Avangrid and Shell-Ocean Winds face $60m in fines for nixed Massachusetts projects
State will likely allow developers seeking to kill offshore wind arrays to bid into its round 4 procurement to spur competition amid a lack of market players
Massachusetts developers may face fines of up to $60m for withdrawing projects but will still likely be allowed to bid into the state's upcoming round 4 offshore wind solicitation, the chair of the legislature's telecommunications, utilities and energy committee said.
Developers seeking to kill projects will pay “to the tune of $48m to $60m… in penalties in order to terminate these contracts,” said legislator Jeffrey Roy of the Massachusetts House of Representatives.
Massachusetts has contracted 3.2GW across three projects towards its mandate of 5.6GW of capacity by 2027. Nearly all this capacity is at risk, though, with two out of three developers looking to cancel their contracts due to declining economics in the face of 40-year inflation.
SouthCoast set a record for lowest offer in Massachusetts’ round 2 with an accepted bid of $77.76/MW, for 804MW of capacity. Per state law at the time, this new low became the bid ceiling for the next round.
The developer was awarded a further 405MW with a $75/MWh offer in the state's round 3 in 2021, while Avangrid’s Commonwealth Wind project was selected at $72/MWh.
Fines will likely be the only damages incurred by the developers as the state’s round 4 solicitation doesn’t prevent them from rebidding the projects that they withdrew.
Massachusetts in May released its draft round 4 solicitation for up to 3.6GW that exceeds the legal mandate but anticipates the potential withdrawal of either or both projects.
“I fully support the notion that we should not preclude them from bidding on the next round,” said Roy.
“There aren't too many players in this space,” Roy said. “We want these two developers to be able to bid so that we can get real competition.”
Commonwealth and SouthCoast are both advanced in the federal permitting system and are expected to be fully approved either late this year or early 2024.
Joseph Curtatone, the president of the Northeast Clean Energy Council, said on the same podcast that Massachusetts needs to focus on learning from the experience to craft better procurements.
“How do we create even greater flexibility transparency to all parties and our stakeholders, ratepayers and our constituents and execute these crucial projects that are so vital for our climate action goals in our economy?” he asked.
The Massachusetts round 4 request for proposals enables additional flexibility by allowing bidders to submit “an alternative indexed pricing proposal intended to reduce risk to bidders and ratepayers”.
“Initial projects have to lay the groundwork, and that costs money,” said Curtatone.