Lawmakers may drop price cap as wind farm’s low prices cause a stir
When Vineyard Wind won the state’s first round of bidding for offshore energy contracts last year, the developer pleasantly surprised just about everyone with its super-low price.
But that low-cost bid is causing a stir in the industry today.
That’s because of a small but important twist that was easy to ignore amid the celebrating: The 2016 state law that established this offshore wind contest requires each subsequent contract to be cheaper than the one that came before. Vineyard Wind’s price, much lower than what the writers of the law envisioned, looks like a tough one to beat.
Now, with the next round of bidding expected to start this spring, wind-farm industry advocates are racing to erase that phrase from the law.
Representative Pat Haddad, the industry’s biggest cheerleader in the House, is vigorously pushing a bill that would strip out the language. She worries the price cap could discourage competition in the next round, and she doesn’t want to penalize developers who set aside money to ensure more work is done locally.
Haddad looks with some jealousy at Rhode Island. That’s where Deepwater Wind, now owned by Orsted, won a bid for a project in a parallel process to the Massachusetts contest. Deepwater’s price was slightly more expensive than Vineyard Wind’s, she says, but offered Rhode Island $40 million-plus in infrastructure investments.
Haddad doesn’t think Vineyard Wind is doing enough for the South Coast economy — particularly for her hometown of Somerset, where two coal-fired plants went out of business. Vineyard Wind will perform much of its work in Europe, before pieces are shipped here for final assembling. Haddad wants more to happen here, to build a true industry from scratch.
Complicating matters: the expiration of a federal tax credit for offshore wind farms. That credit played a key role in Vineyard Wind’s math. To qualify, developers need to start construction by Jan. 1, or at least spend 5 percent of a project’s cost by that date. While there might be enough time for Round 2 of the wind bids, it will become even harder to beat the Vineyard Wind price once the credit goes away.
Cape Wind’s shadow loomed large back when this law was hammered out. The Nantucket Sound project failed to get started; its prices were widely seen as too high. State officials wanted to avoid another Cape Wind and considered the price cap as a way to prevent runaway industry subsidies. The wind farm developers went along. No one expected the eventual winning bid would be so hard to top.
Vineyard Wind’s power price for its 800-megawatt project ended up being roughly one-third of what Cape Wind’s would have cost. But now that price cap could stunt the industry’s potential here — particularly as other states (looking at you, New York and New Jersey) aggressively court developers.
Even Bob Rio at Associated Industries of Massachusetts, a vocal Cape Wind critic, concedes it’s worth reconsidering the price cap, in light of fierce competition that’s curbing costs.
Haddad has an important ally: Representative Tom Golden, House chair of the Legislature’s energy committee. Speaking at an offshore-wind event in Boston on Wednesday, Golden said he wants to revisit that cap sooner rather than later. But Haddad needs to get House Speaker Bob DeLeo, Senate President Karen Spilka, and Governor Charlie Baker on board.
Bills generally aren’t passed this early in the two-year session, but Golden said it can be done. One option: attaching a provision to the state budget.
The price cap was written, with the best of intentions, for a law to jump-start a new industry. But it may need to go for the state to realize that legislation’s full potential.