Baker gets pushback on $750M clean energy proposal

A key state lawmaker on Tuesday questioned Gov. Charlie Baker’s proposal to eliminate a pricing cap on offshore wind proposals in the state, contending it could lead to significantly higher energy costs.

Baker testified before the Joint Committee on Telecommunications, Utilities and Energy in support of clean energy legislation he filed in the fall. The legislation would alter the offshore wind procurement process in Massachusetts, including by eliminating a price cap that requires successful bids to deliver less expensive power than the previous bid. It would also establish a $750 million fund to support Massachusetts clean energy businesses and workers.

The Republican governor is seeking to end the price cap because he believes it hurts the Bay State’s competitiveness in the burgeoning East Coast offshore wind market. While Massachusetts is seen as a pioneer in the sector, other states like New York and New Jersey have made strides in recent years.

“Removing (the cap) would give bidders the flexibility to offer important added benefits to Massachusetts residents, including economic investment, job creation and reliability solutions such as transmission and energy storage,” Baker told lawmakers.

However, the committee’s Senate chair, Sen. Michael Barrett, argued that states that do not have such a cap have seen much higher prices for their offshore wind projects. He said a New York project, for instance, resulted in wholesale electricity costs that are 43% higher than what they are in Massachusetts. In Connecticut, the costs are 68% higher, and in New Jersey, they are double what they are in the Bay State, according to Barrett.

“I want to ask … whether you want to run the risk of these kinds of figures, if we simply jettison the cap altogether, because these are extraordinary increases in the wholesale rate,” said Barrett, a Lexington Democrat and lead author of the climate law that took effect last year.

Competition is limited in the industry because of the high barriers to entry, Barrett said, adding there are “only four players” in the bidding market.

Baker replied that he would like his administration to do an “apples-to-apples” comparison of pricing in Massachusetts compared with other states. He and Energy and Environmental Affairs Secretary Katie Theoharides, who also testified before the committee, noted that state law enables the commonwealth to reject all bids in a round if they find the terms unfavorable. Theoharides also pointed out that state law calls for cost-effective bids.

Barrett in turn expressed concern that while one goal of removing the cap is for offshore bids to include stronger economic and workforce development components, there is no guarantee the bidders will deliver on that promise over the long term. He pointed to Fidelity Investments, which pushed successfully for a state tax break for the mutual fund industry in the 1990s but since then has moved a significant number of jobs out-of-state.

“We risk seeing a Fidelity scenario now all over again with offshore wind,” Barrett said. “I think that we need to take a step back and reconsider whether we have the ability to give them a huge concession upfront and still ensure value over the course of years. I suspect that we haven't thought carefully enough about that problem.” 

In addition to killing the cap, Baker’s bill would put the Department of Energy Resources in charge of choosing among offshore wind bids, rather than utilities.

The $750 million fund would be used for grants, loans and other financial support for clean energy technologies from Massachusetts-based businesses, as well as job training programs geared toward the clean energy sector. Baker has proposed using federal American Rescue Plan Act money for the fund.

During the hearing, the committee’s House chair, Franklin Democrat Jeffrey Roy, indicated that the panel would soon vote on whether to advance another offshore-wind bill.