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Will MA Continue to Lead on Offshore Wind Development?

Recently, the ocean east of Block Island and south of Martha’s Vineyard has seen a “gold rush” of interest as a location for future offshore wind farms. Would be wind farm developers are bidding aggressively in federal auctions to win the rights to build in this area. To date, four commercial wind energy leases have been awarded and recently three more proposed leases have been sold by the federal government at a price of $135 million each. Carbon-free power generated there could be sold to consumers in Massachusetts, Rhode Island, Connecticut, New York or New Jersey. To date, Massachusetts has been leading the way with state-mandated procurements of power. But current state law may make it difficult for Massachusetts to maintain its lead.

The state led the way with the first competitive procurement of a 20 year power supply agreement for 800 MWs of wind energy to be delivered to its consumers. The winning bid, submitted by the Vineyard Wind Project in the summer of 2018, set a record low price of 6.5 cents per kilowatt hour. While this low price created optimism for the future supply of clean, affordable power for the region, it revealed a conundrum for future wind energy procurement in Massachusetts. State law requires that each subsequent procurement result in a price lower than the one that precedes it.

The problem this presents for future Massachusetts contracts was illustrated by the next procurement. On February 7, 2019, Rhode Island approved a 20 year wind energy power supply contract to serve its consumers. National Grid and Ørsted U.S. Offshore Wind were awarded a 20 year power supply contract for 400 megawatts of energy to be delivered by the Revolution Wind wind farm. The project, located northeast of the Vineyard Wind project and 15 miles south of Rhode Island, has a “levelized” price of 7.4 cents per kilowatt hour.

Herein lies the problem for Massachusetts. The Revolution Wind price is almost a full cent higher than Vineyard Wind’s inflation-adjusted contract price of 6.5 cents per kilowatt hour. The price indicates future projects in the area will not be able to meet the current requirement that they be lower than the Vineyard Wind price. If not, the bidders won’t be eligible to receive a long-term contract to supply Massachusetts with energy.

An Act to Promote Energy Diversity, signed by Governor Baker in August, 2016, put Massachusetts at the forefront of offshore wind development in this deep water ocean area. However, the Act stipulates that “the department of public utilities shall not approve a long term contract that results from a subsequent solicitation and procurement period if the levelized price per megawatt hour, plus associated transmission costs, is greater than or equal to the levelized price per megawatt hour plus transmission costs that resulted from the previous procurement.” Massachusetts is obligated by this same law to initiate another procurement for an additional 800 megawatts of wind energy by June of 2019. Yet, the state cannot approve a contract with a levelized price greater than 6.5 cents per kilowatt hour.

Massachusetts faces the prospect that prices bid in this and subsequent procurements will not meet the requirements of the Act. Legislative leaders and the Baker Administration are understandably concerned. The legislature could fix this problem by altering or removing the price cap.  One bill (HD 697) has been filed by House Speaker Pro Tem Patricia Haddad to do just that. However, the legislature is just beginning a new session and it is not clear when an amendment to the 2016 law could be accomplished.

A subsequent law, An Act to Advance Clean Energy, enacted in 2018, requires the Department of Energy Resources to file a report with the legislature this summer on the need to conduct additional solicitations, of up to 1,600 megawatts of wind generation. That report is likely to confirm the need to amend the existing law.

Until the current law is amended to alter or remove the pricing requirement, Massachusetts is in danger of having to watch other states mine the energy “gold” in the ocean waters just off its shores.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume IX, Number 46

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About this Author

David L. O'Connor, SVP Energy & Clean Technology, Energy Attorney, Clean Technology Lawyer, Mintz Levin Strategies
Senior Vice President for Energy and Clean Technology

David is Senior Vice President for Energy & Clean Technology at ML Strategies. He helps energy and technology companies expand their markets and accelerate their growth. With deep knowledge of the energy industry and environmental issues, David helps these companies shape emerging public policies to their advantage.

His clients include companies that deliver energy-efficiency services; develop wind, biomass, and other renewable power plants; install transmission and smart grid technologies; and bring new low-carbon fuels and offsets to the marketplace.

David has been a...

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Member / Chair, Energy & Sustainability Practice
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Tom Burton’s zeal for innovation and passion for energy and sustainability have shaped the clean energy industry. He created one of the nation’s first clean energy legal practices. Clients ranging from investors to entrepreneurs to Fortune 100 companies rely on him for creative and strategic legal solutions, and he has completed hundreds of venture capital and private equity financings, mergers and acquisitions, and IPOs. He guides the industry’s next generation of leaders through active involvement with start-up organizations and accelerators. The Northeast Clean Energy Council recognized his pioneering role in the Northeast with a Decade of Influence award in 2017.

Tom’s global practice focuses on complex corporate finance matters including mergers and acquisitions, venture capital, private equity, and securities transactions. He represents high-growth and emerging businesses, including companies in the energy and clean technology, social media and software industries, as well as life science companies, from start-ups to public companies.

In 2004, Tom founded, and currently chairs, the firm’s Energy & Sustainability Practice, which has completed more than 500 transactions across energy sectors totaling over $8.5 billion since 2006. Serving more than 250 clients, spanning the ecosystem from emerging companies to large corporations, venture capital and private equity funds, investment banks, project developers, and family offices, the firm is recognized nationally as a leading law firm in the space. Tom is ranked byBest Lawyers in America in the Corporate Law section, and he is recognized by The Legal 500 United States as “rising to the fore” in energy technology for Venture Capital and Emerging Companies.

On the corporate and securities side, Tom has served as counsel in the structuring and completion of over 400 venture capital and private equity financings, representing both the funds providing the capital and the emerging growth companies seeking funding. His work in this area has raised billions of dollars. He organizes venture capital funds and represents them in their portfolio investments. Tom is also a key contributor to MintzEdge, an online resource for entrepreneurs that includes useful tools and information for starting and growing a company. In addition, he devotes a portion of his practice to counseling social enterprise companies, impact investors, and nonprofit companies.

Tom routinely counsels businesses on their growth and development, advises their boards of directors on corporate governance matters, and participates in an array of transactions, from private and public offerings to mergers and acquisitions, joint ventures, and technology transfer matters. Tom also has experience in advising investment banks in private placements and underwritten public offerings of equity securities, and in their role as financial advisor in mergers and acquisitions.

He applies his background in corporate finance to counsel energy and clean technology companies through all stages of formation, financing, and exits. His energy and clean technology clients span markets such as solar and wind, smart grid and energy efficiency, energy storage, water technologies, waste treatment, biofuels, electric vehicles, and green buildings.

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