As anticipated, SouthCoast Wind has announced it will seek to terminate the utility contracts it needs to finance the construction of a giant offshore wind farm south of Martha’s Vineyard, citing significant increases in the cost of the project.
The move follows Avangrid’s decision last fall to do the same thing with contracts for a similar project, dubbed Commonwealth Wind, which was also proposed for waters south of the Vineyard. Industry insiders had expected SouthCoast Wind to follow, because its contracts are based on the same economics as Commonwealth Wind’s. But until now, despite conceding similar cost concerns, SouthCoast Wind’s leaders avoided definitively answering the question whether they would need to terminate their contracts too.
Regulatory pressure in Rhode Island, however, apparently forced SouthCoast’s hand. That state’s Energy Facilities Siting Board has been reviewing a proposed power line that SouthCoast (formerly known as Mayflower Wind) has planned through Portsmouth, R.I., for the project, with a hearing scheduled on June 12 to go over the project’s financial viability.
On Friday, SouthCoast informed the Rhode Island siting board that it has started discussions with Massachusetts officials and electric utilities about terminating the wind farm’s power purchase agreements. The SouthCoast project would generate 1,200 megawatts, or enough power for more than one million homes and businesses.
Commonwealth Wind and SouthCoast Wind backing out means the results of two of the three Massachusetts wind-energy auctions so far will be scrapped. Only the winner of the state’s first auction of wind-power contracts, Vineyard Wind, is moving forward. Construction recently began on that project, a joint venture owned by Avangrid and Copenhagen Infrastructure Partners, because its supplier agreements were largely in place before the huge spike in interest rates and other costs last year.
In May, the Healey administration launched the state’s fourth round of offshore wind bidding, inviting developers to submit bids to collectively provide up to 3,600 megawatts — or more than 25 percent of the state’s annual electricity demand. This would be by far the largest auction yet of offshore wind contracts for Massachusetts. Bids are due early next year. Avangrid plans to rebid its Commonwealth Wind project in this round, hoping for higher prices. Now it’s official that SouthCoast Wind — a joint venture between Shell and Ocean Winds, which is itself a joint venture owned by Engie and EDP Renewables — will try to do so as well.
In a statement, SouthCoast chief executive Francis Slingsby said the developer is grateful to the Healey administration for creating enough room for a rebid of its project in the latest auction. He said even after factoring in potential tax incentives, SouthCoast couldn’t make the numbers work, and “termination, and payment of a financial penalty for termination, has become the prudent commercial course ... due to material and unforeseen supply chain and financing cost increases affecting the whole offshore wind industry."
These auctions were originally set in motion by a state energy law passed in 2016 aimed at making Massachusetts more reliant on cleaner sources of electricity. State officials also hope that by sparking a new industry to life, offshore wind can bring economic development as well. Other states in the Northeast have since followed with their own auctions of long-term contracts to buy power, which the wind farm developers use to obtain financing for their multibillion-dollar projects.
Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.