As reported by OWJ, on 6 September 2024 the East Coast states of Rhode Island and Massachusetts awarded contracts to developers of offshore windfarms in the first co-ordinated procurement of its kind in the US.
As a part of the procurement, Massachusetts selected 2.678 GW in total from three projects, and Rhode Island selected 200 MW from one project. Massachusetts selected 1.087 GW of the multistate 1.287-GW SouthCoast Wind project, with Rhode Island Energy awarding the remaining 200 MW. Massachusetts also selected the 791-MW New England Wind 1 project and up to 800 MW of the 1.260-GW Vineyard Wind 2 project.
Among the winning bids, South Coast Wind 1 and New England Wind 1 were projects that were bid into earlier solicitations but cancelled at a later date, continuing a trend seen before in the US where projects re-bid if an earlier deal is terminated. Solidifying this trend, in the state of New York’s fifth solicitation for offshore wind – for which the deadline for bids was earlier this month – two projects also re-bid: Community Offshore Wind and Excelsior Wind.
Asked about the growing trend for projects to re-bid, Aegir Insights senior market analyst Signe Sørensen said, “The US as an offshore wind market is once again showing that it will not be deterred. East coast states remain committed to offshore wind and are willing to work with the sector to find a way forward, even in uncertain times, when macroeconomic and supply chain troubles and the upcoming Presidential election have all contributed to turbulence in the market and cancelled contracts.”
Ms Sørensen said the awards made by Massachusetts in the tri-state auction show that the state is ‘undaunted’ by contract cancellations in 2023, when developers Ocean Winds and Avangrid terminated contracts for two large projects and left the pioneering offshore wind state with a GW-sized gap in its energy transition plans.
“Massachusetts has re-awarded contracts to both project developers, with Ocean Winds getting a new contract for its SouthCoast Wind 1 project and Avangrid getting a contract for New England Wind 1. Furthermore, Massachusetts has awarded a contract to CIP for its Vineyard Wind 2 project,” she told OWJ. “The awards mean that Massachusetts has not allowed there to be any losers in its segment of the tri-state auction – the state has awarded contracts to all three bidders that submitted offers to it.
“The fact that Massachusetts awarded deals to all of the bids made to the state and that the awards total 2.7 GW – the largest award made by the state so far – show that Massachusetts is willing to stick with offshore wind through tough times and higher costs and uncertainty, in order to maintain its pioneering position in the sector.”
Of the three states in the tri-state solicitation only one, Connecticut, did not make an award – at least not yet. But Ms Sørensen believes it will do so before long .
“It is up to Connecticut to decide whether the legacy of the first tri-state auction will be that none of the bidders lost out. The trio of projects that were awarded contracts by Massachusetts and Rhode Island mean that nearly all of the bidders in the auction secured a contract. There were four bidders in all, and only Ørsted’s Starboard Wind didn’t secure a contract. If Connecticut goes for Starboard Wind,” said Ms Sørensen “that would result in the tri-state auction being an ‘auction without a loser,’ which would be an even stronger signal of continued support for offshore wind in the US.
“Connecticut has never directly communicated that it would stick to the same timetable as Rhode Island and Massachusetts,” she told OWJ. “It was assumed that it would align its announcement with the other states, but they now seem to be saying that the state will disclose the results of its tranche of the auction at a later date.
“I think it would have made sense if Connecticut had timed its announcement with those of Massachusetts and Rhode Island, to maintain a united front and potentially make a bigger splash in the news.
“The lack of an announcement from Connecticut means that, right now, it’s hard to come to a definitive conclusion about exactly how well the collaborative auction format worked.
“Massachusetts has garnered most attention as the state that awarded by far the most capacity, but let’s see what Connecticut announces – if it makes awards to Starboard Wind and/or the rest of CIP’s Vineyard Wind 2, it will make a pretty big splash in its own right and the tri-state auction will be seen to have been a very fruitful process for developers and for the states involved.”
Ms Sørensen said the trend highlighted by projects being re-bid in the tri-state auction is also evident in New York, where Community Offshore Wind and Excelsior Wind have re-bid in the state’s fifth solicitation.
“This shows once again that a project isn’t necessarily ‘lost’ if it an offtake contract is cancelled,” she told OWJ. “Some projects aren’t even gone for long and are re-bid as soon as an opportunity arises, often winning a new offtake contract. We’ve seen it multiple times now as part of the continued course-correction of the sector,” Ms Sørensen said.
“As I have said before, states are not ‘punishing’ projects for past wrongs, apart from requiring them to pay termination fees and perhaps increases securities in new contracts. They are allowing the projects and developers to return to the fold because they remain committed to the energy transition and still need the power from the projects.”
Another factor she highlights that is driving the re-bid phenomenon is that states are keen to maintain leadership positions in the offshore wind sector and secure supply chain deals and investment in ports. Both lead to job creation. They can reap the benefits of investment and create jobs if solicitations result in awards.
“Massachusetts awarded contracts to developers that had cancelled contracts and New York was quick to launch a new solicitation round after it had to void contracts from solicitation round 3,” Ms Sørensen concluded. “That ensured that the projects left behind after the third solicitation would have an opportunity to bid again right away. This tenacity on the part of states and developers will be what keeps the US sector growing and maturing, even in the current turbulent environment.”
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Publish date : 2024-09-12 23:43:00
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