February 12, 2020
Massachusetts, Opinions

Good news, bad news on offshore wind

Bruce Mohl | CommonWealth Magazine | Feb 11, 2020 | commonwealthmagazine.org

The offshore wind industry took one step forward and one step backward on Tuesday.

The federal Bureau of Ocean Energy Management said its review of the Vineyard Wind offshore wind project would be completed by June 12 and a final decision on the project issued by December 18 – 15 months later than originally projected. That delay, caused by the need to do a cumulative impact analysis of wind farms going up all along the East Coast, is a setback for the industry and a blow to the state’s efforts to reduce greenhouse gas emissions.

The step forward came with the release of power purchase contracts with the state’s second offshore wind farm, Mayflower Wind. As promised, the contracts showed the price of wind-generated electricity is continuing to fall, a promising sign for a state looking for affordable clean energy.

According to documents submitted by state and utility officials to the Department of Public Utilities, the price of electricity generated by Mayflower over the 20-year life of its contracts will be 7.77 cents a kilowatt hour in levelized nominal dollar terms, or 5.85 cents a kilowatt hour in levelized 2019 dollars. The Vineyard Wind price is 6.5 cents per kilowatt hour in 2019 dollars.
Mayflower, a joint venture of Shell New Energies and EDP Renewables, submitted three original bids. One was a low price bid, a second offered a slightly higher price along with infrastructure and innovation investments, and a third offered a higher price along with manufacturing investments. According to Mayflower, all three of its bids featured prices that were lower than Vineyard Wind’s price.

The utilities unanimously chose Mayflower’s lowest-price bid. In their filing with the Department of Public Utilities on Tuesday, the companies said they consulted with the state’s housing and economic development office and concluded the onshore investments in the second and third bids “were not cost effective because the net present value of the investments did not justify the higher contract costs.”

Mayflower estimates its project will generate 5,520 full-time-equivalent jobs in Massachusetts over the 20-year life of the contracts and 930 jobs elsewhere in the region. Officials believe the wind power will reduce carbon dioxide emissions by 6 million metric tons over the 20-year period.

The company also agreed to pay $55 million to the Massachusetts Clean Energy Center, provide $10 million for marine science and fisheries research, $7.5 million for port upgrades, and $5 million to the Cape Light Compact to help reduce electricity bills for customers with annual incomes of less than 80 percent of the state median income.

Mayflower does not expect to start generating power until September 2025. By contrast, Vineyard Wind had promised to begin operation in January 2022, with the remainder of the project coming online in January 2023.

With the environmental review by the Bureau of Ocean Energy Management not expected to be completed until the end of this year, Lars Pederson, the CEO of Vineyard Wind, issued a cautious statement that confirmed the project would not begin on time.

“While we need to analyze what a longer permitting timeline will mean for beginning construction, commercial operation in 2022 is no longer expected,” Pederson said. “We look forward to the clarity that will come with a final environmental impact statement so that Vineyard Wind can deliver this project to Massachusetts and kick off the new US offshore energy industry.”

The expected delay in action on the federal environmental review of Vineyard Wind was first reported February 3 by CommonWealth. Members of the Massachusetts congressional delegation have accused the Trump administration of being biased against renewable energy projects, but a spokeswoman for the Interior Department said the delay was necessary and the allegations by the lawmakers were “unfounded and uninformed.”

Both Vineyard Wind and Mayflower are counting on federal investment tax credits that are being phased out. It’s unclear whether the delays will prevent the firms from obtaining the tax credits.

The contracts the wind farm developers have with the state’s three utilities also require the firms to achieve certain milestones or face penalties. In Vineyard Wind’s case, the company was required to open phase one of its project by January 15, 2022. Unless the contract is reopened and the deadline extended, Vineyard Wind could face “delay damages, and, ultimately, contract termination,” according to DPU filings.

Like the Vineyard Wind power purchase contracts, the Mayflower contracts stipulate that the three utilities who negotiated the agreements are entitled to compensation equal to 2.75 percent of the total value of their contracts. The price tag for that provision was not immediately available, but it added up to $168 million on the Vineyard Wind contract.

URL to article:  https://www.wind-watch.org/news/2020/02/12/good-news-bad-news-on-offshore-wind/