MA approves second offshore wind procurement process

Massachusetts utility regulators have approved a proposed timetable and method for soliciting a second round of long-term contracts for offshore wind energy generation.

Section 83C of the Green Communities Act requires Massachusetts electric distribution companies to jointly propose a timetable and method for the solicitation and execution of long-term contracts, subject to review and approval by the Department of Public Utilities. As it has been amended, Section 83C calls for multiple procurement rounds, to result in 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. A subsequent law requires the procurement of an additional 1,600 megawatts of offshore wind, by December 31, 2035.

In 2017, the state's electric utilities issued their first solicitation under Section 83C, which resulted in contracts with offshore wind developer Vineyard Wind LLC for 800 megawatts of generation. Section 83C requires that any long-term contracts resulting from this second solicitation must include a nominal levelized price per megawatt-hour that is less than the levelized price resulting from the first solicitation (which was $64.97 per megawatt-hour in 2017 real dollars).

In March 2019, the utilities proposed a timetable and process for soliciting a second round of offshore wind contracts. The utilities proposed a second RFP to seek at least 400 megawatts, but with consideration of proposals from 200 megawatts up to approximately 800 megawatts if a larger-scale proposal is both superior to other proposals and is likely to produce more economic net benefits to customers.

By order dated May 17, 2019, the Department of Public Utilities approved the utilities' proposed timetable and method. The Department accepted the utilities' assertion that a nominal levelized price of $84.23 per megawatt is equivalent to the first solicitation's result. The Department also accepted the utilities' timetable, which includes RFP issuance on May 17, 2019, confidential proposals due by August 9, project selection by November 8, contract execution by December 13, 2019, and submission of contracts for regulatory approval by January 10, 2020.

While approving the overall timetable and process proposed by the utilities, the Department did deny a request by National Grid USA for a "regulatory out", or a provision in any future power purchase agreement resulting from the solicitation which would allow the utility to terminate the agreement if the utility cannot pass the contract's costs onto its ratepayers. In denying National Grid's request for such a "regulatory out", the Department noted that such a clause has never been used in long-term renewable energy contract solicitation in Massachusetts, and that its inclusion would place "the full risk of regulatory disallowance on project developers," in turn making financing more difficult and more expensive. For these reasons, the Department directed National Grid not to include a "regulatory out" provision in its form power purchase agreement for this solicitation.