BOSTON – Competition among three offshore wind developers begins this week after Massachusetts utilities on Friday jointly issued their first clean energy solicitation under a new state law.
Deepwater Wind, Bay State Wind, and Vineyard Wind are expected to respond to Friday’s request for proposals from Eversource, National Grid and Unitil. The RFP calls for at least 400 megawatts of capacity from offshore wind turbines planned on the outer continental shelf.
Proposals are due December 20, and contracts will go before the Department of Public Utilities in late 2018. It could be another two years before the winning bidder, or bidders, begin construction.
The contracts will be evaluated according to a set of hard and soft criteria. For instance, proposals must help reduce winter electricity price spikes, and bring jobs and other economic benefits to Massachusetts.
The Energy Diversity Act signed by Gov. Charlie Baker in 2016 calls for the state’s utilities to procure 1,600 megawatts of offshore wind power by 2027. That’s enough to power up to a million homes.
The 400-megawatt number in Friday’s RFP is significant because the three wind developers had disagreed on how big the initial procurement should be.
Bay State Wind – a partnership of DONG Energy and Eversource Energy – had lobbied for an 800-megawatt offering, arguing that economies of scale would best benefit ratepayers.
Deepwater Wind and Vineyard Wind had said such a large initial bid – half of the total procurement – would kill competition, introduce too much risk, and undermine the organic growth of a regional supply chain and trained labor force.
Under the RFP, contracts up to 800 megawatts will be considered if they are “superior to other proposals … and likely to produce significantly more net economic benefits to ratepayers.” Proposals as low as 200 megawatts are allowed, but each
bidder is required to submit at least one proposal at 400 megawatts.
The firms will be subject to liquidated damages if they fail to deliver.
Each company had initially wanted to build their own underwater transmission line, according to Commonwealth Magazine. But the final solicitation states that each bid must contain an “expandable, non-discriminatory transmission proposal” to allow for the full, 1.6-gigawatt procurement.
That means an offshore switching station may be constructed. The transmission must connect properly to the ISO New England power grid. The generation may be paired with energy storage systems.
The companies have agreed to use a state-owned, custom-designed $113 million marine terminal in New Bedford to stage their projects.
Friday’s joint solicitation was issued with the Massachusetts Department of Energy Resources, and is the first step in a staggered procurement. Each successive contract must show a price reduction.
Other states may contract for the capacity if it doesn’t hurt Massachusetts ratepayers. A Rhode Island utility and the state of Connecticut have expressed interest in procuring Massachusetts offshore wind.
Since Eversource Energy hopes to build a facility with Bay State Wind, and then contract for its power as a utility, the RFP bars most communication between the separate branches of the publicly-traded company.
Avangrid Renewables in May purchased a 50-percent interest in Vineyard Wind, a company already working with Copenhagen Infrastructure Partners. The Providence-based Deepwater Wind, which developed Block Island Wind Farm, is backed by the D.E. Shaw group, a global investment firm.
The three developers in 2012 won competitive long-term leases from the U.S. Bureau of Ocean Energy Management for an area 15-20 miles off the coast of Martha’s Vineyard. The area has been dubbed the “Saudi Arabia of wind” for its potential.
New York, New Jersey, Maryland and Delaware are also planning offshore wind farms.
Massachusetts has been ordered by the state’s highest court to meet greenhouse gas reduction goals mandated by its Global Warming Solutions Act. Decarbonizing the power sector is seen as an important step in forestalling climate change.