U.S. Department of Energy Office of Energy Efficiency and Renewable Energy U.S. Department of Energy Energy Efficiency and Renewable Energy
  • Printable Version
  • Bookmark and Share

Long-Term Contracting Opportunities Poised to Enable Future New England Wind Farms

Long-Term Contracting Opportunities Poised to Enable Future New England Wind Farms

Date: 11/8/2013

For commercial-scale wind farms, long-term power purchase agreements (PPAs) between wind generators and creditworthy buyers provide the revenue certainty that allows renewable energy projects to be financed. With rare exceptions, wind farms constructed in the New England region over the past several years have entered into such PPAs. The contract lengths are from 10 to 20 years or longer and include the plants' commodity energy, renewable energy credits, or both. Long-term contracting for wind power in New England continues to be vital to the development and growth of wind energy in the region, particularly as up-front investments in transmission interconnections and upgrades become more prevalent to interconnect these plants. Many wind power plants under development in the region are distant from the existing high-voltage transmission grid or would require upgrades to the existing grid to reliably transmit their output.

While a lull in new PPA activity contributed to slowing the wind power development pipeline, 2013 has been an important year for developing and implementing policies to make PPAs available to stimulate the next wave of New England wind power development. Several New England states are currently implementing long-term contracting policies for renewables, some of which explicitly address transmission considerations. In addition, proposed regional procurement processes driven by the New England States Committee on Electricity (NESCOE ) on behalf of the region's states may have a significant effect on wind and transmission development in New England.


Policy-driven long-term contracting for renewable energy in Massachusetts was initially motivated by the requirements of Section 83 of the Green Communities Act of 2008. Section 83 established a 5-year, long-term contracting pilot program for renewable energy. The program required the state's four electric distribution utilities to issue solicitations and enter into long-term PPAs of up to 15 years for 3% of their distribution load. As a result of the first solicitation, three of the utilities entered into PPAs with 150 megawatts (MW) of renewable energy projects, comprised primarily of four wind farms, later approved by the Department of Public Utilities. National Grid, however, opted not to contract with any bidders in this competitive process, instead negotiating a long term PPA for 50% of the output from Cape Wind's planned 468-MW offshore wind farm. Later, a settlement agreement relating to the merger between NSTAR and Northeast Utilities included a long-term PPA between Cape Wind and the merged utility for a 15-year contract for 27.5% of the project's output, which also counted toward the Section 83 target. Collectively, the PPAs resulting from the one solicitation plus the two offshore wind PPAs fulfilled the entire Section 83 target well ahead of schedule, leaving other regional wind farms with no apparent prospects for long-term PPAs.

In 2012, the Green Communities Act was amended to include provisions for additional long-term contracting between the state's utilities and new renewable energy projects, equaling an additional 4% of the utilities' distribution load from 2013 through 2016. One-tenth of this total (0.4%) is set aside for PPAs with distributed generation. The first of two requests for proposals (RFPs) for the remaining 3.6% of load required under the amended Section 83A was issued in April 2013. Under the RFP, the Massachusetts' Department of Energy Resources jointly solicited with the state's investor-owned electric distribution companies (EDCs) (Unitil, National Grid, NSTAR Electric Company, and Western Massachusetts Electric Company), offering PPAs with eligible renewable energy resources. The Department of Energy Resources is facilitating the two solicitations under Section 83A, although ultimately selection of finalists will be conducted jointly with the state's EDCs.

The April 2013 RFP targeted the purchase of 1.8% of the utilities' total annual distribution load under PPAs for energy, renewable energy credits, or both, corresponding to approximately 850,000 megawatt-hours per year (the equivalent of approximately 300 MW of wind power capacity). The RFP sought submissions for PPAs with durations between 10 and 20 years, an extension from the 10- to 15-year range under Section 83 recognizing the benefits for project financing and for ratepayers that may result from longer PPA terms.

Responses were due in early May, and negotiations commenced with short-listed bidders in early August, with executed PPAs to be filed for approval with the Massachusetts Department of Public Utilities on or before October 1. The timetable reflects the desire of policy-makers to ensure that wind projects responding to the RFP can realize the benefits of the federal Production Tax Credit and Investment Tax Credit (ITC) in lieu of the Production Tax Credit, set to expire for projects that are not under construction by the end of 2013.

