The Massachusetts legislature has enacted an energy bill that will require utilities to purchase offshore wind energy by 2027. The legislation, known as H. 4568, "An Act to promote energy diversity," has been laid before Governor Charlie Baker for signature.
Earlier this session, the Massachusetts House and Senate had passed two
different bills calling for renewable energy procurement. A conference committee reported out the final bill, H. 4568, on July 31. Through the newly enacted law, the Massachusetts legislature has added a new program of offshore wind energy procurement.
The final enacted bill adds a new section 83C to the state's 2008 Green Communities Act. Among other provisions, section 83C provides, "In order to facilitate the financing of offshore wind energy generation
resources in the commonwealth, not later than June 30, 2017, every
distribution company shall jointly and competitively solicit proposals
for offshore wind energy generation; and, provided, that reasonable
proposals have been received, shall enter into cost-effective long-term
Much of the solicitation and contracting process will occur pursuant to regulations yet to be promulgated by the Department of Public Utilities. The law provides a framework for developing and approving the competitive bidding process, and requires the schedule to "ensure that the distribution companies enter into cost-effective
long-term contracts for offshore wind energy generation equal to
approximately 1,600 megawatts of aggregate nameplate capacity not later
than June 30, 2027." Individual solicitations must be seek proposals for 400 megawatts or more, and may be conducted jointly with other states.
Proposed long-term contracts are subject to the review and approval of the Department of Public Utilities. The law requires the department of public utilities to weigh the potential costs
and benefits of the proposed long-term contract, and directs it to approve a
proposed long-term contract "if the department finds that the proposed
contract is a cost-effective mechanism for procuring reliable renewable
energy on a long-term basis," taking into account factors like reliability, mitigation of price volatility, cost-effectiveness, mitigation of environmental impacts, and economic development.
The law requires the implementing regulations to be adopted by the Department of Public Utilities to "provide
for an annual remuneration for the contracting distribution
company up to 2.75 per cent of the annual payments under the contract to
compensate the company for accepting the financial obligation of the
long-term contract." It also entitles distribution companies to cost
recovery of payments made under an approved long-term contract. Utilities may elect to to use any energy purchased under such contracts for sale to its customers and retain renewable energy certificates for their use, or may sell the energy and RECs into the market. Any proceeds from such market re-sales will be netted against the cost of contract payments, resulting in a credit or charge to all distribution customers through a uniform fully reconciling annual factor in distribution rates.
The law also provides a variety of "outs" or circumstances under which contracts might not result, such as if a "proposal’s terms and conditions would require the contract obligation to
place an unreasonable burden" on a distribution company’s balance
Notably, the law's definitions of “Offshore wind developer” and
“Offshore wind energy generation” place a variety of restrictions on
projects eligible for contracting. The definitions effectively require
that projects be located on the Outer
Continental Shelf, in a designated wind energy area for which an initial
federal lease was issued on a competitive basis after January 1, 2012,
have no turbine located within 10 miles of
any inhabited area, and have a commercial operations date on or after
1, 2018, that has been verified by the department of energy resources. This effectively limits projects to a subset of those winning recent (or future) federal Bureau of Ocean Energy Management lease auction sales.
To date, no commercial offshore wind projects operate in U.S. waters, although Deepwater Wind is currently constructing the Block Island Wind Farm off Rhode Island. Federal programs, along with some state incentives, are available to support qualifying offshore wind projects.