(Reuters) - Three U.S. states in New England - Massachusetts, Rhode Island and Connecticut - on Wednesday agreed to jointly procure offshore wind power as soaring interest rates and rising equipment and labor costs have made some projects uneconomic.
By joining forces, the states hope to counter the pain rippling across the nascent U.S. offshore wind industry, which is expected to play a key part in decarbonizing the power sector and revitalizing domestic manufacturing.
Earlier this week, another offshore wind developer canceled agreements to sell power to local utilities - this time in Connecticut - because the previously agreed upon prices for that power was too low to cover the rising cost of building the project.
Massachusetts Governor Maura Healey announced the agreement between the three states at the American Clean Power Association’s Offshore WINDPOWER Conference in Boston, according to a press release on the governor's website.
The three states will seek multi-state offshore wind proposals for selection in 2024 for up to 6,000 megawatts (MW) of power.
Any two or three states may agree to select a multi-state proposal and split the anticipated megawatts and renewable energy certificates from a single project.
One megawatt can power about 1,000 U.S. homes.
CANCELED CONTRACTS
On Monday, Avangrid (NYSE:AGR), a U.S. subsidiary of Spanish energy firm Iberdrola (OTC:IBDRY), said it filed agreements with power companies in Connecticut to cancel power purchase agreements for Avangrid's proposed Park City (NASDAQ:PCYG) offshore wind project.
“One year ago, Avangrid was the first offshore wind developer in the United States to make public the unprecedented economic headwinds facing the industry," Avangrid said in a release.
Those headwinds include "record inflation, supply chain disruptions, and sharp interest rate hikes, the aggregate impact of which rendered the Park City Wind project unfinanceable under its existing contracts," Avangrid said.
Avangrid has said it planned to rebid the Park City project in future offshore wind solicitations.
Also over the past week, utility regulators in Massachusetts approved a proposal by SouthCoast Wind, another offshore wind developer, to pay local power companies a total of around $60 million to terminate contracts to provide about 1,200 MW of power.
Those Massachusetts power companies include units of Eversource Energy (NYSE:ES), National Grid (LON:NG) and Unitil (NYSE:UTL).
SouthCoast Wind, formerly known as Mayflower Wind, is owned by units of Shell (LON:SHEL) and Ocean Winds. Ocean Winds is owned by units of Portuguese energy company EDP Energias de Portugal's majority-owned EDP Renováveis and France's ENGIE.