Avangrid Cancels Park City Wind Contract, Pays State $16m Penalty

Block Island Wind Farm (Credit: CT Examiner/Clingman)


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After a year of unsuccessfully trying to negotiate a higher price with the state, Avangrid decided late Monday to pay about a $16 million penalty to cancel its contract to sell Connecticut power from its Park City Wind project.

The 804 megawatt project accounts for nearly three-quarters of the 1,108 MW of offshore wind projects from which Connecticut has contracted to buy power. While Avangrid said it plans to re-bid the project at a higher price, for now the decision to cancel takes Connecticut’s largest contract for an offshore wind supplier off the table, and makes its cost uncertain.

“After exploring all potential solutions to the financial challenges facing the project, and engaging in good-faith and productive discussions with Connecticut state officials regarding these challenges, it is clear the best path forward for Park City Wind is in the termination of the Power Purchase Agreements and a rebid of the project,” the company said in a statement late Monday.

Since Avangrid’s announcement last year that it was trying to renegotiate a higher price, offshore wind developers have complained that inflation and supply chain issues have caused the prices of their projects to skyrocket, with some developers threatening to walk away. 

Avangrid, which owns United Illuminating and is owned by Spanish energy giant Iberdrola, declared In September 2022 that the 804 megawatt offshore wind project planned for off the coast of Martha’s Vineyard was no longer possible at the 2019 contract price.

At the time, the company said that inflation, higher interest rates and supply chain shortages made the agreed price of $79.83 per MWh unworkable – and said they would ask Connecticut for a “modest” increase to the price.

But the Connecticut Department of Energy and Environmental Protection was not receptive to changing the terms of the contract after the fact, with Commissioner Katie Dykes telling lawmakers in March that renegotiating the contract would undermine the procurement process and would be unfair to other bidders.

Dykes said in a statement on Tuesday that DEEP met with Avangrid and industry experts over the last several months to talk about the “near-term” challenges facing offshore wind projects in the Northeast U.S., and hoping to hear possible solutions.

“Unfortunately, these discussions failed to materialize in a proposal that met these goals. DEEP is working with the state’s utilities to ensure that bidders into future solicitations—including our upcoming solicitation for offshore wind—are able to deliver completed projects at the prices they offer and face steeper penalties if they do not,” Dykes said.

The partnership of Eversource and Orsted behind Revolution Wind – the project that accounts for the remaining 304 MW of offshore wind power Connecticut has agreed to buy – haven’t tried to renegotiate their prices of $99.50/MWh for 200 MW and $98.43/MWh for another 104 MW from Revolution.

And the canceled Park City Wind contract isn’t unique in New England. Avangrid agreed in July to pay Massachusetts a $48 million penalty to cancel its contract to sell that state power from the 1,200 MW Commonwealth Wind project. And on Monday, SouthCoast Wind – a joint venture of Shell and Ocean Winds North America – agreed to pay $60 million to Massachusetts to cancel contracts for its 2,400 MW project planned off Martha’s Vineyard.

In Rhode Island in March, a procurement for offshore wind drew only one bidder – an 884 MW proposal from Eversource and Ørsted. And in August, Ørsted CEO Mads Nipper warned the company could walk away from unprofitable projects in the U.S. amid the turbulence in pricing and supply chains.


State Rep. Jonathan Steinberg, D-Westport, co-chair of the Energy & Technology Committee, said that Avangrid gave several lawmakers a heads up that the company planned to cancel its contract a couple of months ago.

“They expressed their concerns about the volatility of the marketplace and the affordability, the math doesn’t work anymore based on the supply chain and inflationary issues,” Steinberg said. “It seemed from their perspective to be inevitable.”

Steinberg said DEEP told him they were moving ahead with their procurement for offshore wind, announced earlier this year, with the expectation that Avangrid would cancel the contract. He said he expects the contract cancellations to affect how all the New England states procure offshore wind in the near term.

The first question will be the responses to DEEP’s procurement – how many bids, and at what prices, he said. There will need to be changes to future contracts, including an inflation index to limit the risk to developers, he said. 

“I will say, it’s a little bit concerning that contracts are not being honored and that they are taking the penalty route,” Steinberg said. “That makes me wonder whether the penalty is an effective means of ensuring the integrity of the contract.”

State Sen. Ryan Fazio, R-Greenwich, the ranking senate Republican on the energy committee, said a $16 million cancellation charge is nothing compared to the multi-billion dollar value of the contract.

“Clearly we as governments mispriced these contracts, not just in Connecticut,” Fazio said. “If the cancellation options are priced so low that you only have to pay cents on the dollar to get out of the contract if there’s any market swings – it creates a ‘heads, I win, tails, you lose,’ scenario for consumers in Connecticut and the Northeast.”

Fazio said he always expected that the cost of offshore wind projects would trend higher than the market price of electricity in the region, raising costs for consumers. He said he was concerned about prices of offshore wind continuing to escalate, raising those costs further.

In a statement, Gov. Ned Lamont said he was disappointed Avangrid decided to end the contract for Park City. When Connecticut signed that contract, Avangrid was expected to bring “affordable, clean, reliable power” to Connecticut electric customers.

“Offshore wind remains a critical resource to meet state, regional, and federal clean energy goals and help maintain reliable operations in the wintertime while creating thousands of good-paying jobs,” Lamont said. “That is why I recently joined other Atlantic state governors in urging the Biden Administration for federal action to address concerns about rising costs for offshore wind.”

A bump in the road

In New York, developers of four offshore wind projects are asking to increase their contracted prices by an average of 48 percent, according to New York energy officials. Beacon Wind, a joint project of Equinor and BP, is asking to raise its price to $190.82/MWh – more than double the original price for Park City.

“According to [the New York study], most of these offshore wind contracts in the Northeast are getting renegotiated from around 10 cents per kilowatt hour [similar to Revolution Wind] to around 15 or 16 cents,” Fazio said. “So that’s where we anticipate the market is for offshore wind, in comparison to five cents for the Millstone [contract] and three or four cents on the wholesale market.”

Steinberg said he’s hesitant to look at DEEP’s current procurement as a key indicator for the direction of wind long-term, because it’s a time when everyone is scrambling to find a way forward. He said he’s hopeful that some of the supply chain issues will be resolved in the coming years, alleviating some of the pressure.

“This is not specific to Connecticut,” Steinberg said. “I would like to see the New England states work in concert, to use our collective heft to negotiate better deals, but we’re all kind of trying to figure it out as we go.”

State Sen. Norm Needleman, D-Essex, the other co-chair of the energy committee, said the news was not unexpected.

“I’m hoping that as things settle down, we can get back to a more normal plan for deploying new wind energy,” Needleman said. “I am confident that it is still the way of the future, but this is certainly a bump in the road.”

Avangrid did not say whether its next proposal would include plans to renovate Barnum Landing in Bridgeport to use during offshore wind construction, and declined to elaborate beyond their statement. 

Steinberg said that while Avangrid suggests that it will keep the project moving forward if everything works out with the contract, that is a big presumption. And the state will want to see that the company is still committed to more than just providing power.

“The commitment to Connecticut is not simply in terms of the procurement, but in terms of jobs and projects,” Steinberg said. “So that reiteration on their part we take as very important.”