New London Makes Sense of Connecticut’s Selection of a Bridgeport-based Wind Deal

As New London leaders absorbed news on Thursday of Ørsted and Eversource’s failed bid to secure a large slice of Gov. Lamont’s envisioned 2,000 megawatts of offshore wind power, the future and implications for proposed investments in the State Pier were still unclear.

But by Friday morning, David Kooris, acting chair of the Connecticut Port Authority, said that the Department of Energy and Environmental Protection’s choice of Vineyard Wind — rather than Ørsted/Eversource — for 804 megawatts of offshore wind power, would not cancel out the intended investment of $57.5 million into the infrastructure of State Pier.

“Despite some of the misperceptions I’ve been reading in the press in the last 24 hours or so, the selection of Vineyard Wind by no means terminates the ongoing discussion with Ørsted,” Kooris said during the port authority’s Friday meeting at Fort Trumbull.

A spokesman for the two companies, known together as Constitution Wind, confirmed that plans for the $57.5 million investment were still in the works as was the intention to invest $750,000 a year for two years, $1.5 million total, in the City of New London if the State Pier renovations are completed in a timely manner.

Vineyard Wind, a joint venture of Avangrid Renewables and Copenhagen Infrastructure Partners, proposed its project, dubbed Park City Wind, for Bridgeport. Kooris noted the similarity to Ørsted/Eversource’s pier infrastructure upgrades, but pointed out a major difference in ownership of the sites.

“Despite some of the misperceptions I’ve been reading in the press in the last 24 hours or so, the selection of Vineyard Wind by no means terminates the ongoing discussion with Ørsted”

“The short answer, because I’ve been firewalled outside of the RFP, the fundamental difference is they’ve been negotiating with two private property owners in Bridgeport. There are, I won’t say comparable because I don’t know, but I would say significant structural upgrades that are necessary there as well, as well as potentially dredging needs, so there are a series of infrastructure investments,” Kooris said. “Again, not being privy to the proposal, I don’t know how that blend of funding was proposed, but it is very similar to what we’re talking about here in terms of scope, but big difference here is it’s all on private property.”

“Again, not being privy to the proposal, I don’t know how that blend of funding was proposed, but it is very similar to what we’re talking about here in terms of scope, but big difference here is it’s all on private property.”

Ørsted/Eversource’s proposal for commercial business on state-owned property, and not paying taxes to the City of New London, has been an ongoing point of contention, said New London Mayor Mike Passero, in a phone conversation Friday afternoon.

“For the harbor development agreement, New London’s stake in that was the city saying stop, look, this may be state property, but not-for-nothing, this isn’t a court house or a state park or a hospital. This is a commercial transaction in which the state’s going to make millions of dollars and this foreign company and this huge energy conglomerate are going to make billions of dollars. And, you know, you can’t do this without meeting your property tax obligation in the City of New London — somebody’s got to pay the property taxes,” Passero said, noting that the city’s property taxes on State Pier would amount to $1.5 – $2 million annually.

“It’s a long game and this industry is going to be developing for a long time,” Passero said. “And Ørsted/Eversource are still committed to completing the harbor development agreement with the State of Connecticut, so there’s still anticipated to be a $100 million redevelopment of State Pier to support the offshore wind industry.”

“A significant portion of that property tax replacement was based on Ørsted and Eversource winning at least 400 and up to 800 megawatts of power, to get the full package, and they didn’t get it. So that money’s gone. So now the state’s got to go back and figure out how to fix this deal so that the taxpayers of New London aren’t subsidizing the State of Denmark, Eversource and the State of Connecticut as they’re all making millions and billions of dollars,” he said.

Passero said Ørsted/Eversource’s failed bid also contained $40 million in regional economic investment in education, supply chain, and municipalities over a ten-year period, which would have been managed by the Southeastern Connecticut Enterprise Region, known as seCTer, a nonprofit economic development organization based in Groton.

“We were counting on brownfields money, counting money for the construction of a YMCA here — pockets of money that were part of Ørsted’s bid to DEEP. And all those benefits were going to the City of New London or southeastern Connecticut for economic development … and bingo, that’s gone, but the game’s not over. It’s a long game and this industry is going to be developing for a long time,” Passero said. “And Ørsted/Eversource are still committed to completing the harbor development agreement with the State of Connecticut, so there’s still anticipated to be a $100 million redevelopment of State Pier to support the offshore wind industry.”

The failed bid is a setback for the City of New London, Passero said, because he had a deal that replaced the lost tax revenue because the state is a non-taxable entity.

However, in a memo to the City Council, that Passero read aloud over the phone, he said his goal “remains to achieve a revenue stream from the commercial transaction between the state and Ørsted/Eversource that will equitably replace the property tax revenue that is lost to the city because the state owns the property.”

Ørsted/Eversource has already contracted for a 300-megawatt portion of Revolution Wind — a 700 megawatt offshore wind farm planned for federal waters near Martha’s Vineyard. The farm will be divided into a 400 megawatt portion that will deliver power to Rhode Island and a 300 megawatt capacity portion that will deliver to Connecticut.

Kooris said it was important to remember that Ørsted/Eversource’s use of State Pier was not exclusively connected to projects delivering power to Connecticut.

