Back in 2017, Massachusetts began two efforts to buy of both offshore wind and out-of-state clean energy. We have summarized and evaluated what has happened over the last two years, and think about the future of both efforts.

The Background

Both efforts originate from the state’s 2016 energy diversity bill, which required Massachusetts utilities to enter into 20-year contracts to purchase a total of 2,800 MW of renewable energy.

For context, this is enough energy to power about a million homes, or about twice the electricity produced by soon to be closed Pilgrim nuclear power plant. The law calls for 1,600 MW of this energy to come from offshore wind, while the remaining 1,200 MW from a mix of hydro, solar, and other renewables from out-of-state.

In 2018, Governor Baker and legislative leaders passed another bill, which authorized an additional 1,600 MW of offshore wind by 2035. This puts the state’s total ability to procure offshore wind to 3,200 MW.

Out-of-State Clean Energy

Of the nine project proposals initially considered, the state initially chose Eversource’s “Northern Pass”. The project would have brought Canadian hydro-power to Massachusetts by building 45 miles of new pipeline in New Hampshire, and upgrading another 147 miles of existing line. The proposal was the focus of intense public opposition stemming from its negative environmental impacts on the scenic and protected New Hampshire north country.

When a key New Hampshire siting committee refused to allow construction permits for Northern Pass in March 2018, Governor Baker ordered the state to consider one of its competitor’s projects. It eventually settled on Central Maine Power’s (CMP) proposal for a 145 miles transmission line from the Canadian border to Lewiston, Maine. Called “New England Clean Energy Connect,” the project would import 1,200 MW of hydro from Hydro-Quebec.

Although initially plagued by concerns that local opposition would sink CMP’s project, like it did with Northern Pass, local opposition has failed to gain momentum in Maine. Part of this stems from the public support for the project of Maine’s Governor Janet Mills (D), who took office in 2019. In her support she touted the project’s benefits, including reducing the state’s carbon footprint, controlling energy costs and creating local jobs in Maine. At the same time that two leading environmental groups, the Conservation Law Foundation (CLF) and the Acadia Center, dropped their opposition to endorse the project.

Another big factor in its growing support is a settlement CMP and Massachusetts struck that would provide additional benefits to Maine. Among these are:

• $140 million to provide rate relief for Maine’s electricity customers.
• $50 million towards benefits to Maine’s low to middle income energy customers.
• $30 million to install heat pumps and encourage electric vehicle adoption in Maine.
• $15 million to build out broadband service in the west of Maine.

Construction of the Maine project is anticipated to begin in late 2019, with the project completed and in service by 2022.

Offshore Wind

The state’s procurement plan for offshore wind is spread over many years. Offshore wind development is primarily focused off the southern coast of Massachusetts, in federal waters 14 miles below Martha’s Vineyard. In May 2018, the state selected its first winning bid for offshore wind, choosing Vineyard Wind to develop 800 MW. The project is expected to produce 6 percent of Massachusetts’ total annual electric load when completed, which is enough to power more than half a million homes.

The cost of Vineyard Wind’s electricity came in much below expectations, surprising many analysts and policymakers in Massachusetts and across the country. According to the state, the project’s low prices will save Massachusetts electric customers $1.4 billion on their bills over the next 20 years. These cost savings are primarily attributed to the project’s use of parts manufactured abroad.

Unlike with the out-of-state clean energy procurement efforts, offshore wind hasn’t faced much local opposition. Compare this to the debacle that was Cape Wind in the 2010’s, which ultimately died due to intense opposition from Cape Cod homeowners. Some opposition was raised by the fishing industry, but Vineyard Wind has since offered to pay millions of dollars to offset any impacts in the industry.

In March of 2019, Massachusetts state regulators opened up the second round of the offshore wind bidding process, with 800 MW available for development. The round is set to be completed in 6 months, half the time of the first one. The rush is due in part to allow bidders to take advantage of a soon-to-expire federal tax credit for offshore wind.

This latest bid does not address other significant challenge facing policymakers: balancing local economic impacts versus keeping prices down. Massachusetts is not the only state trying to establish itself as the national leader in offshore wind manufacturing. States like New York and New Jersey are moving ahead with their own aggressive procurement goals. Ultimately, whichever state becomes the regional hub will depend largely on who encouraged the most local investments.

Some observers fear that the low bid prices from Vineyard Wind, made possible in part due to low local investment, will not do enough to encourage future wind manufacturing in Massachusetts. The reason is because a requirement in the 2016 energy diversity act requires all future projects to be competitive with previous ones. Efforts to remove this requirement are underway at the statehouse, led by Representative Patricia Haddad (D-Somerset).

Evaluating The Process

Possibly one change we may see in the future is reducing the involvement of utilities in the bidding process. Massachusetts utilities, primarily National Grid and Eversource, play a dual role in the bidding process for both efforts. Because they are required to purchase the energy they work with state regulators to select different projects. At the same time, they have the ability to submit bids as parts of larger projects. An example of this is Eversource, which was a partner in the Northern Pass project. Some observers have noted this as a potential conflict of interest.

As we move forward I think you’ll see more of a focus on encouraging offshore wind, as opposed as out-of-state clean energy. Part of this reason is because offshore wind developments seem to attract less local opposition, relative to out-of-state clean energy. But the other is offshore wind’s potential for creating jobs in Massachusetts, and providing historically low energy prices.

Overall the jury is still out on the success of each of these efforts. There’s always a possibility that prices could be higher than existing electricity prices, although at least for offshore wind that seems unlikely. Massachusetts has the potential to demonstrate the benefits of such large scale clean energy procurement, and can become a model for states across the country.