Healey playing catchup with latest offshore wind procurement

Abraham Smith

THE HEALEY ADMINISTRATION made the best of a bad situation on Tuesday, issuing a draft of the state’s fourth offshore wind project solicitation, revising the failed third procurement, pushing ahead with a modest wind farm expansion and offering more flexibility to future bidders.

The cloud hanging over this procurement is its predecessor, which looks like it will turn out to be broke. Avangrid pulled the plug on its 1,200-megawatt Commonwealth wind project and said the terms of the power purchase agreement it signed are no longer sufficient to fund the project amid high interest rates, inflation, the war in Ukraine and supply chain difficulties. The corporate team at Shell New Energies and Ocean Winds appears poised to do the same with its 1,200-megawatt SouthCoast Wind project, though the companies are reluctant to say so publicly for the final time.

With the two third-round projects seemingly stuck on the ropes (though not technically knocked out because no one seems to know how to resolve the situation), the Healey administration put together a call for proposals that received up to 3,600 Megawatts of power target – 2,400 megawatts to cover the expected loss of the Commonwealth and SouthCoast wind projects and 1,200 megawatts of the new generation.

Gov. Maura Healey tried to put the situation on a positive footing by portraying her government’s first procurement as the largest in the region’s history, enough to supply 25 percent of the state’s annual electricity needs. All correct, except that this procurement is largely catching up after losing the third procurement, meaning the offshore wind government tender is behind schedule.

The call for proposals was filed with the Department of Public Utilities on Tuesday. After review, bidding should go in June, and the five offshore wind companies with leases off the Massachusetts coast — Avangrid, Orsted, Equinor, Shell/Ocean Winds and Copenhagen Infrastructure Partners — have until Jan. 31 to submit bids to submit. Winners are currently scheduled to be announced in June 2024, with 15- to 20-year contracts with the state utilities being signed, reviewed and approved sometime in fall 2024.

It is the first procurement process in which the Department of Energy Resources takes the lead and the state’s three major utilities play a minor role. State officials also left open the possibility of working out some sort of offshore wind collaboration with a neighboring New England state, though they weren’t sure how that would work.

The country’s most recent procurement fell apart when the economy took a turn for the worse, leaving wind farm developers with power purchase agreements they felt were no longer sufficient to secure funding. The new tender aims to prevent this from happening again by allowing wind farm companies to submit a bid that does not assume material changes in economic conditions and a second “indexed price bid” that would allow the price to rise by the same amount to move up or down 15 percent when an adjustment is required by a shift in a set of indicators agreed by the various parties.

A major area of ​​interest in this procurement was how Avangrid and Shell/Ocean Winds would be treated if they failed to honor the contracts negotiated and accepted last year. The standard process still plays out behind the scenes at Beacon Hill, but the RFP doesn’t seem to be too harsh on the companies.

Westport Senator Michael Rodrigues, the Senate Chief Budget Officer, had called for Avangrid to be barred from the next procurement if it failed to honor its power purchase agreement. Avangrid asked the Healey administration to allow her to scrap her old project and proceed with this procurement. SouthCoast Wind adopted a similar message.

The RFP largely revealed the offshore wind companies’ side on Tuesday, urging bidders to disclose “past completed projects and claims of financial difficulty,” noting that anyone with a blemish on their file could be penalized in the scoring contract process . The RFP also requires bidders who have previously breached or terminated a power purchase agreement to provide additional collateral for their bids.

But the RFP doesn’t stop Avangrid or Shell/Ocean Winds from bidding on what the companies wanted. How the failure itself will be resolved and what fines will be imposed is determined separately.

Meet the author

editor, Commonwealth

Around Bruce Mohl

Bruce Mohl is the editor of Commonwealth Magazine. Bruce came to Commonwealth of the Boston globe, where he held various positions in business and politics for almost 30 years. He covered the Massachusetts State House and served as the globe‘s State House Bureau Chief in the late 1980s. He also signed up for them globe‘s Spotlight Team, which won a 1992 Loeb award for reporting on conflicts of interest in the state pension system. He served as globeIn 1994, he became political editor and subsequently covered consumer issues for the newspaper. At Commonwealth, Bruce helped launch the magazine’s website and has written on a wide variety of topics with a particular focus on politics, taxation, energy and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Around Bruce Mohl

Bruce Mohl is the editor of Commonwealth Magazine. Bruce came to Commonwealth of the Boston globe, where he held various positions in business and politics for almost 30 years. He covered the Massachusetts State House and served as the globe‘s State House Bureau Chief in the late 1980s. He also signed up for them globe‘s Spotlight Team, which won a 1992 Loeb award for reporting on conflicts of interest in the state pension system. He served as globeIn 1994, he became political editor and subsequently covered consumer issues for the newspaper. At Commonwealth, Bruce helped launch the magazine’s website and has written on a wide variety of topics with a particular focus on politics, taxation, energy and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Under current law, the state can procure up to 5,600 megawatts of offshore wind. The state’s first project, the 800-megawatt Vineyard Wind farm, is scheduled to begin generating electricity later this year. The Healey administration wants to procure a total of 3,600 megawatts in this latest procurement — 2,400 megawatts to replace the CommonWealth and SouthCoast wind projects. That leaves room for another 1,200 “new” megawatts in this round and another 1,200 megawatts in a future round.

Sen. Michael Barrett of Lexington, Senate chair of the Legislature’s Telecoms, Utilities and Energy Committee, said he liked the pace of the Healey administration’s procurement. He said that given inflationary pressures, supply chain difficulties and the expiry of a price cap that requires every bid to be submitted, the electricity that will come from this procurement will likely be quite expensive (he used the term “sky high tariffs”) lower than the previous one.

Barrett said the Healey administration needs to catch up on that procurement, but it’s wise to hold off on the final 1,200 megawatts until the pricing environment improves. He also urged the government to exercise caution in trading higher electricity prices in exchange for onshore economic development. He pointed out that clean electricity is increasingly being used to heat homes and power vehicles, and that higher electricity prices are making the transition from fossil fuels more difficult.

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