Factors for bid evaluation included price reviews based on project cost and market value, and non-price factors including site control, development status, experience and capabilities, financing considerations, and any requested exceptions/changes from the model PPA.

Massachusetts regulators and the investor-owned utilities announced in late September that they had received 40 proposals and selected proposals from six wind projects in Maine and New Hampshire for a total of 565 MW at an average price below 8¢ per kWh.

Company Project Name Net MW Term (yrs) Project Location
Exergy Peskotmuhkati Wind Farm 20 20 Columbia Falls, ME
Exergy Passamaquoddy Wind Farm 38.2 15 Columbia Falls, ME
Iberdrola Wild Meadows Wind 75.9 15 Grafton County, NH
Iberdrola Fletcher Mountain Wind 97.1 15 Somerset County, ME
First Wind Oakfield Wind 147.6 15 Oakfield, ME
First Wind Bingham Wind 186 15 Mayfield Township, ME

The actual amount procured under the RFP was dependent on a number of factors. Ultimately, the utilities decided to procure well in excess of the target 1.8% of load to take advantage of lower prices potentially available prior to the pending expiration of federal incentives. The timing and quantity of any future procurement to meet the 3.6% target may depend on how the selected projects perform.

The Section 83A RFP allowed for funding significant transmission facilities associated with proposed renewable energy sources. It provided guidance for bidders seeking to recover transmission costs outside of the PPA via Federal Energy Regulatory Commission (FERC)-approved tariffs, based on Department of Public Utilities-promulgated rules governing Section 83A implementation, which "authorize the contracting parties to seek recovery of such transmission costs of the project through federal transmission rates, consistent with policies and tariffs of the federal energy regulatory commission, to the extent the department finds such recovery is in the public interest." Bidders had the option to propose an alternative under which recovery of significant transmission costs associated with the proposed generation facility could seek to recover such transmission costs outside the PPA, to be paid for by Massachusetts electricity customers through FERC-approved tariffs. While the PPAs were not publicly available at press time, apparently none of the selected projects depended on a separate transmission arrangement.


In June 2013, Connecticut enacted An Act Concerning Connecticut's Clean Energy Goals, also known as Public Act No. 13-303. Among its many features, the Act gives the commissioner of the Connecticut Department of Energy and Environmental Resources (DEEP) the authority to solicit proposals for long-term PPAs from providers of Class I renewable energy sources (which include wind power) under the state's renewable portfolio standard in one or more rounds of solicitation. The state may proceed with a solicitation alone or in conjunction with other New England states, opening the door for Connecticut to participate in the NESCOE's regional procurement process described below. Resulting PPAs may have terms of up to 20 years and serve up to 4% of Connecticut's EDC load.

In July 2013, motivated in part by the looming expiration of federal incentives, DEEP promptly issued a solicitation for the full 4% of EDC load on an accelerated timetable. The RFP seeks a quantity of PPAs equating to approximately 174 average megawatts of Class I renewables installed capacity from sources in the region. If the entire amount were served by wind power, for example, the amount procured could equate to approximately 525 MW. The RFP mirrored the Massachusetts Section 83A RFP to a large degree, and the timing of the DEEP solicitation effectively made Connecticut compete with the Massachusetts Section 83A RFP for the most cost-effective renewable resources available in the region.

Proposals were due in early August (by which time short-listed bidders under the Massachusetts Section 83A RFP had been notified). Shortly thereafter, DEEP reported that more than 2,000 MW of proposals had been received from solar, wind, biomass, fuel cell, and tidal generators. In total, at least 1,000 MW of land-based wind proposals were received from proposed projects in Connecticut and throughout New England.

DEEP, in consultation with Northeast Utilities subsidiary Connecticut Light and Power and United Illuminating, the state's two EDCs that will ultimately contract for the power, completed the project selection process in September and announced that one of the two projects selected was the Number 9 Wind Farm, a 250-MW project being developed at EDP Renewables in Aroostook County, Maine. The other project is a 20-MW solar development in Connecticut. The 15-year agreement for wind power with EDP Renewables will be submitted to the Public Utility Regulatory Agency for approval on a 30-day timetable mandated by PA 13-303.

