Massachusetts regulators approve contracts for 804 MW offshore wind project

New York — The Massachusetts Department of Public Utilities late Nov. 5 issued an order approving long-term contracts for 804 MW of offshore wind capacity from the Mayflower Wind project to supply the state's electric distribution companies. However, uncertainty remains over US East Coast offshore wind project completion timing.

"The approval of these contracts furthers the Commonwealth's development of an offshore wind industry that will create local jobs, spur economic development and provide Massachusetts ratepayers with clean, affordable and resilient energy," Governor Charlie Baker said in an emailed statement.

The project is a joint venture of Shell and EDP Renewables.

The project will bring the volume of offshore wind capacity procured by Massachusetts to approximately 1.6 GW. In 2018, following a report by the Department of Energy Resources that found additional procurements of offshore wind would benefit the state, the Baker-Polito Administration increased the state's overall offshore wind commitment to 3.2 GW by 2035, the statement said.

Mayflower Wind's bid to develop an offshore wind power plant was selected for contract negotiation in October 2019 based a request for proposals that was approved by the DPU after review by an independent evaluator.

After detailed review, Mayflower Wind was determined to provide the greatest overall value to Massachusetts customers by delivering approximately 800 MW/year of offshore wind capacity while providing "substantial ratepayer benefits," the statement said. The DPU order approved the selection and found that the contracts are "cost-effective as well as in the public interest," according to the statement.

Project details

At a total levelized price of 7.8 cents/kWh in nominal dollars, this project is expected to provide approximately 0.1% to 1.8% savings on customer's monthly energy bills, all other bill impacts remaining equal, the DPU said.

Under the proposed contracts, the local distribution companies will purchase, for a term of 20 years, the energy and renewable energy credits associated with the project's output, at the onshore delivery point defined in the power purchase agreements, according to the order.

The combined price for energy and RECs is $77.76/MWh on a nominal levelized basis for both the Phase 1 and Phase 2 PPAs, the order said.

The project is comprised of two approximately 400 MW phases, both located on the outer continental shelf in the Bureau of Ocean Energy Management Lease OCS-A 0521 area. The first phase has a nameplate capacity of 408 MW and a commercial operation date of September 1, 2025 and the second phase has a nameplate capacity of 396 MW with a COD of December 15, 2025, according to the order.

Multiple offshore wind projects are moving ahead along the US Northeast coast, but there is some uncertainty over completion date timing, with developers recently announcing delays related to the federal permitting process with BOEM.

BOEM is due to publish a long-anticipated environmental impact statement for the 800 MW Vineyard Wind project also located offshore Massachusetts that will set out a framework for the broader industry's future in federal waters, including a preferred turbine spacing layout. The assessment has been delayed by more than a year and is now expected in November.

Due to the delay, starting the permitting process for Danish utility Ørsted's projects will probably be "pushed into early 2021," CEO Henrik Poulsen said on an Oct. 28 earnings call, adding that the "significant delay" would mean construction on four of the company's five projects will likely start much later than planned.

"Uncertainty about offshore wind in the Northeast remains, but we expect some clarity in the coming weeks with BOEM to provide guidance on Vineyard's permitting process," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said in a Nov. 6 email.

"The contracts for Mayflower approved by the DPU include provisions for varying levels of federal investment tax credit qualification and appears lower than the agreed upon price for Vineyard, which should allow for more flexibility in completion," Kemmerer said.

"However there remain a variety of obstacles that, for the time being, make the 'guaranteed' commercial operational date in Q4 2025 look challenging to meet," he added.