Wind energy developer seeks to scrap power agreements
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Massachusetts is relying on offshore wind power generation to be a major contributor to its decarbonization goals over the next three decades.
Declaring that the largest offshore wind farm in the state's pipeline cannot be financed and built under existing contracts, Commonwealth Wind on Friday asked Massachusetts regulators to scrap the agreements the company reached with utilities and reopen a new round of bidding.
Commonwealth Wind filed a motion with the Department of Public Utilities seeking dismissal of the power purchase agreements it reached with utility companies in May, which would render them moot, and a reopening of the process of procuring the project's 1,200 megawatts of clean wind energy.
If the DPU agrees, Commonwealth Wind said it would file a new, updated bid with more viable financial terms. That's a risky step: the executive branch could pick a different developer to replace offshore wind capacity and cut Commonwealth Wind out of the picture entirely.
The dramatic escalation comes after nearly two months of public back-and-forth about the viability of the planned offshore wind installation, with developer Avangrid arguing that a combination of economic factors including sharp inflation and the Russian war in Ukraine imperiled its ability to finance the project.
"We have to get to a point where the contract allows the project to go to financing, and under the current structure, it just isn't there," Avangrid Senior Vice President for State Government Affairs Kim Harriman told the News Service. "We have to be able to finance it, and frankly, we can't do that with the current contract. So we think that going out to bid in 2023, that the state issuing that bid, will allow us to put in a contract proposal that reflects a project that we can finance."
The DPU, which will remain under the purview of the Baker administration for about three more weeks until Gov.-elect Maura Healey takes office, will need to decide whether to approve Commonwealth Wind's motion to dismiss the contracts or reject it.
"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, while reducing greenhouse gas emissions and meeting the state's emissions goals, including achieving Net Zero in 2050," said Executive Office of Energy and Environmental Affairs spokesperson Troy Wall in a statement.
National Grid, Eversource and Unitil agreed to the contracts with Commonwealth Wind.
Chris McKinnon, an Eversource spokesperson, said the utility "remain(s) ready to move forward with the contracts as filed."
"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," McKinnon said in a statement. "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 are disappointed that Commonwealth Wind has requested a dismissal of mutually-agreed-upon contracts," a spokesperson for National Grid, the third utility, said in a statement. "The contracts contain a fixed price for electricity, and Commonwealth Wind seeks to renegotiate at a time when electricity supply prices are already high for customers. We will review the motion and evaluate our options."
Gov. Charlie Baker said in November that his team had "no interest in reopening anything" and viewed debate about the contracts as "a discussion to take place between them and the utilities."
"Let's remember, these are long-term contracts, like really long-term contracts," Baker said. "And while there may be some choppy water at the moment with respect to interest rates and supply chains and all the rest, we're talking about a deal that basically lasts for 15 years, some of them more than that, depending upon what actually happens over that period of time. I think it's premature for people to think that where we sit now is necessarily representative of where things are going to be over time."
Commonwealth Wind said in late October that its proposed installation "is no longer viable" and could not advance under the terms of the contracts with utilities reached in May. The company at the time asked DPU to pause its review of the power purchase agreements so it could work on amendments with utilities, who had no interest in renegotiation.
After state regulators set a hard deadline for Commonwealth Wind to commit to its project or back away from the table, the company said it "believes there is a path forward" but would need to find a solution to "unprecedented economic challenges."
Harriman said in the month since then, the utility companies with whom Commonwealth Wind contracted are "refusing to come to the table."
"We are coming up to the end of the year, and time is slipping through our fingers, frankly," Harriman said. "In order to avoid protracted litigation -- I mean, you've got counterparties not even willing to talk and have said, verbatim, we're not going to negotiate no matter what they say -- it seems to us that the best way forward to deliver cost-effective clean energy for residents of Massachusetts is to move for this dismissal."
Harriman said she is optimistic the project's timeline, which eyes a start to operations by 2028, would not be upended if Commonwealth Wind secures new terms in a bid.
State law requires a new round of solicitation for offshore wind development within 24 months after the last round, which Commonwealth Wind attorneys said means the next cycle will need to open by May 7, 2023.
"Let me be really clear that we're not abandoning this project," Harriman said. "We are continuing to invest in the project and permitting and development as we prepare for this next solicitation. Really, this isn't a pause or a stop. It's just we've got to find a path forward."
Avangrid is also involved in a pair of other renewable energy projects Massachusetts elected officials have eyed as key steps to green the electric grid. The company owns half of the Vineyard Wind I project, which is slated to begin delivering power as the nation's first utility-scale offshore wind farm in 2023, and is also working on a contentious New England Clean Energy Connect project in Maine that aims to connect to hydroelectric power generated in Quebec.
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