“You don’t want to buy too much at once because then you’re locked in to that price and if it goes up, great, but if it goes down, you’re paying too much for electricity”

“As it specifically relates to New London, our expectation has always been that if the harbor development agreement is executed for the State Pier and that results in Ørsted utilizing the facility for 10 years or more as an installation hub, that they’ll be doing so for projects that will ultimately deliver power in Connecticut as well as projects that will ultimately deliver power in other states, so the utilization of the facility by Ørsted is not exclusively linked to the power purchase of Connecticut,” Kooris said. “Obviously there’s a relationship, obviously the purchase of the 300 megawatts from them put us in the mix in terms of having a relationship with a company that led to negotiations that are underway — but they are to a great extend decoupled.”

Federal tax credits for offshore wind are expiring at the end of 2019, which means that the state is leaving money on the table by not bidding the full 2,000 megawatts, but Kooris said the state was trying to time its entry into the wind market to take advantage of dropping costs.

“That’s what they’re trying to weigh — how much should we buy now versus later. It’s not unlike investing in a stock index fund. You don’t do it all in January. You’re better off doing it incrementally over the course of a year because sometimes it’s up, sometimes it’s down. So you kind of even out. It’s the same basic idea. You don’t want to buy too much at once because then you’re locked in to that price and if it goes up, great, but if it goes down, you’re paying too much for electricity,” he said. “Fundamentally they’re saying we know the prices are a little bit depressed now because of the tax credits so we want to take advantage of that but we don’t want to over-commit because if the industry really grows and prospers and costs come down further, it will be even better than the impact of the federal tax credit, or maybe there will be more or different federal tax credits in the future.”

Kristina Rozek, director of communications for the DEEP Office of the Commissioner, said in an email on Friday that the state authorized, but did not require, the Department of Energy and Environmental Protection to procure 2,000 megawatts.

“DEEP selected the bid that best met the goals of the request for proposals in terms of economic development, winter fuel security, environmental compatibility, and in the best interest of ratepayers. The bill also calls for DEEP to set a schedule for future procurement of offshore wind through the Integrated Resources Plan, a draft of which is expected in June 2020. The 804 megawatts is a significant purchase and a great start toward meeting our goals,” Rozek wrote.

In a phone call Friday afternoon, Katie Dykes, commissioner of DEEP, said the price of electricity to consumers was the priority in awarding the 804 megawatts of power.

“We are a relatively small player in terms of power purchase, but the hope is now, with potentially two companies having a significant presence in our ports, we will have a disproportionately high share of the on-land and maritime economic activity that results from offshore development.”

“In this procurement … we assigned the lion’s share around the price and cost of the project with respect to energy supply,” she said. DEEP also considered how the proposals mitigated impacts to fishing. “We set a level playing field and invited bidders. To emerge as the winner , companies had to sharpen their pencils and provide a robust package. This one [Vineyard Wind] is exemplary in all different aspects.”

Kooris said the selection of Vineyard Wind “cautiously, optimistically” presents a scenario where two of the state’s deepwater ports will play a commanding role in this industry.

“No one ever presumed New London would be the only facility on the East coast. There are multiple developers who are vying for and will ultimately be awarded power purchase contracts in various states from Virginia up to New Hampshire now,” he said. “We are a relatively small player in terms of power purchase, but the hope is now, with potentially two companies having a significant presence in our ports, we will have a disproportionately high share of the on-land and maritime economic activity that results from offshore development.”

There is no guarantee that turbine manufacturing will take place in North American, much less Connecticut, but according to Kooris, the state is well-positioned with a workforce trained in precision manufacturing, should the opportunity come available.

“If we cannibalize our economy such that we get a great boost in year two, but then can’t do what we need to do in year five, then we’re not any better off. It’s where to find that sweet spot, how much to do when, particularly with all the information coming out now”

“There is a significant manufacturing base built up around this industry, with a pipeline of suppliers in northern Europe, but the hope is the scale of this opportunity is such in North America, and the east coast in particular, that it represents a tipping point and makes economic sense for the Siemens and the GEs of the world to replicate some of that manufacturing capacity this side of the Atlantic,” he said. “If they do so they will be very much advantaged if they locate as close as possible to the installation hubs. And by having now potentially two of those within the state I think we are in a very good position to get that manufacturing.”

Kooris said he was on Lamont’s Council on Climate Change, known as GC3, that set the target date of 2040 for Connecticut’s independence from fossil fuel usage.

“My position on GC3 was always we should be focusing more on what we can do to export the emission reductions than our own emissions reductions,” he said. “If we supply a company that has a great foundation, that creates jobs and results in emissions reductions globally across a sector, that will dwarf our reducing emissions within the state.”

He said the challenge was to find a balance between taking actions to reduce emissions and preserving enough resources to act in the future.

“If we cannibalize our economy such that we get a great boost in year two, but then can’t do what we need to do in year five, then we’re not any better off. It’s where to find that sweet spot, how much to do when, particularly with all the information coming out now,” he said. “That’s why wind is so interesting at this moment in time in this location because it allows you to do both — you can make a big buy and reduce your energy and in the process grow your economy so that you can do something else two years down the road.”