Massachusetts DOER Report Recommends Utilities Conduct Further Offshore Wind Power Procurement

Makes Recommendation On Disposition Of RECs

Recommends Consideration of Storage Procurement

May 31, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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An offshore wind study from the Massachusetts DOER recommends that the electric distribution companies, "should proceed with additional offshore wind solicitations for up to 1,600 MW of offshore wind and only enter into contracts if found to be cost-effective."

"Based on the information that DOER has before it at this time, an analysis on costs and benefits of an additional procurement justify moving forward with up to 1,600 MW of additional offshore wind solicitations. Given uncertainty around regional REC market projections, the cost effectiveness of all proposals should continue to be evaluated at the time of the solicitation. To protect ratepayers, any future solicitations should maintain a price cap similar to the price of the first 83C contract," the report says

The report further recommends treatment of renewable attributes under the procurements.

"Under current market conditions, in order to capture the greatest impact to the Massachusetts Greenhouse Gas Inventory for GWSA [Global Warming Solutions Act] compliance while reducing ratepayer costs, incremental offshore wind RECs should first be used to offset existing regulatory compliance costs associated with the RPS and CES [Clean Energy Standard]. Once so met, if there are additional offshore wind RECs that exceed the Massachusetts RPS and CES obligations, these certificates should be retained in Massachusetts for GWSA compliance instead of being sold. This ensures Massachusetts ratepayers receive an additional benefit of the greenhouse gas emissions reduction from the offshore wind projects," the report says

"Using the solicitation process framework for offshore wind generation provided in Section 83C, the additional procurements should be conducted for up to 800 MW in 2022, 2024 and, if necessary, to meet the procurement target, 2026. DOER should conduct a technical conference to assess whether and/or how a solicitation for independent transmission should occur and if necessary, issue a separate contingent solicitation for independent transmission in 2020 prior to additional solicitations for offshore wind," the report says

The reports also recommends that DOER should "consider" the benefits of an energy storage solicitation along with continuing to allow paired storage in the additional offshore wind solicitation.

The report recommends that, "The Commonwealth should continue to evaluate ways to cost-effectively finance clean energy, reduce risk to ratepayers and improve the procurement process. There are multiple areas that DOER should continue to study as the Commonwealth moves forward with additional offshore wind solicitations. "

Specific areas for further consideration are:

• First, further assessment would be useful in determining the effect long-term contracts have on the EDCs balance sheets and wholesale markets. Since 2008, the Massachusetts EDCs have assembled a portfolio of cost-effective clean and renewable energy power purchase agreements (PPAs) under the Green Communities Act and subsequent amendments with over half (approximately 60 percent) of the EDCs’ electricity load anticipated to be supplied through long-term contracts instead of the wholesale competitive markets. The need, costs, and risks to Massachusetts ratepayers for long-term contracts should be continuously evaluated in the context of our changing energy landscape."

• Second, while offshore wind provides unique energy and environmental attributes, the Commonwealth’s energy and environmental goals and the competitiveness of the wind industry would benefit from comparative evaluation of all renewable and clean energy resources through the competitive solicitation process. Offshore wind has intrinsic resource attributes that make it particularly compelling, including coincident production with expensive winter peak periods, relative close proximity to electric load, and onshore economic development opportunities. However, there continues to be rapid innovation in all renewable and clean energy resources and as evidenced by the sharp decline in pricing in offshore wind just two years from the enactment of the Energy Diversity Act of 2016, expectations of future pricing of other resources may also change quickly. As a result, DOER recommends that the statute be revised to authorize the Commissioner of DOER, after review, to expand eligible resources under competitive solicitations to include other RPS and CES resources. This would allow the Commonwealth to compare all clean and renewable resources and advance the clean or renewable project that best meets the environmental, economic, and energy goals of the GWSA while eliminating the need for a statutory price cap for offshore wind projects. This change would proactively address the chance of not identifying a cost-effective project through future solicitations if pricing were to fall for other renewable and clean resources while increasing for offshore wind."

• "Additionally, although the Independent Evaluator stated the first 83C solicitation was 'properly and fairly conducted,' some stakeholders have suggested that DOER, after participating as a member of the Evaluation Team and in consultation with the Independent Evaluator, should select this winning proposal following written recommendation from each of the EDCs. DOER recommends continuing to utilize the Independent Evaluator and assess the selection process and whether there are opportunities for improvement in order to minimize any identified risk from affiliated projects."

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