Massachusetts Offshore Wind Price Caps

January 13, 2022
John Dalton

The Baker Administration is proposing to remove the price cap from Massachusetts offshore wind (OSW) procurements. (The price cap requires that each approved wind project offer a lower price than the previously approved project.) Some parties are pushing back on this proposal, pointing out that the prices secured in New York and New Jersey, two states without such price caps, are considerably higher than those that Massachusetts secured. While it is true that the prices for OSW procured in New York and New Jersey have been higher than the prices that Massachusetts has realized, this isn’t attributable to the price cap. Both states have signaled to OSW developers in their procurement processes that economic development benefits are highly valued. In New York 20% of points that are used to select projects are awarded based on economic development benefits realized. In essence, this signals that the state is willing to pay a premium relative to the lowest OSW cost project to secure meaningful economic development benefits. This (and less favorable OSW resources in these states) is a more important contributor to the prices realized in these states than the absence of a price cap.  The price cap isn’t necessarily a protection for customers. The best protection for customers is robust competition from OSW developers and there’s evidence that the price cap is a barrier to that. Only two bidders elected to participate in the most recent Massachusetts offshore wind solicitation. While the pricing offered was attractive, these two bidders were effectively competing with the full pool of OSW lease holders in Massachusetts, two of which elected to not participate. Future Massachusetts OSW procurements with a price cap risk being less competitive and stifling the development of the state's OSW industry.

Reference article: Boston Globe