The Healey administration has launched the state’s fourth round of bidding for offshore wind contracts, and it’s the biggest one yet.
The state Department of Energy Resources released a request for proposals on Tuesday that invites bids to provide up to 3,600 megawatts of offshore wind power to the state’s three investor-owned electric utilities. That equals more than 25 percent of the state’s annual electricity demand.
Energy officials in Governor Maura Healey’s administration have been urged by industry and political leaders to essentially “go big” with this round of solicitation to build wind farms. That’s in part because states such as New York and New Jersey had surpassed Massachusetts with much larger offshore wind goals, even though Massachusetts was the first state to line up contracts for a major offshore wind farm.
“If we’re going to attract developers, it’s got to be clear that there’s this long sightline of projects,” said Jim Smith, a lobbyist for Avangrid who said he was pleased to see such a large goal this time around.
So was New Bedford Mayor Jon Mitchell, who is counting on his city becoming a pivotal port for the nascent offshore wind industry.
“We in New Bedford have long expressed concern that Massachusetts was not keeping up with its competitor states in incentivizing wind industry investment,” Mitchell said. “Today’s announcement represents an important course correction.”
State officials are obviously hoping for a better result after the third round went awry.
Primary winner Avangrid decided the contracts it won for 1,200 megawatts are no longer financially viable because of cost spikes caused in part by the Ukraine war and higher interest rates. As a result, Avangrid wants to exit the contracts. Also in that round, the team behind Mayflower Wind, now known as SouthCoast Wind, won contracts for 400 megawatts for its Massachusetts wind farm on top of 800 megawatts that it won in round two — although the future of these contracts is clouded by the same cost issues that Avangrid faces.
While Avangrid’s third-round contracts remain the matter of a legal dispute, the Connecticut-based company has previously said it plans to rebid its Commonwealth Wind project in round four, presumably for a higher price. State officials clearly left room in this round of bidding for Avangrid to do so, though they also said a bidder’s track record will be a factor in the scoring.
Senator Michael Barrett, co-chair of the Legislature’s energy committee, said he expects the SouthCoast Wind contracts from rounds two and three will likely be scratched as well, because the same pricing pressures will make it hard for SouthCoast to fulfill its terms. SouthCoast — a venture backed by Shell, Engie, and EDP Renewables — has declined to comment on the status of its contracts. The developers would likely need to pay some financial penalty, possibly tens of millions of dollars, to the utilities to get out of the contracts.
“I think they threaded the needle pretty well,” Barrett said of the Healey administration. “They are left with an unlucky hand due to world events, but to be honest so are Avangrid and Shell. You don’t want to let parties walk away from a contract but you also don’t want to pretend that the world that existed two years ago is the world that exists today. The administration has been pretty smart in putting out an RFP that gives them the flexibility that circumstances require.”
In an apparent effort to avoid similar headaches, the new rules allow bidders to take an “indexed” approach by offering prices that can fluctuate based on inflation and other macroeconomic factors.
The majority of the scoring — 70 percent — will be based on prices that the bidders offer and the resulting costs to ratepayers. The remainder will be based on so-called qualitative factors, such as commitments to economic development and diversity. The state Department of Energy Resources gave bidders until Jan. 31 to respond, and will pick a winner by mid-June next year. This could allow for time to factor in the results of a separate proposal that Massachusetts and several other New England states are pursuing to build a shared underwater transmission system that could serve multiple wind farms.
Massachusetts officials are asking for bids that can range from 400 megawatts to 2,400 megawatts. That means they will likely end up picking more than one winner in round four.
There are five potential bidding teams that hold offshore lease rights in waters south of Martha’s Vineyard and Nantucket where these wind farms would be built. All five have ties to European energy companies. They are: Avangrid; Copenhagen Infrastructure Partners, doing business as Vineyard Offshore; Equinor; SouthCoast Wind; and a partnership of Ørsted and Eversource. (However, Eversource has been trying to sell its stake in the business.)
The administration’s new rules received a generally warm reception among the potential bidders. Of them, SouthCoast came the closest to definitively committing to participate, saying it “expects to submit several competitive bids.” Avangrid, while expected to bid, would only say on Tuesday that it’s reviewing the draft RFP and wants to continue to work “with all stakeholders to deliver clean, reliable offshore wind power” to Massachusetts. Equinor, formerly known as Statoil, said it looks forward to reviewing the RFP.
And a spokesman for the Ørsted/Eversource venture called the new rules “an historic step” for Massachusetts toward meeting the state’s clean-energy goals. Offshore wind power is considered crucial to wean the state off natural gas for electricity generation, and to reach net-zero greenhouse gas emissions by 2050.
Construction has only begun on one of the projects from the three previous rounds: Vineyard Wind. That project, from the first round of bidding, is a joint venture between Avangrid and Copenhagen Infrastructure Partners that would generate about 800 megawatts, or enough power for 400,000-plus homes. The hope is to start generating power with that project by this time next year.
“We are still digging into all the details of the RFP, but we are thrilled to see the Commonwealth continuing to push forward on offshore wind,” said Susannah Hatch, director of clean energy policy at the Environmental League of Massachusetts. “Offshore wind is a critical climate solution for Massachusetts and New England as a whole and will be the linchpin of our region’s decarbonization efforts.”