Energy panel readying offshore wind proposal; price cap may fall in pursuit of broader benefits | Colin A. Young | State House News Service | Jan. 12, 2022 | www.southcoasttoday.com
The governor and key lawmakers agree that offshore wind is going to become increasingly important to the state’s energy and climate policy over the coming decades and on Tuesday began the latest round of “back and forth” that could lead over the next six months to legislation reforming the way Massachusetts picks offshore wind projects and supports the growing industry here.
In the span of about two hours Tuesday, Gov. Charlie Baker’s bill to pump $750 million in federal aid into the offshore wind industry and to overhaul the project procurement process got its hearing before the Joint Committee on Telecommunications, Utilities and Energy, the committee’s House chair announced that another offshore wind bill that’s been under development for months could be advanced by the committee in the next day or so, and the committee’s Senate chair detailed his concerns with an approach favored by both the House and Baker administration.
“It’s delightful that we have the opportunity to have this back and forth,” House co-chair Jeff Roy said after Baker and Energy and Environmental Affairs Secretary Kathleen Theoharides testified for about 90 minutes in support of Baker’s bill (H 4204). “I would suggest to you that this back and forth will continue because we are going to poll an offshore wind bill this afternoon as soon as this hearing concludes and that will keep the discussion going. The House will have a view, the Senate will have a view and I know that this has been a priority of Speaker [Ron] Mariano.”
In September, Mariano and Roy toured the Block Island Wind Farm off Rhode Island and announced that they were working on a House offshore wind bill that the speaker said would “help us restore our place in this whole competitive market.” Later in Tuesday’s hearing, Roy said “If you like what you saw in 4204, you’re going to love what you see in the committee’s bill.” He said the bill would be reported out “in the next day.”
Energy and climate policy has been one of the issues under intense negotiation right up until the end of formal sessions in each of the last three legislative sessions and Tuesday’s hearing suggested that the 2021-22 session could be the fourth in a row to conclude with an update to offshore wind policy in Massachusetts.
Price cap debate
In addition to a large federal stimulus investment, Baker’s offshore wind bill (H 4204) would eliminate the requirement in state law that each new offshore wind project carries a lower price than the one that came before it. When the governor filed his bill in October, he said removing the price cap was meant “to ensure that projects have the flexibility to incorporate storage, improved reliability and also greater economic development as part of their bids.”
During Tuesday’s hearing, Theoharides said project price would remain a key part of the criteria that offshore wind projects are evaluated on.
“But it’s sort of like if you’re building a bridge and you get a bunch of bids and one of them has four lanes and one of them has three lanes. And the bridge with four lanes costs a little bit more, but you get a lot more value out of it for ratepayers,” she said. “That’s sort of what we’re looking to do here, getting these additional resources in bids like storage, like hydrogen, better transmission, better economic development, paying potentially a little bit more – it’s not even clear that we would pay more – but you pay more and you get something more.”
Senate co-chair Michael Barrett was skeptical of the idea of outright elimination of the price cap when Baker filed his bill and on Monday evening released a letter he sent to Baker and Theoharides asking that they stop their push to lift the price cap.
“The cap protects everyone in Massachusetts who pays a monthly electric bill,” Barrett wrote. He added, “To respond to global warming, we need to go all-electric with respect to both our cars and our heating systems. Which means we need to boost our overall consumption of electricity, in the teeth of the region’s high per-unit costs. It’s a sensitive time to be asking legislators to drop a legal safeguard for their constituents.”
The average residential price of electricity in Massachusetts was 22.59 cents per kilowatt hour in October, compared to a national average price of 14.11 cents per kilowatt hour, according to the U.S. Energy Information Administration.
The senator said he is concerned that the increasing reliance on electricity combined with persistently high electricity bills will make it even harder to secure public support for clean energy projects.
“Though I like to think the risk is far off into the future, I’m concerned that ratepayers could be confronted with unnecessarily steep electricity bills, associate them with climate policy, and rebel against both,” Barrett wrote.
