US offshore wind trailblazer Connecticut opts out of landmark tri-state round

The US state of Connecticut earlier this month was a surprise no-show for tri-state offshore wind project awards despite being one of the procurement’s organisers, put off by the sector’s spiralling costs that could cause electricity prices to rise in its already expensive power market.

Last year, Connecticut joined New England neighbours Massachusetts and Rhode Island in the nation’s first regional offshore wind tender for up to 6.8GW capacity that sought to lower costs through larger economies of scale.

“Everybody would like us to triple down on as much new power, in particular carbon free power, as we possibly can,” Connecticut governor Ned Lamont told reporters during a recent press conference. “And I do as well, but I also have a close eye with the ratepayers because they know how expensive it is.”

Round winners included Copenhagen Infrastructure Partners (CIP)’s 800MW Vineyard Wind 2, Iberdrola-controlled Avangrid’s 797MW New England, and Ocean Winds’ 1.2GW Southcoast to Massachusetts and Rhode Island.

Instead of going ahead with a procurement, Lamont opted to wait and see how contract negotiations between developers and states proceeed over the coming months.

“We have some time. We will take a look at what they have come to terms with,” he said.

Nuclear price hike

Ratepayers in the state pay among the US’ highest power prices, reaching $0.26/kWh in June compared to a national average of $0.16/kWh, according to the Energy Information Administration (EIA), the statistical arm of the Department of Energy.

Rates surged on costly offtake agreements the state signed for energy generated by Dominion’s 2GW Millstone nuclear power station that supplies nearly half its electricity and 90% of clean power.

The Millstone contract was intended as a hedge on volatile imported liquified natural gas (LNG) that the region heavily depends on for power generation.

Opposition to fracking and pipelines has isolated most of New England from Pennsylvania's cheap Marcellus shale gas, resulting in sky-high electricity prices.

The nuclear deal helped moderate prices in 2022 as Russia's invasion of Ukraine sent LNG prices skyward, but now that gas prices have fallen, Connecticut consumers on average pay $7.58 more on monthly bills from the higher nuclear tariffs.

High prices over the summer peak demand have led to public outrage and raised the stakes for the Democratic governor who has not yet decided if he would seek a third term.

“I think wind is going to be a big piece of our energy future, whether you do this round or the next round,” Lamont said, adding: “I’m really cautious about our electric rates right now.”

'I killed Park City'

The state also contracted Iberdrola- controlled Avangrid's 800MW Park City project for $79.8/MWh in 2021, which by 2023 had become too low amid surging inflation and financing costs that wiped out half of US offshore wind projects.

Avangrid sought to renegotiate its offtake to reflect new economic realities but was rejected by the state.

Vineyard jeopardy

Connecticut’s reluctance, however, could have implications for the overall procurement, with at least one project, CIP's Vineyard Wind 2, signalling any contract for 800MW to Massachusetts will depends on Connecticut procuring the remaining 400MW of the 1.2GW total array.

Alicia Barton, CEO of CIP's American subsidiary Vineyard Offshore, commended Massachusetts “for their commitment to procure up to 800MW from our 1,200MW Vineyard Wind 2 project, which provides the opportunity to deliver New England’s next-generation offshore wind project.

“We look forward to Connecticut’s forthcoming decision on the remainder of the procurement so that we can begin to deliver important economic and climate benefits to the region,” she said in a statement.