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For the wind farm industry in Mass., it’s back to square two

Though work on Vineyard Wind is well underway, inflation and supply chain challenges have stymied the next two multibillion-dollar projects

SouthCoast Wind blows off Massachusetts
Reporter Jon Chesto breaks down the impact of a Massachusetts wind farm that will no longer sell power to the state.

Blades as long as football fields are arriving on New Bedford’s waterfront. Foundations for the first three skyscraper-sized towers were just installed at the bottom of the sea south of Martha’s Vineyard. And a transmission line stretching about 30 miles from there to Barnstable’s shoreline is nearing completion.

This flurry of recent work on Vineyard Wind — billed as the country’s first major offshore wind farm, promising enough electricity for 400,000-plus homes — should be reason to celebrate for the emerging industry and its champions in the environmental community.

But optimism has been tempered lately by the hard reality of economics: Inflation and supply chain challenges have left the next two multibillion-dollar wind farms, which together would generate enough electricity to power another million homes, up in the air.

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Avangrid announced plans last fall to terminate contracts with Massachusetts utilities for its Commonwealth Wind project, citing unexpected cost increases tied largely to higher interest rates and the war in Ukraine. Earlier this month, developers of the SouthCoast Wind project did the same.

And with that, Massachusetts, deemed the “Saudi Arabia of wind” because of the heavy gales and relatively shallow waters off its coast, is back to square two in its ambitious efforts to spark this new industry to life, a promise that will now take much longer to realize.

The ship UHL Felicity approached the dock in New Bedford with the first shipment of turbine parts for the state's first offshore wind farm, being developed by Vineyard Wind in the waters south of Martha's Vineyard.Matthew J. Lee/Globe Staff

Rising expenses are prompting similar renegotiations and delays of offshore wind projects in other states. Danish energy company Ørsted this month told New York regulators that it wants to adjust its utility contracts there to reflect inflation pressures. The issue is also affecting wind-farm developments in New Jersey and Connecticut.

The cost of these delays goes beyond the financial toll, because of how critical offshore wind energy is to meeting ambitious climate goals across the Northeast.

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By 2030, for example, Massachusetts law requires the state to cut carbon emissions in half from 1990 levels, and by 85 percent by 2050. Every delay in delivering offshore wind makes that 2030 goal tougher to achieve. Not to mention the campaign-trail pledge by newly elected Governor Maura Healey that all the state’s electricity will come from clean sources by 2030 versus roughly half today, a particularly important goal as policymakers try to shift heating and transportation to electricity. Meanwhile, the Biden administration is counting on these offshore wind farms to generate 30 gigawatts in the United States by 2030. Today, just one gigawatt is accounted for, primarily from Vineyard Wind and Ørsted’s smaller South Fork project under construction east of Block Island.

Jobs and economic development are also at stake. While other states more aggressively courted manufacturing work than Massachusetts did (many components for Vineyard Wind are being made in Europe), the state still expects the burgeoning industry to produce hundreds if not thousands of jobs in places like New Bedford and Salem. Redoing the contracts will certainly slow that down.

“Clearly, the near-term clean energy goals are going to be missed,” said Dan Dolan, president of the New England Power Generators Association. “And then the question becomes: How do we pivot ourselves in the best position to try to facilitate the larger-scale electrification movement that’s going to accelerate in the next few years?”

Workers walked by a section of a steel tower for a GE Haliade-X wind turbine at the New Bedford Marine Terminal. While other states have more aggressively courted manufacturing work than Massachusetts has, the state still expects the burgeoning offshore wind industry to produce hundreds if not thousands of jobs to emerge in port cities like New Bedford and Salem. David L. Ryan/Globe Staff

The Healey administration is trying to do exactly that: In May, state officials announced the parameters for a fourth round of wind contract bids, the largest yet in Massachusetts in terms of generating capacity. They could spur at least one new project and give SouthCoast and Commonwealth another opportunity to bid, but potentially at a higher price. Lawmakers also lifted a long-debated price cap on what ratepayers can be charged for wind energy, to encourage more competition. And the administration is allowing inflation adjustments to be baked into the bids, to avoid a repeat of what happened with the previous two projects. Lesson learned.

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“Pioneering a new industry doesn’t come without challenges, but we’re laying the groundwork for long-term success,” said Rebecca Tepper, Healey’s energy secretary. “As we’ve seen with the Vineyard Wind project currently under construction, this can be done, and we’re working to create fertile ground to get more projects up and running.”

Bids are due in January. The goal is to land enough contracts to generate 3,600 megawatts — or about one-fourth of the state’s current electricity needs.

