A provision tucked into the massive stimulus and federal spending package adopted by Congress last month is likely to bring down the cost of power generated by one of the offshore wind projects expected to deliver electricity to Massachusetts later this decade.
Officials behind Mayflower Wind announced Friday morning that the price of electricity and transmission from the offshore wind farm is slated to drop lower than was contemplated in the contracts a state agency approved last year because the spending plan Congress passed Dec. 21 makes offshore wind projects that begin construction between 2017 and 2025 eligible for a 30 percent investment tax credit, as opposed to the 12 percent credit for projects that began in 2019 or the 18 percent credit for projects that got underway in 2020.
Because of the new ITC level — and a provision included in the project's contracts that requires it to reduce its prices if it qualifies for a greater tax credit — Mayflower Wind said the electricity its turbines generate will cost $70.26 per megawatt-hour (or about $.08 per kilowatt-hour).
In 2019, the average retail price of electricity in Massachusetts was about $.18 per kWh, according to the latest data from the U.S. Energy Information Administration. The Bay State had the third-highest price in the contiguous United States, behind Connecticut and Rhode Island.
"Mayflower Wind creates environmental and economic value. We are proud of this consumer savings provision of our bid. The work we have done to embrace the federal tax credit program is putting us [on] a trajectory to lower our price and increase our value to customers," Mayflower Wind CEO Michael Brown said.
A joint venture of Shell and Ocean Winds North America, Mayflower Wind was picked unanimously in 2019 by utility executives to build and operate a wind farm approximately 26 nautical miles south of Martha's Vineyard and 20 nautical miles south of Nantucket. The 804-megawatt project is expected to be operational by December 2025.
In a letter recommending that the Department of Public Utilities approve the contracts, the Department of Energy Resources wrote last year that the contracts "require Mayflower to maximize the federal investment tax credit ('ITC') for which it qualifies" and if the project is able to secure a more lucrative credit, "the contracted price will be reduced, providing even greater benefits to Massachusetts ratepayers."
"The Baker-Polito Administration is pleased that due to commitments included in the contract negotiated with Mayflower Wind, their project is now on course to provide Massachusetts residents with significant clean offshore wind energy at an even lower rate, continuing to prove that climate action can be cost-effective," Energy and Environmental Affairs Secretary Kathleen Theoharides said. "Offshore wind is critical to meet our net zero emissions commitment by 2050 and is an incredible opportunity for economic development in the Commonwealth, so we are grateful to the Massachusetts congressional delegation for their work to expand the federal Offshore Wind Energy Investment Tax Credit."
Though the DPU approved the power purchase contracts between Mayflower Wind and the state's electric distribution companies in early November, they remain on hold after Attorney General Maura Healey filed a motion to have DPU reconsider the level of compensation it allowed for the utilities.
The 2016 clean energy law that required the Baker administration to procure 1,600 MW of offshore wind power authorized energy distribution companies to issue a "remuneration" charge, capped at 2.75 percent and regulated by DPU, to recoup costs associated with the procurements and possible construction of new transmission infrastructure, and for the risk associated with the long-term contracts.
The contracts that DPU approved for Mayflower Wind in November allowed the utilities to seek the maximum remuneration of 2.75 percent. Healey argued in a filing that DPU failed "to provide a statement of reasons for its remuneration decision and to explain how the 2.75 percent is tied to its reasoning."
In a response brief filed in December, the utilities said Healey's argument was "unfounded" and that DPU should not change the remuneration rate.
"The Attorney General has failed to raise any valid issue for reconsideration and the Department should not reconsider its decision. As demonstrated above, the Department provided a robust statement of reasons and adequate subsidiary findings of fact to support the approved remuneration percentage," they wrote.
Brown, the Mayflower Wind CEO, added, "We look forward to speedy resolution of the Attorney General's pending motion and concluding the process of locking in this benefit to the customers."
In addition to the expected economic benefits of the Mayflower Wind project, developers have also committed to putting more than $77 million towards economic development, including the creation of an Offshore Wind Development Fund, $10 million for marine science and fisheries research, $7.5 million for port upgrades and $5 million for a low-income strategic electrification program.
The Mayflower Wind team said in its bid that it is committed to locating "our operations and maintenance jobs and base in Massachusetts with at least 75% of O&M jobs being local, with a commitment of $20,000 additional funding per employee shortfall to support further workforce development if required." It also committed to a supply chain strategy that would have the company turn to local providers first.
In the publicly-available version of Mayflower Wind's bid, the project developers pledged economic impacts up to "$3.7 billion in electric rate reductions, 10,680 jobs over the life of the project, and direct spending by Mayflower Wind of more than $1.2 billion with virtually all in" economically-distressed areas.
Correction: the original version of this article listed incorrect energy costs per kilowatt-hour, for both Mayflower Wind and the state average. WBUR regrets the error.
This article was originally published on January 08, 2021.