Massachusetts regulators approve PPAs for offshore wind energy generation, RECs

The Massachusetts Department of Public Utilities, in an April 12 order, approved the power purchase agreements (PPAs) between several companies, including Eversource (NYSE:ES), and Vineyard Wind LLC for offshore wind energy generation and renewable energy certificates (RECs) filed in July 2018.

As noted in the order, NSTAR Electric d/b/a Eversource; Massachusetts Electric and Nantucket Electric, each d/b/a National Grid; and Fitchburg Gas and Electric Light d/b/a Unitil – collectively referred to as the companies – in July 2018 each filed a petition with the department under the “Green Communities Act, St. 2008, c. 169, § 83C (Section 83C)” for approval of two long-term contracts to purchase offshore wind energy generation and associated renewable energy certificates (RECs).

Section 83C requires each electric distribution company to jointly and competitively solicit proposals for offshore wind energy generation by June 30, 2017, and, provided that reasonable proposals have been received, enter into cost-effective long-term contracts to facilitate the financing of offshore wind energy generation resources.

The order added that the companies solicited bids for up to 1,600 MW of offshore wind energy generation, and as a result of that process, the companies each seek department approval of two PPAs for energy and associated RECs from the Vineyard Wind 800-MW offshore wind energy generation project, which features two separate 400-MW phases, both located on the Outer Continental Shelf in the Bureau of Ocean Energy Management Lease OCS-A 0501 area.

The first phase of the project – Phase 1 – has a nameplate capacity of 400 MW and a commercial operation date (COD) of Jan. 15, 2022, while the second phase – Phase 2 – has a nameplate capacity of 400 MW and a COD of Jan. 15, 2023. The order added that the companies have agreed to purchase 100% of the energy and RECs generated and delivered by the project over a 20-year term.

The companies jointly conducted negotiations with Vineyard Wind resulting in a total of six PPAs. The order also said that the combined price for energy and RECs begins at $74 per MWh for Phase 1 and $65 per MWh for Phase 2, and increases by 2.5% for each year of the contract term. The 20-year average nominal cost of the two PPAs is $89 per MWh, the order said.

The order noted that the companies have provided evidence that the project will qualify as an RPS Class I renewable energy generating source. The proposed contracts provide that the companies are not obligated to purchase RECs if the facilities fail to qualify for RPS Class I. Therefore, the order added, the department finds that, prior to the delivery of any products under the contracts and for the duration of the contract terms, the facilities will meet the RPS Class I eligibility requirements.

The department also finds that the companies have demonstrated that the facilities will operate in a designated wind energy area for which a federal lease was issued on a competitive basis after Jan. 1, 2012, and that, as such, the companies have demonstrated that Phase 1 and Phase 2 of the project each qualify as an eligible offshore wind energy generating resource under Section 83C, for instance.

The order added that the department has found that entering into a long-term contract with a creditworthy counterparty, such as an electric distribution company, allows a developer to obtain favorable long-term financing. The companies argue that, based upon the information provided by Vineyard Wind, the PPAs would support Vineyard Wind’s ability to finance the project.

The order also said that in its bid, Vineyard Wind indicated that the investment commitments that it has secured to finance the project are predicated on long-term contracts for the output of the project and, thus, approval of the PPAs is necessary to secure financing. Accordingly, the department finds that the proposed contracts will facilitate the financing of the project, the order said.

The department also finds that the project will provide enhanced electricity reliability, the order said, noting that Vineyard Wind will interconnect and delivery energy into the regional transmission system at the Barnstable 115-kV substation and deliver energy into the Southeastern Massachusetts (SEMA) load zone. Because SEMA is geographically distinct from the location of existing regional wind resources, energy deliveries at that location will provide fuel diversification and improve the consistency of wind generation across New England, thereby enhancing regional system reliability, the order said.

Of avoided line loss, mitigated transmission costs, and protection from transmission cost overruns, the order noted that the PPAs provide for Vineyard Wind to deliver and sell energy, as well as RECs, on a fixed price schedule as measured at the onshore delivery point. The department finds that the structure of the PPAs ensure line loss risk and transmission costs are borne by Vineyard Wind and any transmission cost overruns will not be borne by ratepayers, the order said.

Among other things, the order discussed mitigation of environmental impacts, noting that Vineyard Wind has identified the project’s effects on major environmental area categories and has described its mitigation strategy for each category, including environmental and zoning permitting efforts, outreach on visual impacts, and working with fisheries stakeholders. The department finds that the project mitigates any environmental impacts, where possible, the order said.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.