If anyone should be trying to build wind farms off the coast of Massachusetts, it’s Ørsted.
The Danish energy company happens to be the world’s biggest developer of offshore wind farms. Its largest US office is here in Boston. And it controls a big stretch of the sea near Martha’s Vineyard, with high winds and relatively shallow waters that make it an ideal place to put up turbine towers.
But Ørsted and its local development partner Eversource steered clear of competing in the state’s third round of bidding for wind energy contracts last year. So did Equinor, another European energy company with a big lease area south of the Vineyard. Their big reason? A price cap baked into state law that requires each bid to be lower than the winning bids in the previous rounds. It’s a rule designed to keep prices under control for consumers. But it threatens Massachusetts’ early lead in a nascent but quickly growing sector, and the on-shore jobs and factories it could bring.
The stakes seem to get higher almost by the month. The race is on for the wind industry thanks to generous federal tax credits, a pro-wind president in the White House, and states along the East Coast putting contracts out to bid to finance these multibillion-dollar projects. Just last week, wind-farm development teams ponied up more than $4 billion, just for the rights to build in federal waters southeast of New York City. The industry’s center of gravity sure seems to be shifting — away from us.
Many lawmakers on Beacon Hill want to make sure Massachusetts doesn’t fall any further behind.
Toward that end, House Speaker Ron Mariano and Representative Jeff Roy, co-chairman of the Legislature’s energy committee, teed up a pro-wind bill for a floor debate on Thursday. The bill would establish new offshore-wind tax incentives, and rework who gets to pick the winners in these contract competitions. It gives economic development such as factories that create long-term jobs a greater weight in future bids, and allows more input from commercial fishermen concerned about the potential navigation hazards posed by these giant towers.
And, perhaps most notably, the bill would remove that controversial price cap.
Mariano and Roy took notice last fall when Ørsted and Equinor skipped the last round of bidding. There has been industry grumbling about the price cap for a while; lawmakers even lifted it temporarily for round two, in 2019. But seeing the companies sit out round three served as a wake-up call. Mariano put Roy to work, to draft new legislation to keep Massachusetts in the mix for more industry growth.
It’s not as if round three was a disaster. Far from it. Avangrid’s Commonwealth Wind project won contracts for 1,200 megawatts, enough to power about 600,000 homes, while Mayflower Wind won 400 megawatts in that round on top of 800 megawatts in round two. Avangrid’s Vineyard Wind joint venture won the first round, essentially opening the door for the growing list of utility-scale offshore wind farms proposed along the East Coast.
The Commonwealth Wind project prompted Italian manufacturer Prysmian Group to plan a cable factory in Somerset that could employ 250 people. And all three wind farms will bring construction and assembly jobs to seaside cities such as New Bedford and Salem. But Mariano and Roy worry Massachusetts might miss out on bigger economic development projects, like those now planned for New York and New Jersey.
Their bill is likely to pass the House. But it faces an uncertain future in the Senate — where Senator Mike Barrett, Roy’s co-chair on the energy committee, is raising concerns about energy costs.
Barrett is a vocal advocate for shifting Massachusetts from fossil fuels to renewables. But he worries that voters will push back if energy prices go too high. He argues that the auctions have worked fine with the rate cap — Mayflower Wind stayed under the cap, even though it didn’t need to in 2019 — and that it should remain in place. He said he fears a “ratepayer rebellion” could break out, not just against higher electric rates, but also broader climate policies, if offshore wind costs start driving up electric bills in a noticeable way.
Barrett also worries that the House bill puts too much emphasis on offshore wind at the expense of other forms of clean energy. And he expects the Senate will also include language to reduce carbon emissions in the transportation and building sectors as well. As a result, it’s hard to know when the Senate will put forward its version. If the Legislature stays true to form on controversial bills, we may not see a compromise until July, at the end of the year’s formal legislative sessions.
House leaders say they’re taking cost concerns into consideration. They dropped their initial plan to increase the renewable charge on electric bills (while keeping a roughly $18 annual charge on natural gas bills, to subsidize other forms of clean energy). Roy also noted that wind-energy prices would still be a major factor in bid evaluations with the cap gone, and overly expensive bids could be rejected.
For his part, Ørsted CEO Mads Nipper — on a recent visit to Boston — said it’s tough to spur the kind of investments necessary to support a proper infrastructure for the industry with a price cap in effect. Nipper and David Hardy, chief executive of Ørsted’s offshore North American arm, said they share the same goal as Mariano and Roy: building a sustainable sector here in Massachusetts, with a diversified supply chain and ample local jobs. Proper competition, they said, should keep a lid on costs.
They can see the State House’s golden dome, from the windows of their Back Bay office. And they’ll be closely monitoring what happens under that dome, to determine whether Ørsted’s ambitious plans for its East Coast expansion will include Massachusetts in the future.