THE MASSACHUSETTS Department of Public Utilities on Monday gave its blessing to an agreement terminating offshore wind contracts between the state’s three utilities and SouthCoast Wind, even as utilities in Connecticut moved to terminate an offshore wind contract there.
The agreement approved by the DPU requires SouthCoast to pay a total of $60 million in termination fees, which will be rebated to customers, while allowing the joint venture of Shell Energy Ventures and Ocean Wind North America to walk away from signed contracts the company said were no longer workable given rising interest rates, inflation, supply chain disruption, and the war in Ukraine.
The termination arrangement is similar to one signed earlier by Avangrid, which paid $48 million to terminate its contract for the Commonwealth Wind offshore wind farm.
The termination of the Commonwealth Wind and SouthCoast Wind contracts represents a major setback for the state’s offshore wind efforts. Combined, the two projects were expected to generate 2,400 megawatts of power. The Healey administration is hoping to rebound with a major procurement scheduled for up to 3,600 megawatts next year, but the price of the electricity is likely to be much higher given the high degree of uncertainty in the industry.
The DPU approved the SouthCoast and Commonwealth contracts in 2022 despite warnings from the offshore wind developers that the economic underpinnings of the agreements had eroded amid changing economic conditions.
The three current commissioners of the DPU gave no rationale for the agency’s decision on Monday. Maria Hardiman, a spokesperson for the DPU, issued a statement saying the approval of the termination amendment was necessary to get the industry back on course.
“The DPU’s decisions balance the Commonwealth’s long-term climate goals, as well as the need for reliable and affordable energy for our electric distribution customers, while delivering immediate rate relief to customers,” Hardiman said. “The approval of the latest amendment will help set a new course for offshore wind development by solidifying an affordable and less volatile pathway to clean energy.”
Massachusetts is not alone in grappling with offshore wind setbacks. Most other Atlantic coastal states are facing similar problems as offshore wind developers seek revisions to previously approved contract terms. The latest example came Monday evening when Avangrid said it is moving to terminate its contract for its proposed Park City wind farm in Connecticut. Terms of the termination agreement with that state’s utilities were not immediately available.
“One year ago, Avangrid was the first offshore wind developer in the United States to make public the unprecedented economic headwinds facing the industry,” Avangrid said in a statement. “After exploring all potential solutions to the economic challenges facing the project, and engaging in good-faith and productive discussions with Connecticut state officials regarding these challenges, it is clear the best path forward for Park City Wind is in the termination of the power purchase agreements and rebid the project.”
Vineyard Wind, under construction off the coast of Martha’s Vineyard, is one of the few exceptions. Approved before the war in Ukraine, the offshore wind farm was able to secure contracts with suppliers before prices exploded. Despite challenging supply chain problems, Vineyard Wind is expected to begin producing some electricity soon and finish the 800-megawatt project next year.