NERVOUS ABOUT rising prices for offshore wind power, the states of Massachusetts, Rhode Island, and Connecticut are banding together to solicit larger wind farm projects that hopefully will come with lower price tags.
Massachusetts Gov. Maura Healey announced the three-state partnership at an offshore wind conference in Boston Wednesday morning. Individually, the three states were planning to solicit as much as 6,000 megawatts of offshore wind power in January; now they will solicit bids together.
“Working together, through this new agreement, we can align our procurements to leverage our collective buying power. We can lower project costs and maximize benefits for ratepayers across the region. And we can increase efficiencies and reduce project risk for offshore wind developers,” Healey said in prepared remarks.
Even as she announced the joint effort, Healey may have somewhat undercut the push for lower prices. Lawmakers have been warning that the Healey administration needs to be willing to walk away from offshore wind deals if the prices are too high, but the governor in her speech indicated that Massachusetts will find it difficult to walk away because the state desperately needs the power to meet its climate change goals.
“Our administration is all-in on offshore wind,” Healey told the conference guests. “It is the backbone of our clean energy vision. It is critical to achieving the clean energy transition and meeting our emissions reduction limits. It is also a key piece of our economic strategy – and our drive to be a global leader through innovation that makes our state and our world a better place.”
The upcoming procurement that begins in January comes at a very difficult time for the industry. Offshore wind developers up and down the Atlantic coast and around the world are terminating existing contracts or seeking to adjust upward the pricing on them because the economics have changed due to inflation, higher interest rates, supply chain disruptions, and the war in Ukraine.
In Massachusetts and Connecticut, wind farm developers with approved power purchase agreements have or are terminating those deals. In Rhode Island, the last procurement ended with the state’s leading utility canceling the project because the cost was deemed “too expensive for customers to bear.”
In this environment, Healey and her fellow governors are betting that giving offshore wind developers bigger projects to bid on will allow them to lower their prices. The governors are also hoping the approach will spur more onshore investment.
Pedro Azagra, the CEO of Avangrid, a wind farm developer terminating its previously approved contracts in Massachusetts and Connecticut, welcomed the joint bidding process.
“At this critical time for the industry in the United States, as well as the rapid acceleration of the climate crisis, this bold procurement strategy rises to the level of urgency the moment demands while providing offshore wind developers an opportunity to leverage economies of scale that will unlock more competitive bids and the potential for greater investments in local development and job creation,” he said in a statement.
Attorney General Andrea Campbell recommended a different approach when the Healey administration was soliciting comments on its original procurement plans. Campbell suggested Healey should reduce the size of the upcoming procurement; instead of one big procurement of as much as 3,600 megawatts, she suggested a series of smaller procurements over time, starting with an initial 1,600 megawatts.
“During this time of prolonged and compounded uncertainty, the [procurement], as proposed, could lock ratepayers into massive long-term offshore wind generation contracts at time when the cost of those contracts is at an unprecedented high,” Campbell said in a filing. “Instead, the Commonwealth should take a more measured approach in this solicitation by seeking to procure a smaller amount of offshore wind generation, while allowing matters impacting the economy generally and issues specifically affecting the offshore wind industry (e.g., supply chain issues and availability of wind turbine installation vessels) to settle. Indeed, procuring smaller amounts of offshore wind generation in each solicitation with more frequent solicitations, as described in the following section, hedges against locking in large amounts of offshore wind at the same price, especially during periods of unreasonably high bid pricing.”