2nd Wind Developer Moves to Terminate Contracts; New Bid Process Unveiled

Another offshore wind developer took a major step Tuesday toward scrapping its initial plans for an installation in waters off the coast of Martha's Vineyard. SouthCoast Wind, whose pair of successful bids represented a combined 1,200 megawatts of anticipated offshore wind power, agreed to pay utility companies $60 million to terminate contracts the parties previously struck for the clean energy. The penalty would be divided into $32.4 million for Eversource, $27.3 million for National Grid and $591,000 for Unitil, according to contract amendments filed with the Department of Public Utilities. The utility companies would then credit the payments to their ratepayers through contract adjustments. The move makes official the developer's attempt to cancel existing contracts after months of warning that the project was no longer financially viable under the negotiated prices as a result of economic trends. Like Commonwealth Wind, another developer whose termination agreement won approval from state regulators last week, SouthCoast Wind officials have signaled they plan to resubmit a bid for the project in the next state solicitation, hoping to secure a higher price for their project and its energy. The Department of Public Utilities will still need to give the green light to SouthCoast Wind's proposed termination agreement. If regulators sign off, the amount of already-approved offshore wind energy in the state's pipeline would drop to just 800 megawatts after hitting a high of 3,200 megawatts. The Healey administration is seeking between 400 megawatts and 3,600 megawatts in the next round of bidding set to open early next year. Massachusetts must secure 5,600 megawatts by 2027 to comply with a state clean energy law. CommonWealth Magazine first reported about the SouthCoast Wind termination agreement. 

A Wednesday Restart

On Wednesday, the Healey administration and state utility companies released their formal request for proposals for more offshore wind power Wednesday, kicking off a bidding process that will unfold over the course of 2024.

The 157-page RFP seeks up to 3,600 more megawatts of offshore wind generation capacity, which would be more than twice as large as the 1,600 MW selected in the last offshore wind solicitation two years ago, and it also allows bidders to submit alternative indexed pricing as a way of providing flexibility for projects to address the changing dynamics of the economy that have essentially wiped away the projects chosen in the last round. That likely means a less favorable economic picture for ratepayers.

A draft version was unveiled in May and feedback was incorporated into the development of the formal RFP issued Wednesday, officials said.

"We are excited to embark on the fourth round of offshore wind solicitation. This adaptive RFP was drafted to create a transparent, competitive process that will benefit Massachusetts' residents and businesses with cleaner air, lower energy bills, jobs in a growing industry and economic development opportunities," Energy and Environmental Affairs Secretary Rebecca Tepper said. "Offshore wind is the cornerstone of Massachusetts' clean energy transition and will help us build a healthier, more resilient Massachusetts."

Bids are due Jan. 31, 2024 and an evaluation team led for the first time by the Department of Energy Resources will have until June 12, 2024 to select projects. Bidders are allowed to propose projects of between 200 MW and 2,400 MW. Once projects are chosen, they will have until Aug. 14, 2024 to execute long-term contracts and a newly-required memorandum of understanding with DOER and the Mass. Clean Energy Center "to memorialize the commitments made in the bid package regarding economic development, environmental justice, and [diversity, equity and inclusion] Plans." The MOU also requires that projects include benefits for low-income ratepayers.

Contracts must be submitted for Department of Public Utilities approval by Sept. 18, 2024.

Through the state's first three procurement rounds, Massachusetts utilities chose and state officials approved projects totaling 3,200 MW of capacity. But developers behind both wind projects selected in Massachusetts's last round of offshore wind procurement said that shifting economic conditions made their projects no longer financially viable at the prices they previously negotiated and have either secured or are seeking approval to terminate the contracts they signed. Developers Commonwealth Wind and SouthCoast Wind have both suggested they may rebid their projects with higher prices in the next procurement round.

The Healey administration said Wednesday that the new RFP "does not limit eligibility" based on a bidder's history of terminated contracts. "However, the experience and track record of the bidder will be included in the evaluation to help ensure projects are viable and have a high likelihood of achieving commercial operation to help the Commonwealth meet its clean energy goals and reach emissions limits," the administration said.