Following Avangrid’s requested contract annulment, Shell and Ocean Winds say they agree that developing offshore wind projects pursuant to contract specifications is no longer economically viable.
Offshore wind development in the waters of Massachusetts is unsound business – or, at least under the contract conditions applicable when developers won auction bids both last year and in 2019, when Commonwealth Wind and Mayflower Wind secured development rights for a rough total of 2.4GW, firstly for a price of USD 77.76 per MWh and most recently for USD 75 per MWh.
So said Commonwealth Wind’s sole owner, Avangrid, in late October. Meanwhile, Shell and Ocean Winds – EDP Renewables and Engie’s offshore wind joint venture – now support this argument in a public hearing reply.
”Mayflower Wind respectfully must nonetheless agree with much of the factual analysis underlying Commonwealth Wind’s conclusion, especially as Mayflower is subject to these same facts, pressures and realities,” the company writes.
More specifically, developers assert that rising prices on both energy and materials, high inflation rates, not to mention associated interest rate hikes are squeezing the business cases behind their investments.
The Massachusetts Department of Public Utilities (MDPU) is the authority that called for hearing answers from relevant stakeholders – a request following on the heels this last month’s reaction to Avangrid’s initial complaint and application to delay contract signing by a month, the time needed to renegotiate the agreement, according to the developer.
This request, however, was rejected by MDPU in early December, only to be met with a new letter from Avangrid sent a mere two weeks later, this time entailing a request to cancel the power purchase agreements (PPAs) signed among Commonwealth Wind and three power companies on behalf of Massachusetts. Instead, the developer flagged its interest in partaking anew in the New England commonwealth’s coming auction in April.
The MDPU has still not made its decision on whether to grant the developer’s request. For their part, Shell and Ocean Winds – and despite voicing support for sector colleagues – clarify that ”[to] this end, Mayflower Wind continues to develop the Mayflower Wind Project consistent with the timelines set forth in its PPAs”.
As if eroded project economy wasn’t enough, Avangrid’s wish to retract its Commonwealth Wind project makes the affair even less viable, the hearing document reads:
”Mayflower Wind notes that Commonwealth Wind’s Motion to Dismiss has materially disrupted the Section 83C procurement process, and therefore altered the underlying assumptions on which Mayflower relied when it made its two successful Section 83C bids.”
Hence, the developer recommends that authorities postponing signing PPAs in order to ”allow time for coordinated, meaningful discussion among all interested parties”.
Remaining stakeholder interest in how the MDPU responds to the hearing answer belongs solely to the three aforementioned utilities which signed PPAs on behalf of the state. These companies outright oppose that Avangrid should be allowed to back out of its obligations.
”Commonwealth Wind negotiated and executed comprehensive purchase power agreements with the companies that are now before the department for approval following a full and fair adjudicatory process,” the three write in a joint letter to the MDPU:
”Approving the motion to dismiss at this very late stage would significantly undermine what to date has been a very successful process established in Massachusetts to encourage the development of offshore wind projects.”
