Mayflower Wind is cutting its price for delivering electricity to Massachusetts customers by roughly 10 percent with the help of a new federal tax credit included in the recent COVID-19 stimulus package.
Under the terms of its 20-year contract with the state’s three utilities, Mayflower agreed to an average price of 7.77 cents per kilowatt hour but also agreed to lower that price if the federal investment tax credit for offshore wind, which was being phased out, was retained and/or improved.
The recent stimulus package contains a host of new incentives for renewables, including a 30 percent investment tax credit for offshore wind projects that begin construction by December 31, 2025.
With the bigger tax credit, Mayflower is cutting its price to 7 cents a kilowatt hour, which will save ratepayers roughly $25 million a year. The Mayflower price is well below the 8.7 cents per kilowatt hour Vineyard Wind is charging the state’s utilities.
The announcement comes at a time when offshore wind development is stalled but big changes appear to be on the horizon. Both the Baker administration and the Legislature are calling for a major expansion of offshore wind development to deal with climate change. The upcoming change in administrations in Washington also is likely to alter the regulatory environment in favor of renewables.
Two projects for offshore wind farms off the Massachusetts coast have won contracts with state utilities, but federal permits have not been approved for either project. Mayflower expects its 804 megawatt offshore wind farm to be operational by the mid-2020s.
In its bid for a contract with Massachusetts utilities, Mayflower offered three options – a low price option, an option with a slightly higher price and more onshore development, or an option with an even higher price but onshore manufacturing of components. The Baker administration, much to the chagrin of South Coast officials who preferred more onshore investments, opted for the low-price option, which contained the provision to cut the price more if the investment tax credit was retained.
“We were mindful of what the administration wanted,” said Seth Kaplan, the director of government and regulatory affairs for Mayflower Wind, referring to maximum carbon reduction at the lowest possible price.