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HARTFORD — Hoping for a sense of how supply chain issues, new tax credits and a redeveloped New London State Pier will have on offshore wind prices, the Lamont administration announced on Tuesday it plans to take new bids for offshore wind projects for the first time since 2019.
The Department of Energy and Environmental Protection announced plans to open two procurements for zero-carbon energy this year, including one specifically for offshore wind. The department has authority to procure about another 1,200 MW of offshore wind, but said it hasn’t determined how much, if any, it will procure this year.
Speaking to state lawmakers during an Energy and Technology Committee hearing on Tuesday, DEEP Commissioner Katie Dykes didn’t commit her department to selecting any bids, saying they want to evaluate how the costs would stack up against forecasts of future energy prices and see if they’re in the “best interests” of electric customers.
Dykes told the lawmakers that it’s a “dynamic moment” in offshore wind, with factors in play that could push costs up, and others that could push costs down – leaving behind major uncertainty about where the price of new offshore wind projects will land.
She said supply chains are starting to re-establish themselves after disruptions from COVID that have driven higher costs for materials like steel, and interest rates and labor costs have increased since the last time Connecticut solicited offshore wind projects.
At the same time, Dykes said technologies have advanced, with companies developing larger turbines capable of producing more energy. And federal guidance on a host of tax credits included in the 2022 federal “Inflation Reduction Act,” is expected soon, she said. In a competitive bidding process, she said developers have an incentive to use those tax credits to lower their price and boost their chances of being selected.
Dykes also said she has heard anecdotally that developers have “a lot of interest” in using the New London State Pier, where the Connecticut Port Authority said last week that work has completed on the heavy-lift delivery platform that the offshore wind partnership of Eversource and Ørsted will start using this spring for staging in the construction of their South Fork Wind project.
“We’re eager to see what the pricing will be,” Dykes said. “I think that’s the reason we wanted to put our line in the water at this time.”
Energy and Technology Committee co-chair Sen. Norm Needleman, D-Essex, told Dykes he thought the timing was right to open bids for offshore wind projects, saying everyone is “hanging by our thumbnails” waiting to see the prices that come in for the 2,000 MW procurement New York opened last year.
The last time DEEP took bids for offshore wind in 2019, it selected Park City Wind to sell power at $79.83 per megawatt-hour to Connecticut electric customers from Avangrid’s 804 MW project proposed to be built off the coast of Martha’s Vineyard.
Last year, Avangrid announced it was planning to ask Connecticut to raise the price of that contract, saying the projects weren’t feasible at the contracted rate because of escalating costs and supply chain shortages.
State Rep. Holly Cheeseman, R-East Lyme, said she was concerned the unpredictability of supply chain and permitting issues for offshore wind projects would lead to more developers coming back and asking for higher rates after being selected, and asked what protections the state has from that.
Dykes said the department does not renegotiate prices of contracts unless a new revenue source – like a federal tax credit – would lower the cost of a project for Connecticut electric customers.
“We use competition for a reason, in order to be assured that we are getting the best projects at the best price for Connecticut ratepayers,” Dykes said. “It’s really not fair to other bidders, and undermines that process if we then renegotiate prices outside of a competitive process.”
Concerns about the environmental impacts of pile driving on the ocean floor to install turbines, and offshore wind-related jobs coming in below expectations have led some lawmakers to push for DEEP to weigh those factors more heavily in future offshore wind procurements.
Dykes said there would be a period before DEEP actually opens bids to take input on how it should shape the proposal to include those considerations.