PROVIDENCE – After months of uncertainty about the viability of SouthCoast Wind’s power contracts for its $5-billion offshore wind proposal off Massachusetts, the developer now says it is seeking to walk away from the nine agreements it signed to sell electricity to that state's utilities.
The company, a joint venture between fossil-fuel giant Shell and Madrid-based renewable energy firm Ocean Winds, announced its intent to terminate the contracts in a filing submitted to the Rhode Island Energy Facility Board.
More: Portsmouth residents are voicing their opposition to windfarm cables. Here's why.
SouthCoast Wind: Sale prices too low to attract financing
In written testimony to the board, CEO Francis Slingsby said the company has concluded that the sale prices in the contracts are too low to attract financing in light of unforeseen increases in supply-chain costs and interest rates. Instead of sticking with the agreements, he said, SouthCoast plans to rebid the contracts under the latest solicitation for offshore wind power from the Massachusetts government.
“While SouthCoast has pursued, and is open to other solutions, and even after factoring in potential tax incentives, termination and payment of a financial penalty for termination has become the prudent commercial course to realize the project due to material and unforeseen supply chain and financing cost increases affecting the whole offshore wind industry,” Slingsby said in a statement.
The company, he continued, is committed to the proposal.
“We continue to move our project through federal and state permitting and have the grid connections necessary to ensure delivery of 2,400MW of power, the full capacity of our lease area, without needing significant and expensive system upgrades,” Slingsby said.
Filing is part of a larger question about financing offshore wind projects
SouthCoast, formerly known as Mayflower Wind, applied to the Rhode Island siting board last year for permission to run transmission cables through state waters in the Sakonnet River to the site of the former Brayton Point Power Station in Somerset, where they would plug into the regional power grid.
Last November, the board moved to consider suspending the application until questions about financing for the first 1,200 megawatts of the SouthCoast project were resolved, and twice scheduled a show-cause hearing. After the company asked for more time to consider its position, the hearing was postponed to June 12. The filing containing the decision to end the contracts was submitted last Friday.
Broader questions about financing were initially raised by Avangrid Renewables, the developer of a second 1,200-megawatt offshore wind project off Massachusetts known as Commonwealth Wind.
In a filing last October with the Massachusetts Department of Public Utilities, the company asserted that the project is “no longer viable and would not be able to move forward” under the terms of the long-term contracts it signed last spring to sell power to utilities. Inflation, shortages of equipment and interest rate hikes tied to the COVID pandemic and the war in Ukraine had changed the economics of the project, the company said.
More on offshore wind: Has the Block Island Wind Farm lived up to its promise? Here's what we found.
SouthCoast, whose agreements were also pending before the DPU, joined with Avangrid in support of a month-long pause in the review of the contracts. In one filing with the agency, SouthCoast argued that “the resource may no longer be economic and financeable without adjustments to the PPAs.” In another, the company proposed solutions, including raising the power prices in the contracts and exploring the impact of new federal tax incentives.
The utilities that signed onto the contracts balked at any changes. The DPU subsequently denied the offshore wind developers’ request and ordered them to either commit to the contracts or pull out. While Avangrid eventually did the latter and signaled its intent to bid again, SouthCoast initially told regulators that it planned to move forward under the current agreements.
What appears to have changed the company’s mind is a third-party analysis it commissioned of the economics of the contracts. The analysis found that the costs of building and operating offshore wind farms have increased more than 20% since 2019, according to Slingsby’s testimony to the siting board.
SouthCoast needs permission from the board to deliver power from its project, which would be built in Atlantic Ocean waters south of Nantucket and Martha’s Vineyard. The company proposes bringing two export cables from the lease area, which is about 59 miles southeast of the Rhode Island coast. They would run up the Sakonnet River, through the Island Park neighborhood of Portsmouth and across Mount Hope Bay before connecting to the substation where New England’s largest coal-burning power plant once stood.
In his testimony, Slingsby argued against suspending SouthCoast’s application to the board, pointing to requirements among New England states to increase their supplies of renewable energy.
“Further staying the proceeding would materially delay and jeopardize the development of the project and would be counter to the very same public policy requirements that drive the need for it,” he said.
This article originally appeared on The Providence Journal: SouthCoast Wind wants to walk away from contracts to sell power to Massachusetts. Here's why.