Avangrid Inc. asked Massachusetts regulators to dismiss their review of the 1,232-MW Commonwealth Offshore Wind Project's power purchase agreements, or PPAs, and instead enter the project into a competitive solicitation planned for April 2023.
"The PPAs do not meet the fundamental statutory threshold that they must 'facilitate the financing of offshore wind energy generation,'" Avangrid said in a Dec. 16 filing with the Massachusetts Department of Public Utilities. "Unfortunately, despite diligent efforts by Commonwealth Wind to find a path forward for the Project under the PPAs that did not necessitate dismissing these proceedings, the PPAs remain unable to meet this threshold requirement, and it does not appear that there is a viable pathway that would allow that threshold to be met." (Docket Nos. 22-70, 22-71 and 22-72)
The Iberdrola SA subsidiary in October asked the Massachusetts Department of Public Utilities for permission to renegotiate with the contract-holding utilities in question — Eversource Energy subsidiary NSTAR Electric Co., Unitil Corp. subsidiary Fitchburg Gas and Electric Light Co., and National Grid PLC utilities Nantucket Electric Co. and Massachusetts Electric Co. — due to rising project costs, supply chain constraints and interest rate increases for the offshore wind farm, which is scheduled to begin commercial service in 2028.
The state rejected that request Nov. 4, due in part to the electric distribution companies' reluctance to renegotiate contracts. On Nov. 14, Avangrid asked the regulator to keep the proceedings open to facilitate a solution, as the offshore wind developer "worked diligently and urgently with the parties to find an alternative to dismissing these proceedings," according to the Dec. 16 filing.
Avangrid said in a statement that it has "the utmost confidence, given the advanced stage of the project and its inherent benefits, that it can address the current economic challenges facing the project and offer the most cost-effective pricing" through the upcoming solicitation.
Industry analysts disagreed on whether eschewing the existing PPAs in favor of a competitive solicitation would be financially beneficial for Avangrid.
KeyBanc Capital Markets told clients Dec. 19 that the move may "potentially put the company on a stronger footing when negotiating a new contract." However, Wells Fargo Securities wrote that "reneging on such a high profile contract award could result in reputational damage" and "put the company at a competitive disadvantage in future solicitations."
ClearView Energy Partners, meanwhile, noted that the solicitation would not necessarily resolve the "economic headwinds" facing Commonwealth Offshore Wind.
"The structure of state-led solicitations designed to encourage buildout of the resource could ironically make offshore wind especially vulnerable to them," the policy research firm wrote Dec. 19. "While solicitations provide a clear need and offer a higher degree of certainty for projects, financial realities over time can differ from the assumptions implied in the original PPAs."
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