Wind

US offshore wind standoff | Avangrid sticks by giant project but insists power deal 'not viable'

Iberdrola-backed developer meets state deadline to affirm 1.2GW Commonwealth Wind, but says offtake contracts with Massachusetts utilities must change 'in public interest'

The Massachusetts State House in Boston.
The Massachusetts State House in Boston.Foto: Shutterstock
  • Tim Ferry
Iberdrola-controlled Avangrid affirmed its commitment to its 1.2GW Commonwealth Wind project on Monday, bowing to demands by regulators in the US state of Massachusetts but insisting that already-signed power deals are not financially viable under current economic circumstances and need to be amended.

In a late day reply, Avangrid requested the US state “should not dismiss the proceedings as to the power purchase agreements (PPAs) between Commonwealth Wind and the Massachusetts electric distribution companies”, which would have voided the contracts under an extended deadline set by officials.

Avangrid also stated that it strongly believes it is “in the public interest to allow the parties to negotiate PPA contract amendments that allow… Commonwealth Wind to be economically viable, to obtain financing and to proceed to construction”.

The dispute stems from record low PPAs signed by Avangrid and fellow Massachusetts developer Mayflower Wind that the companies say are no longer feasible in the face of “unprecedented economic challenges”, including “sharp and sudden increases in interest rates, prolonged supply chain constraints, and persistent inflation”.
Avangrid was awarded the Commonwealth development last December in Massachusetts’ round three solicitation. The developer signed PPAs with local utilities in April for $72/MWh, a new low for the US market.

The contracts are currently under review by the Department of Public Utilities (DPU), the state agency charged with managing offtake agreements between generators and utilities.

In October, however, Avangrid filed a motion to halt the DPU’s contract review for 30 days to allow it to advocate for a “modest increase” to compensate for the deteriorating economic situation.

DPU rejected the developers’ requests and demanded that they declare “whether they intend to move forward with their contractual obligations under the PPAs or file a request to dismiss the proceedings.”

Mayflower met the demands within the DPU-imposed three-day deadline and affirmed its commitment to its combined 1.2GW Southcoast Project, while Avangrid requested an extension until Monday, which the agency granted.

Avangrid met the second deadline with a late day reply in which it stated: “The appropriate action is for the [DPU] to continue with this proceeding such that the parties can continue ongoing discussions to employ all opportunities, including contract improvements, to achieve a financeable and economically viable project.”

Sy Oytan, senior vice president for offshore projects for Avangrid, said: “Ensuring Commonwealth Wind is able to move forward is... the best possible outcome for Massachusetts and its ratepayers.”

Massachusetts attorney-general and governor-elect Maura Healey’s spokeswoman Chloe Gotsis expressed continued support for Commonwealth Wind and Avangrid’s “commitment to the DPU process” to local media.

“We are reviewing project financials and will work collaboratively to explore options to improve project economics for all parties,” she said.

DPU has made no response to Avangrid’s request. Massachusetts law mandates 5.6GW of offshore wind capacity under contract by 2027.

(Copyright)
Published 15 November 2022, 15:54Updated 16 November 2022, 00:05
AmericasUSMassachusettsAvangridIberdrola