The wholesale price the state of Massachusetts will pay for electricity generated from the 800-MW Vineyard Wind offshore wind project has raised a few eyebrows. Not because it’s high, but because of how low it is.
Documents from the Executive Office of Energy and Environmental Affairs, Department of Energy Resources released by the state show that Vineyard Wind will provide the Commonwealth with energy and renewable energy certificates at a total levelised price of US$0.065/kWhr over the term of the contracts.
The department said that, on average, the contracts are expected to reduce customer’s monthly electricity bills by 0.1% to 1.5%.
“The total price is materially 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/KWhr over the 20-year term of contract,” the statement said.
Over the life of the contract, the Vineyard Wind Project is projected to provide an average US$0.014/KWhr of direct savings to ratepayers.
In addition to the direct market benefits from these fixed cost contracts, the 800-MW offshore wind project also provides indirect benefits. These indirect benefits include 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.
Overall, the total direct and indirect benefits to Massachusetts ratepayers from the long-term contracts with Vineyard Wind are expected to be US$0.035/kWhr, or US$35.29/MWhr on average over the term of the contract, with total net benefits of approximately US$1.4Bn.
Vineyard Wind, which will develop the project – the first large-scale, commercial offshore windfarm in the US, released the following statement about the successful conclusion of contract negotiations with the Massachusetts electric distribution companies. Vineyard Wind LLC is 50% owned by funds of Copenhagen Infrastructure Partners and 50% by Avangrid Renewables.
Vineyard Wind chief executive Lars Thaaning said, “Today’s historic filing represents the start of an industry, one that will assure access to abundant clean energy resources for decades to come.
“Vineyard Wind is pleased to offer a competitive price to energy consumers in the Commonwealth of Massachusetts while continuing to advance the clear environmental and economic benefits associated with offshore wind.
“By utilising federal investment tax credits within the structure of a long-term power purchase agreement, Vineyard Wind was able to offer an attractive price to the benefit of consumers while creating value for its shareholders. This long-term investment and commitment to Massachusetts will stimulate job growth, economic development and acceleration of an emerging offshore wind industry in the US.”
In a related development, the Massachusetts House of Representatives recently passed a bill that could see the volume of offshore wind developed off the coast of the state increase from 1.6 GW by 2035 to 3.2 GW. The bill now needs to be approved by state governor Charlie Baker before it becomes law.