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26 October 2022

Avangrid US wind project “no longer viable” asks for more time

Avangrid, a US based subsidiary of Spain’s Iberdrola, which serves millions of customers across New England and the state of New York, has filed a motion with the Massachusetts Department of Public Utilities, seeking a one-month suspension in the Department’s review of the Power Purchase Agreements (PPA) for the Commonwealth Wind Project (CWP).

CWP is supposed to deliver 1.232 GW of clean and affordable energy to 750,000 homes and in the process displace over 2.35 million tons per year of greenhouse gas emissions. The project will be developed in an area at least 22 miles south of Martha’s Vineyard that was designated by the federal government in 2015 following a rigorous environmental review that included many communities and stakeholders and will serve as a catalyst for hundreds of millions worth of investments in offshore wind infrastructure.

Avangrid states that the “unprecedented economic challenges facing all major infrastructure projects” are the reason behind the company filing this motion in an attempt to seek a one-month suspension for the review of the PPA.

“Price increases for global commodities, sharp and sudden increases in interest rate, prolonged supply chain constraints and persistent inflation” are the main challenges that Avangrid is quoting in its latest public statement regarding the motion.

Its statement also points at the fact that this one-month period would not only be beneficial for the Connecticut based company, but also for the Massachusetts Electric Distribution Companies, state and regulatory officials, and stakeholders to evaluate these economic challenges and “assess measures that would return the project to economic viability including, but not limited to, modest changes to the PPAs.” After all consumer energy prices have ballooned in the US, a small upwards tweak should not affect things too much in the shadow of far larger increases.

After the motion was filed, Avangrid claimed that it still believes that CWP remains the best possible solution for the state of Massachusetts to meet its ambitious clean energy and climate goals in spite of these historic global headwinds and that the project is “well-positioned” to begin operations in 2028 although the motion quotes this suspension to be “crucial”, as “under the current PPAs, the Project is no longer viable and would not be able to move forward.” It is likely that many other US wind projects will hit the same kind of headwinds.

The energy company also refers to the Inflation Reduction Act (IRA) as part of the motion. Potential tax incentives as a result of the IRA coming into action after the PPAs were agreed upon might represent serious cost savings.

This Massachusetts project could help the Biden administration reach its goal to deploy 30GW worth of offshore wind projects across the US.

Two disruptions in the form of the current energy crisis caused by the Russian invasion of Ukraine and supply chain woes in the aftermath of the  Covid-19 pandemic are hindering renewables during a time when policies are enough of a nuisance to deal with by any sustainable developments.

Avangrid also operates eight electric and natural gas utilities in the same area so perhaps maybe it should call it even with any economic discrepancies that will appear as part of CWP. But we all know that won’t happen since its shareholders are looking forward to January 3rd, 2023  when its dividend is due at $0.44 per share.