STATE HOUSE, BOSTON, MAY 2, 2023.....The Healey administration wants to add up to 3,600 more megawatts of capacity to the state's offshore wind pipeline in one swoop, a procurement that Gov. Maura Healey herself dubbed "the biggest in our region's history."
But how much more the proposal moves the needle on the clean energy transition depends on the outlook of two other wind projects selected in prior rounds.
The state Department of Energy Resources and electricity companies on Tuesday jointly unveiled a 165-page draft request for proposals that they want to guide the next round of soliciting offshore wind power, which would be the fourth under a 2016 law and the first with Healey at the helm.
Their proposal calls for adding at least 400 MW and as much as 3,600 MW more to the constellation of in-development or under-contract offshore wind projects. That maximum amount would be more than twice as large as the 1,600 megawatts selected in the last round two years ago and, according to the Healey administration, on its own would meet about a quarter of the state's annual electricity demand.
The RFP would give new weight to projects that aim to support minority- and women-owned businesses, low-income workers and workers of color, and it would subject bidders to more review of their track record in the field.
Developers would get the opportunity to submit their bids with an "alternative indexed pricing proposal," which the administration said could take into account possible changes in large-scale economic factors.
"This draft RFP is a signal to the rest of the world that Massachusetts is all-in on offshore wind and ready to be the industry's hub," Healey said in a statement. "Our proposal is also a commitment to Massachusetts ratepayers to chase after all clean energy for our homes and businesses."
The Department of Public Utilities will solicit public feedback and review the draft RFP. An administration official who would speak only on background said bidding will likely open this summer once the DPU finishes a process that in past rounds took between six and 10 weeks.
Round Three Uncertainty Clouds Round Four
Through the first three procurement rounds, Massachusetts approved projects totaling 3,200 MW of capacity, more than half of the 5,600 MW the state needs to hit by 2027 under its clean energy law.
Not all of those installations are guaranteed, however. Avangrid, the developer of the 1,200-megawatt Commonwealth Wind project chosen in 2021, is seeking to terminate its contracts for the installation and re-bid in the next round at a higher price. Company officials believe the project "cannot be financed and built" under the originally agreed-upon terms, saying that increases in commodity prices, rising interest rates and supply shortages put it out of reach.
The other bid picked in 2021, now known as SouthCoast Wind, has also said shifting economic conditions created new difficulties, but so far its leaders have not deemed the project no longer viable nor sought to cancel contracts. SouthCoast Wind won a 2021 bid with a 400-megawatt project as well as a 2019 bid with an 800-megawatt project.
With as many as 2,400 megawatts of previously authorized wind power facing uncertainty, the next round of procurement might not be entirely additive.
Depending on how Commonwealth Wind's ongoing appeal plays out and whether SouthCoast Wind follows suit, as much as two-thirds of the energy sought in the next procurement might effectively backfill capacity from the last round.
"Nobody knows, nobody can know -- the administration included -- how much double-counting is involved in the 3,600 megawatt maximum target. It could be as low as 1,200 to be rebid, but it could be as high as 2,400," said Sen. Mike Barrett, who co-chairs the Legislature's Telecommunications, Utilities and Energy Committee. "I suspect we're going to see the figures come out on the high side, which means that we'd only be buying 1,200 new megawatts in this round."
The Healey administration's RFP assumes 2,000 MW of wind power is locked into contract and 1,200 MW, reflecting Commonwealth Wind's share, is in limbo pending resolution of an appeal.
An administration official said the draft RFP has a hard cap of 3,600 MW that could be newly authorized. That means if both Commonwealth Wind and SouthCoast Wind scrap their contracts and move to re-bid -- which is by no means a certainty -- officials would either need to get permission from DPU to raise the maximum procurement in the fourth round or plan for a fifth round to get Massachusetts up to the required 5,600 MW of offshore wind power.
Barrett said he believes offshore wind developers have highlighted "legitimate" concerns, describing similar trends in European and Asian markets.
"No one can pretend that Putin's invasion of Ukraine, pandemic-produced supply chain disruptions and the resulting high inflation were angles that the parties anticipated when they negotiated these original contracts," he said. "You don't want to be taken advantage of, but you do want to acknowledge that we live in a different world than the one that existed even 24 months ago."
New language in the latest RFP would take into account a bidder's "experience and track record" when weighing options, including "consideration of any project that has been delayed, failed, substantively amended, defaulted under, withdrawn, agreed to termination, or otherwise did not proceed."
The administration official said they do not believe that provision would limit Avangrid or any other developer's eligibility to bid, but instead would ensure the winning proposals are cost-effective projects that actually get built.
Barrett said he believes the measure has real teeth, projecting it "will be given significant weight" in the evaluation process.
