SouthCoast Wind wants to cancel its contract to build offshore turbines

The developer behind SouthCoast Wind wants to cancel its contracts and secure more money to build 1,200 megawatts of offshore wind power, throwing uncertainty over a majority of the already-approved energy capacity in the state's offshore wind pipeline.

SouthCoast Wind, a joint venture of Shell and Ocean Winds, signaled to Rhode Island regulators that it plans to follow the lead of another developer and scrap a pair of previous agreements with utility companies.

The developer concluded that its 800-megawatt project bid selected in 2019 and its 400-megawatt project bid selected in 2021 are no longer financially viable at the previously negotiated prices.

"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," SouthCoast Wind CEO Francis Slingsby said in a statement.

He said the move was prompted by a "significant increase in projected capital expenditures and finance costs of our project."

The developer informed the Rhode Island Energy Facilities Siting Board of its intention in pre-filed testimony on Friday. The Providence Journal first reported about the shift Monday afternoon.

SouthCoast Wind is effectively turning to the same playbook that another major wind developer, Commonwealth Wind, deployed after concluding that its own 1,200 megawatt installation "cannot be financed and built" under existing contract terms.

Commonwealth Wind in December filed a motion with the Department of Public Utilities asking regulators to scrap the power purchase agreements the developer and utility companies previously reached. The DPU rejected that proposal and sought to uphold the contracts, and the matter is now under appeal.

Officials for both projects are betting that by backing out and launching a new bid in the next solicitation round this summer, they can get selected once again with more favorable financial terms.

Slingsby said SouthCoast Wind officials "believe our project can deliver more than enough clean power for every home in Rhode Island" and for South Coast homes in Massachusetts "potentially ahead of other projects in development."

"In fact, we expect to have our federal permit in hand at the end of this year," Slingsby said. "In addition, our project will help meet state, regional and national climate goals, which at present are in jeopardy of falling short of target."

Through three rounds of bidding — one in 2017, one in 2019 and one in 2021 — Massachusetts has procured a total of 3,200 megawatts of capacity for offshore wind power. Commonwealth Wind and SouthCoast Wind scrapping their contracts would cut that pipeline by three-quarters.

Slingsby said SouthCoast Wind "recently initiated discussions" with state regulators and utility companies about spiking the contracts, and a DPU spokesperson said Monday that the developer has not yet filed any formal paperwork.

"We encourage all parties to find clarity on the next steps before the fourth offshore wind solicitation becomes active," DPU spokesperson Maria Hardiman said.

The Healey administration took uncertainty about the pair of previously approved wind projects into consideration when it drafted a request for proposals for the upcoming fourth offshore wind procurement. Previous procurements have drawn just a handful of bidders.

The administration proposed adding between 400 MW and 3,600 MW more wind power in the next round, much of which might be backfilling prior capacity if both Commonwealth Wind and SouthCoast Wind indeed back out. Officials also sought to add language taking into account a bidder's "experience and track record" when considering new wind proposals, including "consideration of any project that has been delayed, failed, substantively amended, defaulted under, withdrawn, agreed to termination, or otherwise did not proceed."

Sen. Mike Barrett, one of the Legislature's point people on clean energy and offshore wind, said he does not see SouthCoast Wind's push to cancel its contracts as a massive blow to the state's climate goals.

"Losing something from our pace doesn't mean that we lose the race. We can endure an extra two years of delay, as long as every single megawatt we're counting on ultimately gets generated," Barrett, who co-chairs the Telecommunications, Utilities and Energy Committee, told the News Service. "I'm not thrown by the prospect of delay. The world really has changed since the Ukraine [invasion], the inflationary spike, and the supply chain upsets. There's no sense in pretending as if those things didn't happen. We're slowing down, but we're still going to finish the course."

Some elected officials, particularly in the House, have been voicing concerns that Massachusetts is losing its offshore wind competitive edge as other states like New Jersey take significant steps.