and CEO of Eversource, told investment analysts that his company was “not going to renegotiate no matter what they say.”

The decision by Avangrid leaves Massachusetts clean energy efforts in limbo. Company officials say they believe they can still bring their 1,200-megawatt wind farm online by 2028 if the project is tacked on to the next procurement and moved forward swiftly. That’s the same year the project was supposed to come online under the current procurement.

Mayflower Wind, which was participating in the current procurement along with Avangrid, also said it needed pricing adjustments to make its offshore wind deal work. Unlike Avangrid, however, Mayflower decided to move forward with the procurement anyway when the state Department of Public Utilties told the companies to fish or cut bait. Mayflower apparently believes it can make its deal work with the help of new federal tax credits for such projects.

Avangrid appealed to the DPU on November 14 for more time to renegotiate the terms of its contract, but there has been no response from the agency for the last month so Avangrid decided to drop out of the process and start over.

“Although Commonwealth Wind has had discussions with the other parties in this proceeding, unfortunately, at this point, there has been no progress with the [utilities], and there does not appear to be a viable path that would allow the project to move forward under the power purchase agreements,” Avangrid said in a filing Friday with the Department of Public Utilities.

William Hinkle, a spokesman for Eversource, said he could not confirm the quote Harriman attributed to Nolan, but said the CEO’s comments in general have been consistent with the company’s statements. “The three Massachusetts electric utilities selected these projects through a competitive process and negotiated these contracts in good faith with the offshore wind developers and various state agencies in accordance with all applicable laws and regulations,” Hinkle said. “They were filed with the department as part of our responsibility to procure the energy supply needed to help the Commonwealth achieve its clean energy goals and provide our customers with safe, reliable service. We remain ready to move forward with the contracts as filed.”

The filing with the DPU by Avangrid spelled out the economic challenges facing such projects. “When Commonwealth Wind bid into the third solicitation under Section 83C in September of 2021, its bid price was supported by then current and reasonably anticipated future economic conditions. Many of those economic conditions remained stable at the time the power purchase agreements were signed, in early April of 2022. However, since that time, the global economy has changed both dramatically and swiftly in ways that could not have been managed or predicted by Commonwealth Wind. Among other factors, the prolonged war in Ukraine has unsettled markets and increased costs for many products, inflation has been persistent, interest rates have increased in a manner unprecedented in recent times, commodity prices have risen sharply, and supply shortages and supply-chain constraints once thought to be temporary remain pervasive. In particular, input costs for offshore wind projects have risen in an unprecedented manner, as reflected in recent announcements from major turbine suppliers that – contrary to historic trends – prices for turbines will rise significantly going forward. Those changes have dramatically upended the Project’s cost assumptions, rendering the PPAs uneconomic and insufficient to support financing. Simply put, it is now far more expensive to construct the project than could have been reasonably foreseen even earlier this year,” the company said in its filing.

Troy Wall, a spokesman for the Baker administration’s executive office of energy and environment affairs, which encompasses the Department of Public Utilities, said the state remains committed to its climate goals. “The Baker-Polito Administration is disappointed by Avangrid’s request to the Department of Public Utilities to dismiss the review of the Commonwealth Wind contracts, but remains committed to the deployment of commercial-scale offshore wind and advancing clean, affordable energy on behalf of the Commonwealth’s residents and businesses,” he said in a statement.

Harriman of Avangrid said the company remains committed to New England, noting it is investing roughly $10 billion in regional clean energy projects so far. They include Commonwealth Wind; Vineyard Wind, the nation’s first industrial-scale offshore wind farm, scheduled to come online late next year; and New England Clean Energy Connect, a project to import hydro-electricity from Quebec that is currently stalled in the Maine courts.