It’s a go-big or go-home moment for the industry.

Senator Mike Barrett, co-chairman of the Legislature’s energy committee, said it still might not be enough to keep Massachusetts on track for its 2030 benchmark. But at this point he’s not overly concerned.

“The real world is intruding here,” Barrett said. “If the timetable slips by a year or two, ... no harm, no foul. What I would be quite concerned about is if the pool of potential bidders were to get any smaller.”

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Governor Maura Healey has pledged that all the state’s electricity will come from clean sources by 2030 versus roughly half today, a particularly important goal as policymakers try to shift heating and transportation to electricity. Craig F. Walker/Globe Staff

Barrett’s House counterpart, Representative Jeff Roy, also has his doubts about hitting the 2030 goal. But he said other energy sources, such as Avangrid’s long-awaited hydropower transmission line through Maine from Quebec and New England’s two remaining nuclear power plants, can help fill some of the gap.

At Avangrid, a partner in the Vineyard Wind joint venture, hopes remain high that Commonwealth Wind can be built before 2030 if it succeeds in winning a bid in this next round.

Sy Oytan, the company’s chief operating officer for offshore wind, said the scope of the new contracts is large enough to keep Massachusetts on track for its 2030 goal. When Avangrid’s Commonwealth Wind won its bid in December 2021, the federal funds rate was essentially zero, and the company expected it could build the wind farm for about $4 billion. When interest rates rose last year, so did the price tag, to well over $5 billion, in part because of borrowing costs.

Other key players in the industry remain optimistic, describing the pricing issue as a temporary complication.

Italian manufacturer Prysmian Group confirmed to the Globe that it will stick with its plan to build a cable factory in Somerset, a $250 million investment that will create as many as 200 permanent jobs. Likewise, Mayor Dominick Pangallo of Salem said Crowley Maritime isn’t backing away from its vision for a turbine assembly hub on his city’s waterfront. And Mayor Jon Mitchell of New Bedford said private investments in his city’s port — long seen as a potential offshore wind hub — have not slowed despite the demise of the wind-energy contracts.

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“The next Massachusetts procurement will be the largest ever, and it will likely generate considerable demand for our facilities and maritime businesses for several years,” Mitchell said. “Given the dearth of suitable port facilities on the East Coast, we are confident that we will have opportunities to fill the gaps between Massachusetts-based projects with work from other states.”

Still, to skeptics, the failure of these contracts is an “I told you so” moment.

The ship UHL Felicity, carrying massive parts for offshore wind turbines, arrived to the dock in New Bedford last month. Once assembled by developer Vineyard Wind, the turbines at sea will stand more than 850 feet high. Rodrique Ngowi/Associated Press

Scott Lang, Mitchell’s predecessor as New Bedford mayor, worries about the conflicts posed to commercial fishing and the thousands of jobs it supports in his city, the nation’s most lucrative fishing port. He describes offshore wind as “a carnival that’s going to come, set up, and leave shortly thereafter,” noting that many of the jobs New Bedford will see would be temporary, during construction.

His sentiment is shared by many in the fishing industry who argue that wind-turbine survey work is already disrupting marine life, including Bonnie Brady, executive director of the Long Island Commercial Fishing Association in Montauk, N.Y.

“They’re wringing their hands and crying in public,” Brady said of wind developers, “so they can break their contracts and make more money on the backs of ratepayers.”

Indeed, fishing industry concerns are one reason that offshore wind has been slow to develop in the United States. In reaction to commercial fishing complaints, the Trump administration had held up federal approval of Vineyard Wind until a broader study of the impact from the various offshore wind farms could be done. After President Biden took office in early 2021, the project was quickly ushered across the finish line.

Now, the industry faces a new obstacle: soaring inflation.

Amanda Lefton, who led the federal agency that oversees offshore wind for Biden and is now senior policy director at law firm Foley Hoag, said most major infrastructure projects are facing inflation-related headaches, though the situation is exacerbated for offshore wind because the nascent industry doesn’t yet have much of a domestic supply chain. Lefton remains optimistic, though, particularly with the billions of federal funds being pumped into the sector from the recently approved Inflation Reduction Act.

“It’s why it’s so important we get these early projects built,” Lefton said.

And Massachusetts is still poised to benefit significantly from the industry’s arrival. That’s just taking much longer to materialize than was first hoped.

“We definitely had the first-mover advantage,” said Jim Smith, a Boston-based lobbyist who represents Avangrid. “I don’t think we’ve lost it. ... It’s a momentary setback.”

A dynamic positioning system barge at the New Bedford Marine Terminal. David L. Ryan/Globe Staff



Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.