Welcome to the Offshore Gold Rush. Bring your panning kits, ideas for power lines, and any federal tax credits you can find before they disappear. Lobbying muscle would help, too.
Governor Charlie Baker’s administration made it official on Friday: The state will continue to solicit bids for offshore wind power for years to come. The goal is to dole out contracts to wind-farm developers that would total 3,200 megawatts of power over time, potentially doubling the capacity of those that are already in motion. That means electricity for up to 2 million homes – roughly one-third of the state’s total power demand – could come from the strong winds that blow across the ocean.
As in any contest, everything hinges on the rules of the game. And some of the rules for this game could be changing.
Vineyard Wind won the first round of contracts last year and is now gathering permits for an 800-megawatt project. If all goes according to plan, it would be the first large-scale offshore wind farm in this country. (Deepwater Wind built a small, five-turbine system off the coast of Block Island in 2016.)
We’re in the middle of Round 2. Bids are due in August. Another 800 megawatts could get built. State officials hope a winner can be picked in time for that lucky developer to take advantage of a 12 percent federal tax credit that expires at the end of 2019. Vineyard Wind’s winning bid in Round 1 partially relies on that credit.
With the release of a long-awaited wind-energy report on Friday, the administration has set the course for Round 3 and Round 4. The goal is to put 800 more megawatts out to bid in 2022, and then another 800 in 2024.
Here’s what the Offshore Gold Rush looks like so far:
The big players have bought up vast leasing rights for waters south of Martha’s Vineyard and Nantucket. Vineyard Wind, owned by Copenhagen Infrastructure Partners and Avangrid, will compete again. The Danish energy giant Orsted beefed up its ranks by acquiring rival Deepwater Wind and teaming up with Eversource Energy. Then there are the new kids on the block: Equinor (formerly known as Statoil) and Mayflower Wind (a Shell-EDP Renewables joint venture).
Equinor, at least, sounds optimistic. An executive with the Norwegian company says the Massachusetts report helps create a long-term, predictable market that should drive down costs and foster a robust supply chain.
Well, not everything is predictable just yet. These gold seekers should pay close attention to what happens on Beacon Hill, as the rules get refined. For example, the Baker administration wants to hold a separate contest next year for the rights to build a power line out to the offshore lease areas, a line that could be shared by rival developers. This is a significant change from the current process, which requires the wind-farm developers to build out their own lines as part of their bids.
Then there’s the thorny issue of a price cap.
The state’s 2016 clean-energy law that started it all set a ceiling: Developers in later rounds would need to beat the winning price in Round 1. That was a safeguard inspired, in part, by the ill-fated Cape Wind project, which died before these contests started. But that winning bid in the first round from Vineyard Wind came in at roughly a third of what Cape Wind would have cost, a low price that surprised just about everyone. There are now widespread concerns that it could be tough to beat, especially after that tax credit goes away.
Leaders on the South Coast also worry the cap discourages developers from making economic investments in their region.
Removing that cap requires a legislative change. State lawmakers are already talking about it. One House proposal currently before a budget conference committee would make some adjustments.
The Baker administration, in its report, says it supports keeping the existing cap. Its analysis: More offshore wind makes sense for ratepayers as long as prices remain similar to or below Vineyard Wind’s winning bid.
That said, the administration is open to lifting the cap if one significant stipulation is met: Other clean-energy sources, such as Canadian hydropower or solar, can enter the competition.
Last year, the Legislature passed a law that gave the administration the authority to proceed with rounds 3 and 4. But if the price cap brouhaha is any indication, the debate about the industry’s future won’t be resolved at the State House anytime soon.
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