Shell's push into the U.S. offshore wind market is approaching a full gallop.
Massachusetts on Wednesday selected an 804-megawatt project backed by Mayflower Wind, a joint venture of Shell and EDP Renewables, as the winner of its second offshore wind procurement.
The announcement brings another major project into focus in the rapidly evolving U.S. market. Mayflower will build the offshore wind farm 20 miles south of Nantucket, with an anticipated start-up date in 2025.
Mayflower beat out two other development groups in the solicitation: Vineyard Wind (comprising Avangrid and Copenhagen Infrastructure Partners) and Bay State Wind (Ørsted and Eversource). It will now negotiate a final contract with the state’s distribution utilities, a process expected to wrap up in December.
EDP Renewables, a unit of Portuguese utility EDP, is among the world's leading renewables developers, with a major presence in U.S. onshore wind.
The announcement came earlier than anticipated, with Avangrid noting in its Wednesday earnings report that it expected to learn the result on November 8. Connecticut is expected to announce the result of its own offshore wind solicitation over the next few weeks, potentially worth up to 2 gigawatts of capacity.
Mayflower's win comes a year and a half after Massachusetts awarded an 800-megawatt project in its first solicitation to Vineyard Wind. Put together, the 1,600 megawatts of capacity from Vineyard and Mayflower's projects are expected to generate the equivalent of 12 percent of Massachusetts' annual electricity demand.
The state is likely to procure another 1,600 megawatts in the early 2020s, helping to maintain momentum for the supply chain. Some analysts believe Massachusetts will eventually expand its offshore wind target even further as it competes for jobs with states like New York and Connecticut.
The addition of another huge project in the northeastern market, not to mention one backed by one of the world's largest energy companies, comes as the young U.S. industry nervously awaits the outcome of additional studies the federal government unexpectedly imposed this summer on Vineyard's project. The studies have delayed Vineyard's original construction schedule and could cause logistical problems for the market as it scales up.
With its winning bid, Mayflower had promised to deliver the "lowest cost offshore wind energy ever in the U.S."
The developer did not reveal its winning bid price, but said it came in below the original price cap of $84.23 per megawatt-hour based on Vineyard’s bid last year.
Mayflower “proposed wind energy at a more competitive price with greater economic development benefits for the Commonwealth and the South Coast than any other bidder,” the state government said in a press statement.
Anthony Logan, senior analyst for North American power at Wood Mackenzie, noted that Mayflower is aiming to qualify for the 12 percent investment tax credit despite the project's targeted 2025 completion date.
"Getting those year-on-year cost reductions and the ITC two years after it technically is over is having your cake and eating it too," Logan said. "On the other hand, it speaks volumes to how beneficial a real ITC extension bill for offshore wind would be."
Logan added that the project is likely to benefit from very cheap debt thanks to the backing of Shell.
Mayflower's planned build schedule means it will benefit from local supply chain investments made by earlier-dated projects and ongoing turbine technology improvements. Vineyard Wind currently expects to finish its 800-megawatt project in 2022.
Massachusetts has built a sophisticated offshore wind staging area in New Bedford, and additional supply chain investments are in the works for Connecticut, New York, New Jersey and beyond.
Mayflower paid a record $145 million for its Massachusetts zone in the most recent federal offshore wind lease auction last December. Shortly afterward, Shell acquired a second lease area off New Jersey with France's EDF.
Shell has said it may shift employees from the Gulf of Mexico to the northeastern U.S. to capitalize on the region's coming offshore wind boom. A growing number of European oil and gas companies are growing their presence in offshore wind, among them Norway's Equinor and Italy's Eni.