The state of Massachusetts has greenlighted amendments to Mayflower Wind’s 804MW Round 2 project award that slash its offtake contract by nearly 10%, plumbing new depths for US offshore wind pricing.
The state utilities regulator, Department of Public Utilities (DPU), approved amendments to the 2020 power purchase agreements (PPAs) for the Shell-Ocean Winds-owned Mayflower Wind that cut its rate from $77.76/MWh, the previous US record, to $70.26/MWh, now the lowest price for American offshore wind.
The amendments were requested by the power buyers, the New England utilities Eversource, Unitil and National Grid, based on a contract clause that allows for a rate reduction if the project becomes legally eligible for investment tax credits (ITC) “in excess of 12%”.
The Inflation Reduction Act (IRA) passed by Congress last summer allows developers to claim a 30% ITC for offshore wind projects.
“This reduction of nearly 10% in the contract pricing will lessen the impacts on customer bills while providing the same level of benefits to the Commonwealth [of Massachusetts],” the power companies noted. Mayflower declined to comment.
The revised PPA rate breaks new pricing ground in the US and returns Mayflower to its position as low-priced leader in the US market. It comes amid a dispute between Massachusetts and its Round 3 project developers, including Mayflower, over declining market conditions.
The DPU approved Massachusetts’ Round 3 project PPAs last month despite both Mayflower and Avangrid, developer of the 1.2GW Commonwealth Wind array, asserting that “unprecedented economic headwinds” have made them unfinanceable.
“Because of the impact of… historic inflation, sharp increases in interest rates, and supply chain bottlenecks, the current PPAs do not allow the company to secure the significant financing needed to construct this critical project,” Craig Gilvarg, Avangrid spokesman, told Recharge. “The project cannot proceed under these contracts.”
Mayflower won its additional 405MW in Massachusetts’ Round 3 with a $75/MWh offer while Iberdrola-backed Avangrid’s Commonwealth was selected with a bid of $72/MWh.
The developers signed 20-year PPAs which were submitted for review to state officials to ensure they “meet the requirements of law and deliver reliable and clean energy at an affordable price”, according to DPU.
In October, however, both developers called for a pause in the review process to renegotiate PPA terms, which was rejected by the DPU.
Avangrid ultimately moved to dismiss the contracts in December and have Commonwealth’s capacity applied to Massachusetts’ upcoming tender in the spring.
“The best path to move the project forward as expeditiously as possible is through Massachusetts’ forthcoming offshore wind solicitation this spring,” said Gilvarg.
The DPU declined Avangrid’s motion for dismissal and approved the PPAs as written.
“The pricing terms in the PPAs are reasonable for offshore wind energy generation resources,” the DPU said.
Brayton Point interconnection
DPU also approved several other amendments to Mayflower’s Round 2 PPAs, including allowing the developer to move the point of interconnection (POI) from Cape Cod to Brayton Point, where Mayflower intends to connect its Round 3 capacity.
Brayton Point on Massachusetts’ south coast is the site of New England’s now-shuttered largest coal-fired power plant, and its significant footprint, including transmission grid interconnection capacity, is being redeployed for the offshore wind sector.
“Given the availability of transmission infrastructure at Brayton Point and the complexities of interconnecting Mayflower Wind’s offshore wind generation at Cape Cod, moving the point of interconnection… to Brayton Point seems reasonably calculated to preserve and enhance the viability of the [Mayflower] Project,” the utilities said.
In pushing for approval of the POI move, a key consideration for the utilities was “to avoid creating incentives for Mayflower Wind to ‘under build’ its [now] lower-priced Round 2 project and to maximise the capacity of its higher-priced Round 3 project”, the utilities said.
The amendments include provisions aimed at preventing such moves by Mayflower while allowing the developers to push back key milestones, including commercial operation date (COD), by seven to 15 months.