Offshore Wind Virginia

Two offshore wind turbines, which have been constructed off the coast of Virginia Beach, Va., are seen in 2020. Massachusetts DPU approved contracts for off shore wind against the wishes of the developers.

The Department of Public Utilities on Friday approved the contracts between both the Commonwealth Wind and Mayflower Wind offshore wind projects and Bay State utilities, rejecting Commonwealth Wind's request to scrap an agreement that it says would not allow its project to be financed and built.

The DPU determined that the contracts, which the wind developers and utility companies agreed to in May, "are in the public interest," but both developers have said that increases in commodity prices, rising interest rates and supply shortages make their projects much harder to finance than a year ago when they were selected to provide a combined 1,600 megawatts of offshore wind power. Commonwealth Wind earlier this month filed a motion to dismiss its power purchase agreements (PPAs), saying that the largest offshore wind farm in the state's pipeline "cannot be financed and built" under the terms of those contracts.

"[T]hrough the use of a fair, open and transparent competitive solicitation process, the [utility] Companies have demonstrated that: (1) the pricing terms in the PPAs are reasonable for offshore wind energy generation resources; and (2) there was no higher ranking portfolio of proposals ... available to the Companies. In addition, the Department finds that it was reasonable for the Companies to contract for 1,605 MW of offshore wind energy generation based on the competitiveness of the bid, the level of economic net benefit to ratepayers, and the requirements of Section 83C. Finally, the Department finds that the estimated bill impacts of the PPAs are reasonable in light of the benefits of the contracts," the DPU wrote in its order dated Friday, a copy of which was acquired by the News Service. "For these reasons, the Department finds that the PPAs are in the public interest."

Commonwealth Wind parent company Avangrid has been arguing publicly for about two months that a combination of economic factors including sharp inflation and the Russian war in Ukraine imperiled its ability to finance the project. It had hoped DPU would dismiss the contracts filed in May, then allow the company to re-bid the project on what it considers more realistic terms in 2023.

"We have to get to a point where the contract allows the project to go to financing, and under the current structure, it just isn't there," Avangrid Senior Vice President for State Government Affairs Kim Harriman told the News Service earlier this month. "We have to be able to finance it, and frankly, we can't do that with the current contract. So we think that going out to bid in 2023, that the state issuing that bid, will allow us to put in a contract proposal that reflects a project that we can finance."

While Mayflower Wind has said that its roughly 400 MW project faces many of the same economic headwinds as Commonwealth Wind, Mayflower has also said it remains committed to its project.