Barrett brought up the same points during Tuesday’s hearing as he and Baker talked through the issues raised in the letter. The governor said he would respond to the senator’s letter in writing.
The Massachusetts Fiscal Alliance joined Barrett’s chorus of concern Tuesday, saying that the governor’s bill “would bail out international wind companies from rising inflation costs” while placing a greater burden on Massachusetts ratepayers.
“Massachusetts electricity prices are already 60 percent higher than the national average. Now is not the time to increase those prices, especially while demand is expected to increase,” Mass Fiscal’s Paul Craney said. “Governor Charlie Baker and Secretary of Energy and Environmental Affairs, Kathleen Theoharides need to understand that the concerns for Massachusetts ratepayers must be a priority over those of powerful international offshore wind companies.”
Like Baker’s bill, the legislation that Mariano and Roy outlined in the fall would remove the price cap and essentially pivot the state from focusing mostly on cost and towards other aspects of the bids, like job creation and long-term economic development.
“Experts in 2020 expect future onshore and offshore wind costs to decline 37 – 49 percent by 2050, resulting in costs 50 percent lower than predicted in 2015. Given these circumstances, there is less concern that we will get extreme bids without the offshore wind price cap,” a report compiled by Roy’s office said in its section recommending the elimination of the price cap. “The Commonwealth can always choose to not take bids if the pricing is egregious. And removing the price cap will likely bring additional value to Massachusetts in terms of storage solutions, interconnection, and economic development opportunities.”
Baker’s bill got the backing of two mayors – New Bedford’s Jon Mitchell and Salem’s Kim Driscoll – whose cities are poised to be major players in the offshore wind industry in Massachusetts, having been selected as base ports for projects in the state’s pipeline.
Areas of agreement
Though he laid out significant issues he has with the idea of eliminating the price cap, Barrett told Baker and Theoharides after their testimony Tuesday that he “agree[s] with almost everything you said – almost everything.” Aside from the price cap issue, no other provision of the governor’s plan attracted noteworthy pushback during Tuesday’s hearing.
The governor’s bill would also direct that $750 million of American Rescue Plan Act money be used to establish a clean energy investment fund that his office said would represent “the single largest investment in the clean energy economy in Massachusetts to date.” The Legislature has preserved a little more than $2.3 billion in federal ARPA funds for future use.
The Massachusetts Clean Energy Center would administer the fund to provide support for the advancement of clean energy technology, help fund higher education efforts to develop and train the offshore wind workforce, support research and development efforts, and provide for “the long-term coexistence and sustainability of the fishing and clean energy industries,” according to the administration.
The legislation would also transfer the authority to select a winning offshore wind bid from the current setup in which executives from National Grid, Eversource and Unitil pick a winner with some state assistance to one under which the state’s Department of Energy Resources would choose the successful projects with technical assistance from the utilities.
“Like the industry itself, the relationship between our utilities and the developers of these projects has evolved with the success of Massachusetts’ procurements to a place where both major utilities now have joint ventures with offshore developers,” Theoharides said Tuesday. “By transitioning the authority for selections from the utility companies to the Department of Energy Resources, this legislation would maintain the robust, well-established selection process while providing an additional level of independence.”
Projects procured so far
Massachusetts has about 1,600 MW of offshore wind power already under contract between Vineyard Wind I (expected online by the end of 2023) and Mayflower Wind (expected online by the end of 2025). The most recent procurement round yielded another 1,600 MW split between the same two developers. Those contracts are to be filed with the Department of Public Utilities by April 27.
Once all four projects are operational, offshore wind are expected to generate roughly 25 percent of Massachusetts’ annual electricity demand, enough to power about 1.6 million homes. To meet its climate goals and to account for the expected increased demand for electricity, Massachusetts will have to get on pace of bringing about 1 gigawatt (or 1,000 MW) of offshore wind power online each year in the 2030s, the Baker administration has said.
The four projects either selected or under contract total about 3,200 MW and the state can procure another 2,400 MW before the Legislature would need to authorize more.
URL to article: https://www.wind-watch.org/news/2022/01/12/energy-panel-readying-offshore-wind-proposal/