"If weight should be given to the experience and track record of the bidder, the utilities are going to be only too happy to oblige," he said. "That doesn't mean Avangrid and SouthCoast, if it goes this route, aren't going to win. They may very well win. They put in a lot of effort already. Their development plans have been proceeding even as the contract difficulties have arisen. They have a lot of money and time already invested in perfecting a potential proposal. They're in decent shape."
Rep. Jeff Roy, Barrett's counterpart on the Telecommunications, Energy and Utilities Committee, added that the emphasis on a bidder's track record "is certainly something worth considering."
"Avangrid may be able to make a very compelling case as to why they are forced to terminate, and they may be able to make a compelling case of how experienced they are and how well-positioned they are," Roy said. "It's a good thing to look at. It gives DOER and the independent evaluator something in addition to look at, but it also gives potential bidders a chance to make their case for why they're in the position they're in. It also sends a signal to other companies who may not have participated in the past that they're going to get a fair shot at winning a bid in round four."
"Massachusetts Means Business"
The administration's proposed RFP would welcome proposals for projects ranging between 200 MW and 2,400 MW of offshore wind power, and it empowers the selection team to pick any project or projects with neither a specific number required nor a preferred size.
Developers would get more time to craft their proposals than in previous rounds, which the administration official said would allow them to incorporate anticipated guidance on potential tax credits and federal grants for transmission upgrades. DOER and utilities proposed requiring submissions by Jan. 31, 2024 and selecting winning projects by June 12, 2024.
Barrett said the longer timeline could also insulate the process from the inflationary pressures that have contributed to the Commonwealth Wind upheaval.
"They're waiting to see whether 2024 brings a subsiding to high costs and supply chain disruptions," Barrett said of the Healey administration. "They're elongating the period during which bids can be prepared. The clear signal to bidders is that they expect the bids to reflect ideally reduced prices from today's top range."
State officials are working with a relatively small pool of bidders in the developing industry, which could limit competitiveness or open the door for gamesmanship as companies vye to get the best terms possible. Regulators received three bids in the first round of offshore wind procurement in 2017, another three bids in the 2019 second round and then just two bids in the third round in 2021.
The 800 MW Vineyard Wind I is expected to begin generating power by the end of the year as the first commercial-scale offshore wind farm in the contiguous United States, but some policymakers have been warning that Massachusetts is losing its edge in the nascent offshore wind industry, particularly as other states like New York and New Jersey roll out larger procurement efforts.
"Offshore wind seemed to be losing some momentum, and we needed something to really boost the industry and send a signal to the world that Massachusetts means business and is open for business in the offshore wind space," Roy said. "I think this type of a package sends precisely that signal."
New Bedford Mayor Jon Mitchell, whose community stands to play a major role in offshore wind, described concern that Massachusetts "was not keeping up with its competitor states in incentivizing wind industry investment."
"Today's announcement represents an important course correction in state policy and puts New Bedford in a stronger position to establish itself as a national leader of this emerging industry," Mitchell said in a statement.
SouthCoast Wind CEO Francis Slingsby said in a statement the company is "excited about the administration's commitment to a large procurement."
"We are examining the document closely, determining what options are available, and expect to submit several competitive bids. SouthCoast Wind is committed to delivering its full 2400MW of clean power to Massachusetts' and New England's electric customers," Slingsby said, referring to the full capacity of the lease area and not to the 1,200 MW covered by the company's procurements.
Said Avangrid spokesperson Craig Gilvarg, "AVANGRID commends the Healey-Driscoll Administration for its commitment to building a robust offshore wind industry in the Commonwealth, and is reviewing the Draft RFP filed with the Department of Public Utilities today. AVANGRID continues to work with all stakeholders to deliver clean, reliable offshore wind power, economic development, and jobs to Massachusetts."
Efforts to build out an offshore wind industry have run into opposition from commercial fishermen, who have argued the turbines will disrupt stretches of ocean long used to harvest seafood, and from some other groups.
On the same day the Healey administration rolled out its RFP, the Save the Whales Coalition wrote to federal regulators threatening litigation against a Virginia company's push to begin construction of turbines, substations and other equipment.
"With dozens of dead whales and dolphins washing up on the shores of New York, New Jersey, Maryland, and Virginia, now is a particularly unsuitable time for [the National Oceanic and Atmospheric Administration] to authorize the harassment or injury of right whales and other endangered species," said CFACT President Craig Rucker.
The Massachusetts Fiscal Alliance worried Tuesday that the new procurement will enable companies to pass inflationary costs on to ratepayers, adding to the region's historically high electricity prices.
"Ratepayers should be worried," said alliance spokesman Paul Craney. "If offshore wind companies are allowed to pass the inflation costs to the ratepayers, they absolutely will. The Healey administration is devaluing ratepayers in order to help get this latest project done."
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05/02/2023