Avangrid Decides to Back Out of PPAs Signed for 1.2 GW Massachusetts Project, Plans It for April Solicitation
Avangrid, the developer of the 1.2 GW Commonwealth Wind offshore wind project in Massachusetts, has filed a motion to dismiss the ongoing review and approval proceedings for its power purchase agreements (PPAs) at the Massachusetts Department of Public Utilities (DPU) and plans to take the project to the upcoming offshore wind solicitation in the state.
The move follows a series of submissions and DPU responses over the past few months, after the developer first asked the state regulator for a one-month pause in the PPA proceedings that are currently ongoing at the DPU, with the hope to renegotiate the PPA conditions.
Avangrid’s request came amid the developer deeming the project “no longer viable” under the contract conditions due to the current macroeconomic conditions, “including historic price increases for global commodities, sharp and sudden increases in interest rates, prolonged supply chain constraints, and persistent inflation“.
(As it will later turn out, Avangrid’s statement on its project being no longer viable under the current PPAs brought further complication for Mayflower Wind – a Shell-Ocean Winds partnership which joined the motion a week later – in Rhode Island.)
In Massachusetts, the DPU had rejected the request for a one-month suspension of the PPA review and noted that the Electric Distribution Companies (EDCs), with whom Commonwealth Wind and Mayflower Wind signed the agreements earlier this year, did not intend to renegotiate the contracts.
In its response, the DPU asked the developers to either continue with the current PPA proceedings, or to file a motion to dismiss them entirely.
Both developers then responded by withdrawing their motions for a one-month suspension. Nevertheless, both also retained their position that the global economic challenges are affecting the projects under the existing PPAs.
Now, Commonwealth Wind has moved to dismiss the PPA proceedings in a motion on 16 December, which is yet to be granted by the Massachusetts DPU.
Avangrid says the current PPAs do “not meet the fundamental statutory threshold that they must ‘facilitate the financing of offshore wind energy generation'” as per Section 83C(a).
“Unfortunately, despite diligent efforts by Commonwealth Wind to find a path forward for the Project under the PPAs that did not necessitate dismissing these proceedings, the PPAs remain unable to meet this threshold requirement, and it does not appear that there is a viable pathway that would allow that threshold to be met. Approving the PPAs would therefore not advance the purposes of Section 83C because the Project cannot be financed and constructed under the current terms of the PPAs”, the developer states in the motion to the DPU.
In a public statement issued on the same day, Avangrid said that it filed the motion to advance the 1.2 GW project as expeditiously as possible. Namely, the developer says exiting from the PPA proceedings will allow the Commonwealth Wind project to be included in the upcoming offshore wind solicitation, scheduled for April 2023.
“With this step, a competitive process that accounts for the unprecedented changes will ensure that a clean energy project can be built to serve the Commonwealth’s energy needs”, Avangrid said.
On the case regarding the current PPAs and ongoing proceedings, the company said it had engaged “in good-faith and productive discussions” with the state officials on the challenges the project is facing and the need to restore its economic viability, and added that it had been “disappointed in the Electric Distribution Companies’ refusal to immediately engage on this matter”.
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