Avangrid Senior Vice President for Offshore Projects, Sy Oytan, said that the company will ask Connecticut for a “modest adjustment” to the state’s contract to buy power from the company’s planned 804 megawatt Park City Wind project south of Martha’s Vineyard, to “reflect the current economic realities.”
In a call with investors on Thursday, Oytan said the company would be delaying by a year both its Park City project and the 1,200 MW Commonwealth Wind project, and would ask both Connecticut and Massachusetts to adjust contracts to buy power from those projects.
Since Connecticut agreed to buy power from the Park City project in 2019 at a price of $79.83 per MWh, Avangrid has faced the same challenges as other businesses around the world – inflation, higher interest rates, supply chain shortages and escalating commodity prices, Oytan said.
“As both Park City and Commonwealth Wind were bid at a time of 40 years of inflation stability, we are working hard to examine every opportunity to improve the business case of both projects,” Oytan said.
Avangrid representatives did not immediately answer Friday afternoon when asked what new price it would be seeking from Connecticut for the power generated by the Park City project.
A spokesman for the Connecticut Department of Energy and Environmental Protection said that the department will review any request for an amendment to the Park City contract when it is submitted, and will determine if it is “in the interest of ratepayers and helps further the state’s energy goals,” including reliability, economic development and equity.
Park City is now scheduled to come online in 2027 instead of the original state date of 2025. Oytan told investors that the delay will allow Avangrid to use newly-developed wind turbines with a capacity of between 17 to 20 MW each.
That is a significant advance from the 13 MW turbines Avangrid is using for the 800 MW Vineyard Wind project it is building now, which is still expected to come online by the end of 2023, Oytan said. He said Avangrid is also exploring whether the Park City and Commonwealth projects could benefit from any tax credits in the Inflation Reduction Act that Congress passed in August.
Delay “not a surprise” given global economy
Dan Dolan, president of the New England Power Generators Association, said that Avangrid’s announcement was not a surprise considering Avangrid is facing the same challenges as just about everyone in energy around the world – a tightening supply chain and increasing commodity prices.
“I’m curious about them throwing out the concept of trying to renegotiate some of the prices and the costs [of their contracts with Connecticut and Massachusetts],” Dolan said. “Unfortunately, given the broader global dynamics, it’s not a surprise right now.”
Melissa Birchard, director of clean energy for the nonprofit renewable advocate Acadia Center, said that the “short delay” of the two projects is understandable given the global challenges in energy.
Birchard said it’s good news that the delay still keeps the projects in line to be completed within the timeframes laid out in their contracts with the states. She said the push for offshore wind needs to continue on multiple fronts, to make sure that progress is still being made even if individual projects are delayed.
“We need to do everything we can to bring offshore wind to customers as soon as possible, along with other renewables,” Birchard said. “The spiking costs of fossil fuels are hurting families and businesses and the impacts of climate change are getting worse every year.”
Dolan said the delay shows the challenges that come with making big bets on individual projects that are funded by ratepayers under contracts that span multiple decades.
“It puts a lot of eggs in one basket, rather than trying to set up a more robust market signal through something like carbon pricing that can have a lot of other projects in line to backfill, should there be any delays in any one,” Dolan said.
State Rep. Holly Cheeseman, R-East Lyme, a member of the Energy and Technology Committee, said that given permitting delays in the U.S. Bureau of Ocean Energy Management and global supply chain issues, she was not surprised that costs have increased since the agreement was made.
“Am I surprised, no,” Cheeseman said. “But I would be very skeptical of a producer coming back and saying they want a higher price than they put in a bid for, because that’s not in the best interest of the Connecticut ratepayer.”
State Sen. Norm Needleman, D-Essex, also said he was not surprised that inflation would have an impact on offshore wind costs. But without knowing what kind of increase Avangrid is asking for, he couldn’t say whether it was a reasonable request.
“If it’s a modest increase, and DEEP thinks that it’s fair, then so be it,” Needleman said. “The devil’s in the details here, and I think DEEP will be thorough.”
Eversource/Ørsted partnership says it’s still on schedule
The partnership between Danish energy giant Ørsted and Eversource is the other developer with a contract to sell power to Connecticut from an offshore wind development. The partnership signed agreements to sell 304 MW of power from its 400 MW Revolution Wind project planned off the coast of Rhode Island.
Eversource has said it plans to sell its stake in the partnership soon to cash in on booming prices for offshore wind leasing areas, and pay off short-term debt.
In a statement, the joint venture between the two companies said that the offshore wind industry is seeing the same supply chain and inflationary pressures as the rest of the global economy, but said that its projects are still on track.
The 132 MW South Fork Wind being built off of Long Island is on track to be operating before the end of 2023, and Revolution Wind and the 880 MW Sunrise Wind are still expected to be operational in 2025.
The statement said the venture locked in more than 80 percent of its supply costs for those projects because they were “early movers” in the offshore wind market, which has helped keep them on track.
“As we move forward, we remain committed to developing a new domestic supply chain in the U.S. that will play an important role in reducing costs and minimizing disruption to future offshore wind projects, while creating well-paying jobs for American workers across the country,” the statement said.
The partnership did not say whether they thought they would need to negotiate their contracts with Connecticut. The venture agreed in 2018 to sell Connecticut about 200 MW from the Revolution Wind project at a price of $99.50/MWh, as well as a 104 MW expansion of that project for $98.43/MWh.
The impact of those fixed-rate contracts on Connecticut electric customers depends on the market price of electricity. If market prices are below the price of the contract, customers pay more for the fixed-price contract. If prices are high, they save money.
When low natural gas prices led to low electric prices in 2020, Eversource blamed a similar contract for Connecticut to buy over 1,000 MW from the Millstone Nuclear Power Plant in Waterford at $49.99/MWh for a rate increase.
This year, as record-high gas prices have led to high electricity prices in New England, the relatively low price of that Millstone contract led to a rate decrease.
This story has been corrected to reflect that the comments were made by Sy Oytan, not Avangrid CEO Pedro Azagra