The Block Island Wind Farm stands 3 miles off of Block Island. (Photo by Scott Eisen/Getty Images)
A second Massachusetts wind farm developer has hit economic headwinds and decided to renege on its contracts. Could Rhode Island’s projects be next to fall?
State officials and offshore wind proponents say no.
Instead, they have brushed off the news that Massachusetts wind farm developer Southcoast Wind Energy LLC (formerly known as Mayflower Wind) wants to scrap its agreements to sell 1,200 megawatts of electricity to the Commonwealth amid rising project costs.
“It’s just part of the regular business cycle we’re dealing with,” said Patrick Crowley, a union organizer and co-chairman of Climate Jobs Rhode Island. “Construction projects are always trying to negotiate their contracts. It’s just part of the business.”
Indeed, the SouthCoast Wind farm – a joint venture by Shell and Spanish company Ocean Wind – is hardly the only development project hurt by inflationary cost hikes and supply chain slowdowns. Another Massachusetts wind farm developer, Avangrid Renewables, ended its existing contracts with state utility companies for the Commonwealth Wind project in 2022 for similar cost concerns.
For SouthCoast, the payments from utility companies it negotiated in 2019 just don’t work anymore. A third-party analysis shows construction and operation costs have spiked more than 20%, according to Southcoast Wind Energy CEO Francis Slingsby.
“The existing PPAs will not attract the financing necessary to construct the Clean Energy Resource and Project because they are low-priced, have no indexation and thus offer no way to overcome the significant and unforeseen economic challenges,” Slingsby wrote in June 2 testimony to Rhode Island regulators.
Both Southcoast and Avangrid plan to rebid for new power purchase agreements in Massachusetts in the hopes of getting more money from the utility companies.
Will proceed as scheduled
Orsted A/S, co-developer of the Revolution Wind Farm slated to provide electricity to Rhode Island and Connecticut, has no plans to rebid its agreements, according to Meaghan Wims, a spokesperson for the developer. Ted Kresse, a spokesman for Rhode Island Energy, also confirmed that the project is moving forward.
Gov. Dan McKee, too, is backing the existing deal.
“We have no concerns with the Rhode Island power purchase agreement that was approved for the Revolution Wind project in the Spring of 2019,” Olivia DaRocha, a spokesperson for McKee’s office, said in an emailed statement. “Pending environmental/construction permit approval at the federal level on the project, we are anticipating the Revolution Wind project to begin construction in 2024 and be operational in 2025.”
According to 2019 power purchase agreements, Rhode Island’s then-utility operator National Grid agreed to pay the developer 9.84 cents per kilowatt-hour for 400-megawatts of electricity from the offshore wind facility over the entire 20-year contract. National Grid in turn would earn $4.6 million in renewable energy credits sold from the project.
While project co-developer Eversource Energy recently agreed to sell its remaining share of the undeveloped federal lease area to Orsted amid financial woes, the Danish wind giant appears to have survived the economic storm unscathed, reporting a $1.02 billion first-quarter profit for the year.
Construction projects are always trying to negotiate their contracts. It’s just part of the business.
– Patrick Crowley, a union organizer and co-chairman of Climate Jobs Rhode Island.
Amanda Barker, who heads the Rhode Island State Committee for New England for Offshore Wind, chalked up Orsted’s strong financial footing in part to project timing – unlike SouthCoast, which took shape later, Orsted was able to buy steel and copper for construction before inflation and supply chain snafus took hold.
It helps, too, that Orsted is also developing on a slew of other wind farms along the East Coast, including the neighboring South Fork Wind Farm which will power Long Island.
“It could be an economies of scale thing,” Barker said. “They have already started building components so things seem to be going ahead full force.
Crowley shared Barker’s confidence.
“I think the prognosis for the industry continuing to develop here in Rhode Island looks healthy and robust and I am looking forward to the jobs that come with it,” he said.
Meanwhile, area residents and fishermen who have expressed concern over the pace and environmental repercussions of the nascent industry welcome any potential slow down to the SouthCoast project. That includes residents of Portsmouth, Middletown and Little Compton, who have expressed concern over a proposal to run a transmission line from the SouthCoast Wind Farm up the Sakonnet River, over Portsmouth and out Mount Hope Bay to reach land in Somerset’s Brayton Point.
The cable plan proposal is under consideration by the Rhode Island Energy Facility Siting Board. Amid the contract termination plans, the board has asked the developer to prove why it should keep considering the cable plan application instead of postponing until there is a new power purchase agreement in place. The board will hold a hearing on that topic on June 12.
Slingsby in his written testimony insisted that while the new contracts are still being ironed out, the developers remain committed to the project.
“Moving to terminate the existing PPAs does not mean that SouthCoast Wind is any less committed to fully developing its offshore wind Clean Energy Resource and necessary transmission connectors, including the Project that is the subject of this proceeding,” Slingsby wrote.
Marisa Desautel, an attorney representing Little Compton and Middletown in the review, was unconvinced.
“This is like building a school when you don’t have the students,” she said. “At the very least, the ESFB needs to wait and see what happens and if SouthCoast can successfully bid again.”
This is like building a school when you don’t have the students. At the very least, the ESFB needs to wait and see what happens and if SouthCoast can successfully bid again.
– Marisa Desautel, an attorney representing Little Compton and Middletown to the R.I. Energy Facility Siting Board
Slingsby in testimony referenced plans to respond to a new, draft request for proposals from Massachusetts Office of Energy Resources to buy up to 3,600 megawatts of wind-powered electricity. But the proposed timeline for the new bid wouldn’t end with signed contracts until August 2024, according to Slingsby’s testimony.
Desautel didn’t see the delay in the project as a negative, but rather a chance for more thorough review on what she described as a fast-moving process.
Fishermen toss snowball metaphor
Also welcoming a delay was Rich Hittinger, a longtime recreational fisherman and first vice president for the Rhode Island Saltwater Anglers Association.
“We are not in opposition to offshore wind but we believe it needs to be done in a responsible manner,” Hittinger said. “Right now this is a snowball, rolling down the hill that is going to crush us all. It would probably be a good thing to slow it down.”
The association opposed SouthCoast’s power line proposal, fearing that running a transmission line up the Sakonnet River would disrupt the scarce and sought after Atlantic Cod that are reared there.
“That area is very important to fishing and fish resources,” Hittinger said. “There’s no reason they have to run it up the Sakonnet, except that it’s cheaper for them.”
Barker, meanwhile, hoped state regulators would not halt their review of the cable plan so as not to delay the project any further.
“We are at a pivotal point in our transition to a clean energy economy and a strong offshore wind industry that could make our region a leader,” Barker wrote in testimony to the board. “It is crucial that the RI EFSB process does not result in any more delays in bringing this critical project online.”
The Energy Facility Siting Board will hear arguments from SouthCoast on whether to continue its review of the cable plan at a meeting in its scheduled for 1 p.m. on June 12. The meeting will be held in Warwick but also live-streamed.
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