Mayflower escalates US offshore wind PPA row with motion in support of Commonwealth
Shell-Ocean Winds joint venture simultaneously affirms progress in line with contract timelines while calling for “meaningful discussion” before making a final decision on project's future
Mayflower Wind filed a motion with Massachusetts state utility regulators today (Friday) that supported fellow developer Avangrid’s decision to withdraw its Commonwealth Wind project while hedging its own future.
The Shell-Ocean Winds owned Mayflower Wind said in its motion that while it continues to develop the project “consistent with the timelines set forth in its PPAs… [it] must nonetheless agree with much of the factual analysis underlying Commonwealth Wind’s conclusion” that the projects are no longer economically feasible.
The best path forward “is for the offshore wind energy generation capacity currently included in the PPAs to be procured in the next solicitation”, Avangrid said.
Commonwealth would bid into that next round, expected next spring.
Mayflower’s motion said: “extraordinary global economic conditions, including unexpected and significant commodity price increases and supply shortages, have materially increased the expected cost of financing and constructing” its project.
Furthermore, “the project and tax equity financing required for the delivery of Mayflower Wind Project, along with the cost of such financing, has changed dramatically and unexpectedly as interest rates have risen sharply.”
The DPU had previously chided the “sophisticated market participants” for not factoring in contingencies into their plans to protect their “interests in the event of unforeseen circumstances”.
Mayflower pushed back, saying, “these unprecedented global economic conditions could not have been reasonably foreseen by Mayflower Wind (or, for that matter, any other party to these proceedings).”
BloombergNEF wind energy analyst Chelsea Jean-Michel noted that proposals for Massachusetts' third round offshore wind solicitations were due in September 2021 and projects were awarded in December 2021.
Mayflower said that the withdrawal of Commonwealth “has materially disrupted the… procurement process, and therefore altered the underlying assumptions on which Mayflower relied” when it made its two successful bids.
Accordingly, “Mayflower Wind respectfully requests that the DPU allow time for coordinated meaningful discussion among all interested parties, before making a final decision on the Mayflower Wind PPA.”
Future price impacts
Commonwealth is the first major US project to walk away from a signed PPA but might not be the last as global economic conditions continue to negatively impact long-term offshore wind PPAs.
“Offshore wind as a new a new industry is not immune to the impacts of global economic trends and certainly rising prices worldwide have had an impact,” said Josh Kaplowitz, head of trade group American Clean Power Association’s offshore wind unit.
Avangrid’s efforts to gain a higher PPA are “an adaptation to [current] conditions”, said Willet Kempton, professor at the University of Delaware and adviser to Special Initiative for Offshore Wind think-tank.
It will also give developers “food for thought going into upcoming state solicitations”, said Wood Mackenzie senior wind analyst Samantha Woodworth.
Several states are slated for offshore wind tenders next year, including New York, New Jersey and Massachusetts, and the industry will be watching for Commonwealth’s impact on future prices.