Rhode Island

Beginning in 2010, National Grid subsidiary Narragansett Electric, the distribution utility serving nearly all of Rhode Island's customers, has complied with the Rhode Island Long-Term Contracting Standard for Renewable Energy through a series of solicitations for long-term PPAs from grid-scale renewable energy generators, as well as two executed PPAs required by statute (including Deepwater Wind's 30-MW Block Island Wind Farm) and PPAs executed under the state's distributed generation standard offer program. The standard requires National Grid to achieve 90 average MW of renewable energy under long-term PPAs by the end of 2013. If met entirely by wind, this total would equate to roughly 270 MW of nameplate wind power capacity.

On July 1, 2013, National Grid issued an RFP seeking proposals for up to 22.5 average MW of contract capacity (less the amount contracted under the distributed generation standard offer) to be secured separately under the distributed generation standard offer program. If met entirely by wind, this could amount to approximately 60 MW of nameplate capacity. The RFP was intended to be the last required to fulfill the contracting standard. However, citing two recent developments, National Grid withdrew the RFP several weeks after its issuance. First, on July 11, An Act Relating To Public Utilities and Carriers - Distributed Generation Standard Contracts was signed into law. Among other changes, this law extended the deadline for compliance with the long-term renewable energy contracting standard from December 2013 to December 2014. In addition, on July 1, ISO-NE proposed several changes to the Transmission, Markets, and Services Tariff, including a change that would allow negative bids in the region's competitive energy market (see New England's Wholesale Market Treatment of Wind Evolves as Penetration Increases). National Grid proposed several changes to the PPA with winning bidders in the prior year's RFP in response to the negative pricing rule and sought time to assess how to address the issue in the 2013 RFP. No date has been announced for reissue of the RFP.

NESCOE's Coordinated Regional Procurement Process

In July 2012, the New England Governors passed a resolution to issue a regional RFP for a considerable amount of renewable energy through a coordinated process among the New England states. The ultimate goal of the coordinated process is to identify resources with the greatest potential to help meet New England's renewable energy goals and deliver those resources at the lowest cost with respect to generation and transmission costs. NESCOE released a final work plan for implementing a coordinated regional procurement process in November 2012. NESCOE plans to implement the work plan and issue a regional competitive procurement solicitation by the end of 2013. Issuance of the RFP would not obligate any of the individual New England states to procure any amount of renewable energy resources, thereby giving interested states the flexibility to participate if they deem it in the best interest of their own consumers, while allowing others to opt out of the process if they prefer. Commitment would only be made if a state's regulatory authority approved a contract proposed by an EDC. With the state-level activities under way in Massachusetts, Connecticut, and Rhode Island, it remains to be seen whether there are further opportunities for long-term procurement through the NESCOE process in the near future.

Transmission, Hydropower, and Wind

Several New England states are considering agreements that would facilitate large-scale hydroelectric imports from Canada. In June 2013, NESCOE launched a study of the economic and environmental costs and benefits of increased imports of hydroelectric energy along with analysis for accompanying transmission issues. This study is in support of an initiative of five of the six New England states to expand large hydro imports into the region. With one exception, this initiative does not appear likely to directly impact the market for wind power since these hydroelectric imports would not count toward a state's renewable portfolio standards goals. The possible exception is Connecticut. Under a new provision in PA 13-303, large hydro resources may meet up to one-quarter of the 20% by 2020 Class I RPS goal under limited circumstances brought on by a material shortage of Class I resources.

However, transmission built to carry large hydroelectric imports into New England could provide synergies for wind energy projects requiring new transmission from northern New England or outside of New England. This is because the cost of new transmission facilities must be paid for regardless of the amount of energy they transport. Dedicated transmission lines transporting wind energy may have a per-megawatt-hour cost of three times more than a facility used to its full capacity in all hours, due to wind capacity factors typically between 30% and 40%. Using new facilities to move hydropower when wind is not producing results in greater utilization of transmission facilities and holds the promise of reducing the per-MWh cost of transmitting wind. For example, proponents of the Northeast Energy Link project plan to bring power to southern New England from future wind projects in northern Maine in addition to Canadian hydro imports.

This information was last updated on November 08, 2013