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Draft RFP could see another 800 MW of offshore wind in Massachusetts

Fri 05 Apr 2019 by David Foxwell

Draft RFP could see another 800 MW of offshore wind in Massachusetts
John Dalton: “the RFP’s accelerated schedule appears to be an effort to allow proposals to realise the benefit of the investment tax credit which expires at the end of 2019”

Late March 2019 saw Massachusetts electric distribution companies submit a draft plan to the Massachusetts Department of Public Utilities for up to 800 MW of offshore wind capacity.

The 83C 11 request for proposals (RFP), as it is known, is the east coast state’s second solicitation for offshore wind.

Power Advisory president John Dalton said the RFP has an accelerated schedule, which appears to be a deliberate effort to allow proponents to realise the benefit of the investment tax credit, which expires at the end of 2019.   

The schedule proposed is for an RFP to be issued on 17 May 2019, followed by confidential submission of proposals by 9 August 2019 and submission of public proposals by 16 August 2019. Selection of projects for negotiation is due to take place by 8 November 2019 with contracts executed by 13 December 2019 and the contracts submitted for regulatory approval by 10 January 2020.

“Similar to the first 83C RFP, the distribution companies are seeking to procure at least 400 MW of offshore wind capacity but will allow proposals from 200 MW up to approximately 800 MW, with up to 800 MW if the evaluation team determines that a larger-scale proposal is both superior to other proposals and likely to produce more economic net benefits to customers,” Mr Dalton explained. “An 800-MW project would utilise the full 1,600 MW procurement authority under the 83C legislation.”

Recognising that the 83C legislation specifies that price declines in subsequent procurements, the RFP will specify that the nominal levelised price of any proposal must be less than US$84.23/MWh (that is the Vineyard Wind price), with the price recovering all costs associated with the proposal, including the cost of offshore delivery facilities, cost of network upgrades, and, if applicable, energy storage. Massachusetts state law requires that each subsequent procurement result in a price lower than the one that precedes it.

Mr Dalton said one significant refinement is the treatment for transmission interconnections. “The RFP requires that proponents submit proposals committing to signing a voluntary agreement to ‘negotiate in good faith and use commercially reasonable best efforts’ to enter into an agreement with third-party offshore wind developers regarding the interconnection to and the expansion of such interconnection facilities,” he explained.

“The RFP allows the proponent to reflect any associated impact on pricing with this commitment, without an incremental proposal fee. 

“While this provision appears to be an improvement over the Expandable Transmission Network proposal in the first 83C RFP, there is no incremental value considered or assigned to proposals in the evaluation process if proposals improve upon this commitment – that is, if they have additional transfer capability that would reduce interconnection costs for subsequent facilities or use an independent offshore transmission network that reduces environmental impacts by reducing onshore transmission landings.  

“Reflecting such incremental value that a proposal offers would advance the objective of promoting more efficient development of interconnection facilities,” he explained.

The first project in Massachusetts waters, the 800-MW Vineyard Wind project came in at an unexpectedly low price. Vineyard Wind will provide the Commonwealth with energy and renewable energy certificates at a total levelised price of US$0.065/kWh over the term of the contracts. That means that on average, the contracts are expected to reduce customer’s monthly electricity bills by 0.1% to 1.5% and the price is below the levelised projected costs of buying the same amount of wholesale energy and RECs in the market, which is projected to be a total levelised price of US$0.079/kWh over the 20-year term of contract. The Vineyard Wind Project is therefore expected to provide an average US$0.014/kWh of direct savings to ratepayers, along with indirect benefits including energy market price reductions and lower renewable energy portfolio standard compliance costs through increased REC supply. Additionally, ratepayers receive the benefit of price certainty through a fixed-cost contract.

More recently, the results of the auction for offshore wind leases off Massachusetts eclipsed the results of all seven offshore lease sales in the US so far.

Announced by the Bureau of Ocean Energy Management at the end of 2018, the auction saw bids totalling US$405M submitted in what became a ground-breaking auction for offshore wind leases off the coast of Massachusetts. All three sums bid for the leases far exceeded the highest bids so far in the US offshore wind industry. If fully developed, the lease areas could support approximately 4.1 GW of commercial wind generation.

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