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The Department of Public Utilities on Friday approved the contracts between both the Commonwealth Wind and Mayflower Wind offshore wind projects and Bay State utilities, rejecting Commonwealth Wind's request to scrap an agreement that it says would not allow its project to be financed and built.
The DPU determined that the contracts, which the wind developers and utility companies agreed to in May, "are in the public interest," but both developers have said that increases in commodity prices, rising interest rates and supply shortages make their projects much harder to finance than a year ago when they were selected to provide a combined 1,600 megawatts of offshore wind power.
Commonwealth Wind earlier this month filed a motion to dismiss its power purchase agreements (PPAs), saying that the largest offshore wind farm in the state's pipeline "cannot be financed and built" under the terms of those contracts.
"[T]hrough the use of a fair, open and transparent competitive solicitation process, the [utility] Companies have demonstrated that: (1) the pricing terms in the PPAs are reasonable for offshore wind energy generation resources; and (2) there was no higher ranking portfolio of proposals ... available to the Companies. In addition, the Department finds that it was reasonable for the Companies to contract for 1,605 MW of offshore wind energy generation based on the competitiveness of the bid, the level of economic net benefit to ratepayers, and the requirements of Section 83C. Finally, the Department finds that the estimated bill impacts of the PPAs are reasonable in light of the benefits of the contracts," the DPU wrote in its order dated Friday. "For these reasons, the Department finds that the PPAs are in the public interest."
Commonwealth Wind parent company Avangrid has been arguing publicly for about two months that a combination of economic factors including sharp inflation and the Russian war in Ukraine imperiled its ability to finance the project. It had hoped DPU would dismiss the contracts filed in May, then allow the company to re-bid the project on what it considers more realistic terms in 2023.
In a statement Friday, spokesman Craig Gilvarg said Avangrid is disappointed in DPU's order approving the contracts and "continues to review the Department's decision while assessing its legal options."
"AVANGRID has been clear and transparent, in evidence submitted to the Department, that because of the aggregate impact of unprecedented global economic headwinds, including historic inflation, sharp increases in interest rates, and supply chain bottlenecks, the current Power Purchase Agreements do not allow the company to secure the significant financing needed to construct this critical project, and thus the project cannot proceed under these contracts," Gilvarg said.
Gilvarg reiterated the benefits of the Commonwealth Wind project -- "enough to power 750,000 homes and cut greenhouse gas emissions by over 2.35 million tons per year, the equivalent of taking more than 460,000 cars off the road ... driving the creation of 11,000 good-paying jobs, delivering Massachusetts' its first offshore wind manufacturing plant at Brayton Point and making Salem a hub for offshore wind development" -- and said that Avangrid remains "focused on delivering these transformational economic and environmental benefits."
"[T]he best path to move the project forward as expeditiously as possible is through Massachusetts' forthcoming offshore wind solicitation this spring," Gilvarg said. "As we assess our options and pursue the best course for the project, we will continue to work closely with our business, labor, industry, environmental, and community partners, as well as the incoming Healey-Driscoll Administration, to ensure Commonwealth Wind can move forward, maintain the same urgent timeline, and help Massachusetts meet its nation-leading climate target for 2030."
While Mayflower Wind has said that its roughly 400 MW project faces many of the same economic headwinds as Commonwealth Wind, Mayflower has also said it remains committed to its project.
"These unprecedented global economic conditions could not have been reasonably foreseen by Mayflower Wind (or, for that matter, any other party to these proceedings), and impose significant economic hardship on the Mayflower Wind Project. Furthermore, the project and tax equity financing required for the delivery of Mayflower Wind Project, along with the cost of such financing, has changed dramatically and unexpectedly as interest rates have risen sharply, presenting significant challenges to the Mayflower Wind Project's economics," Mayflower Wind wrote in its own DPU filing on Dec. 23. "Mayflower Wind is diligently working to develop and provide to the Department a detailed third-party analysis on the impact of these unforeseen events on the financeability on the Mayflower Wind Project."
