Avangrid pulls out of offshore wind contracts

Decision appears unlikely to impact the Salem port

by Karen Kahn

Avangrid, which is behind the 1200-megawatt Commonwealth Wind project, announced recently that it is pulling out of the power purchase agreements it had negotiated last spring. That puts at risk Commonwealth Wind, which was going to be staged from the new Salem wind port. Avangrid had planned to be the first lessee of the port, using it to assemble its wind turbines for the project.  

Avangrid had tried to renegotiate the power purchase agreements with Massachusetts’ utilities and state agencies but there was no interest in reopening the process. The company claims that between the war in Ukraine, which has disrupted supply chains, and rising interest rates, it cannot obtain financing for the project based on the price that it originally negotiated. Essentially, according to Avangrid, costs for building the wind turbines have doubled in just a few short months.

According to Avangrid, costs for building the wind turbines have doubled in just a few short months.

Avangrid has tried to put to rest concerns that they will not move forward with the project. They have decided that it is more practical to pay the multimillion-dollar fine associated with reneging on the contracts and to re-enter the next round of bidding for wind farm contracts in Spring 2023. The company claims, if it wins the contracts, it will still be able to build the Commonwealth Wind by 2028, as it had originally planned.

Avangrid senior vice president Kim Harriman explained to the Boston Globe, “We’re committed to finding the right solution to bringing Commonwealth Wind forward. We’re not starting fresh. If anything, we’re further ahead than probably anybody else that’s going to bid.”

That’s good news for Salem. Presuming Avangrid is able to rebid and win a contract, all indications are it will move forward with its lease at the Salem port. And if not, the winners of the bidding contest will in all likelihood need the Salem port to assemble their offshore wind turbines.

New England for OffShore Wind (NE4OSW), of which SAFE is a coalition partner, made the following statement regarding the Avangrid announcement:

Avangrid’s request to dismiss the Commonwealth Wind PPA [power purchase agreement] proceedings is unfortunate. The Commonwealth Wind project is critical to Massachusetts’ ability to achieve its 2030 climate target and offshore wind goals. We are also disappointed that the state’s utilities and Avangrid were unable to renegotiate the PPA in a way that would continue to ensure fair energy prices for ratepayers and keep this important project on its intended timeline given the climate and economic benefits it was poised to provide.

While Massachusetts has not officially announced a new solicitation into which Avangrid could bid Commonwealth Wind in 2023, the coalition will advocate for a solicitation this spring, as required by law, to ensure Massachusetts stays on track with its offshore wind goals. We believe that the competitive bidding process will result in a beneficial cost of energy that will protect Massachusetts ratepayers from the ongoing price volatility of fossil fuels.

In the meantime, Avangrid is in the process of building its first offshore wind project in Massachusetts waters. Vineyard Wind, an 800-megawatt project, is expected to come online in 2024. Progress is also being made on the build out of the Salem wind port. Despite Avangrid’s announcement, a few days later, the Baker administration awarded $75 million to Crowley Maritime, the port developer, as part of its infrastructure improvement package. Crowley expects to break ground in summer 2023.  

Karen Kahn is a board member of SAFE.