This month, Governor Charlie Baker of Massachusetts signed into law An Act Driving Clean Energy and Offshore Wind, weeks after the passage of the federal government’s Inflation Reduction Act. The two bills will work together to “create profound benefits to multiple clean energy industries”, said Tom Burton, chair of Boston-based law firm Mintz’s energy and sustainability practice.
The top industry to benefit, as indicated by the title of the bill, is offshore wind. “There I see a couple of major opportunities”, Burton explained. “First, the elimination of the price cap.” The cap in question guided the auctions of all offshore wind leases to date in the state of Massachusetts, and it required winning bids to price any energy produced below existing energy prices.
“With the cap, you had a race to the bottom and ultimately an economic outcome with the effect of limiting competition in the marketplace, and the dramatic slowdown of offshore wind development”, Burton explained to Infrastructure Investor. “So, the elimination of the cap combined with the incentives in the Inflation Reduction Act like loan guarantee benefits, plus competition with more entrants in the marketplace, will have a massive impact.”
He continued: “[The law also creates new] rules relating to transmission, authorising coordination among states to create long-term clean energy transmission. Transmission bottlenecks have been a big challenge in recent years. Finally, the bill expands Massachusetts’s offshore projects by another 1.6GW from 4GW to 5.6GW. So that will encourage more bids and thus competitively priced renewable energy.”
The bill also allows Massachusetts to team up with other Northeast states such as Maine to bid for renewable energy project leases.
There are opportunities, however, outside of offshore wind. “I do think that with the creation of of the Clean Energy Center [in 2009], the promotion of renewables broadly, [and the promotion of] energy efficiency in particular is going to be a huge part of the policy mix for Massachusetts now”, said Burton. “EV charging infrastructure, zero emission vehicles and green buildings are also being promoted.”
Still, Burton is not without his critiques: “One thing that the bill doesn’t address as well is storage. And I think storage is probably one of the biggest levers that will allow us to move past natural gas. It would have been great to see the storage push maybe five years ago. It is coming, and I’m optimistic for that. But it has been a little bit slower than I would have liked.”
The biggest downside of all is that, as a result of legislation design in the state, the $4.5 billion of funding envisaged for the bill is yet to be approved. An attempt to do was previously rejected, although figures on both sides of the political divide have signaled their intentions to do so.
The state of states
When it comes to climate bills, the Massachusetts legislation is “truly monumental at the state level”, according to Burton, and puts it at the forefront of such measures promoted by other states.
Burton continued: “Massachusetts is certainly one of the first states to really double down its policy efforts in the clean energy space. But in recent years, states like New York and California have really roared to the forefront as well. Many, many years ago, when we were first implementing policies to promote clean energy, the recognition was that New England didn’t have any oil, natural gas, coal… none of the fossil fuels. What set Massachusetts apart from other states was its offshore wind – it blows, and it blows hard.”
Indeed, Massachusetts was one of the first states to auction off lease areas for offshore wind development, garnering $405 million in 2018. New York and California recently joined the game, with the former auctioning leases off the New York Bight for a whopping $4.37 billion early this year to ventures led by industry giants such as Copenhagen Infrastructure Partners, Blackstone, Caisse de dépôt et placement du Québec and Global Infrastructure Partners. California is planning the West Coast’s first-ever offshore wind auction for later this year.
Additionally, the Carolinas held auctions for leases off the Carolina Long Bay in May of this year, while Massachusetts’s new law provides opportunity to collaborate with other New England states.