The Block Island Wind Farm, the first U.S. offshore wind farm. (Photo by Dennis Schroeder / NREL) National Renewable Energy Laboratory

Connecticut’s largest offshore wind project — Park City Wind — is not quite dead in the water but is now on serious life support.

Its developer, Avangrid, announced Monday night that it and Connecticut’s utilities have terminated an agreement for the utilities to buy the power from the project. In doing so, Park City, at 804 megawatts, becomes the third major New England offshore wind project, and the second for Avangrid, to hit the shoals.

The reason for each is the same. The economy has shifted so much since the power purchase agreements, PPAs, were negotiated, that the projects are no longer viable.

Avangrid said in a statement that the “unprecedented economic headwinds facing the industry including record inflation, supply chain disruptions, and sharp interest rate hikes” have “rendered the Park City Wind project unfinanceable under its existing contracts.”

“After exploring all potential solutions to the financial challenges facing the project, and engaging in good-faith and productive discussions with Connecticut state officials regarding these challenges, it is clear the best path forward for Park City Wind is in the termination of the Power Purchase Agreements and a rebid of the project,” the Avangrid statement continued. Avangrid will pay $16 million to terminate the agreement.

As the CT Mirror first reported in May, Avangrid had already notified the Department of Energy and Environmental Protection that it wanted to renegotiate its PPA. The PPA was signed in late 2019, before COVID and the Russian invasion of Ukraine had dramatically altered the world economy.

A PPA indicates to project lenders there is a guaranteed market and price so the developers can repay their loans. But costs had risen so much that it was no longer the case — the prices for the power would not cover the cost of the project. And while contracts for large energy developments such as offshore wind often do plan for the unexpected — building in mechanisms such as inflation indexing or other sorts of adjustments — the Park City contract did not.

Neither did Avangrid’s 1,200-megawatt Commonwealth Wind for Massachusetts, one of the other projects to break its agreement. Nor did the third, SouthCoast Wind, also a 1,200-megawatt project for Massachusetts.

Avangrid, which is the parent company of United Illuminating and the U.S. arm of the multi-national Spanish energy giant Iberdrola, had continued the development and permitting processes for Park City while it negotiated with DEEP. An Avangrid spokesman indicated to the CT Mirror that it would continue those processes.

The spokesman would not indicate whether the company would actually participate in any rebidding of a PPA.

DEEP, in a statement from Commissioner Katie Dykes, confirmed they had been negotiating with Avangrid and working with offshore wind experts.

“We hoped to hear proposed solutions to enable the Park City Wind project to move forward while protecting Connecticut’s ratepayers and respecting our state’s commitment, embodied in statute, to conduct competitive procurements. Unfortunately, these discussions failed to materialize in a proposal that met these goals. DEEP is working with the state’s utilities to ensure that bidders into future solicitations — including our upcoming solicitation for offshore wind — are able to deliver completed projects at the prices they offer and face steeper penalties if they do not.”

Connecticut has a mandate of 100% zero carbon energy by 2040, and offshore wind is widely seen as key to achieving this goal.

“The question remains, though, what the prospects are given what we can now assume are real financial issues that these companies are facing and whether there will be successful bids in this RFP (request for proposals),” said Charles Rothenberger, clean energy attorney with Save the Sound. “These are savvy businesses; they can refinance their project along the way. As much as we want to have escalators to reflect changing economic circumstances, there should be deflators as well — an obligation on the part of the companies to mitigate risk by refinancing and passing along those savings to ratepayers.”

The Park City project represented 804 megawatts of a 2,000-megawatt offshore wind allocation approved by the legislature in 2019. That’s roughly equivalent to the power from both Millstone nuclear power units, which provide about one-third of the state’s power. In July of this year, DEEP announced the remaining 1,196 megawatts would be open for bids next year. The parameters for that RFP are still in draft form.

DEEP indicated there is the potential that the solicitation will be reconfigured to include the full 2,000 megawatts to make up for the loss of Park City. There is also a question of whether Avangrid will be allowed to compete. Even if it is allowed to do so and does, there is no guarantee that Avangrid would win the contract.

Connecticut still has a 304-megawatt offshore wind project, Revolution Wind, on track. In August, the Bureau of Ocean Energy Management gave the developers, Ørsted and Eversource, the environmental go-ahead to begin construction. That project predates the 2,000-megawatt approval by the Connecticut legislature, so is not included as part of that total. It will be staged from the State Pier in New London.

The pier is already in operation for the South Fork wind project, a New York project off Long Island.

The original plans for the Park City project also included a headquarters in Bridgeport and a multibillion-dollar redevelopment of an 18-acre port area for staging construction and long-term operations, maintenance and management. The Connecticut Department of Economic and Community Development commissioner at the time said this work would provide nearly $900 million in economic benefits and more than 2,000 direct jobs, though not all would be permanent, and an equal number of indirect and induced jobs.

But that component of the plan fell apart months ago. As recently as July, Aziz Dehkan, executive director of the Connecticut Roundtable on Climate and Jobs, indicated the on-again, off-again discussions regarding port development were at a standstill. Dehkan did not respond to questions regarding the Avangrid situation.

The economic turmoil with offshore wind is not unique to Connecticut and Massachusetts. A 2022 solicitation in Rhode Island drew only one bidder, which the state ultimately rejected. Developers in New York and New Jersey have also sought to renegotiate contracts. A number of other projects have been delayed. Even in Europe, which has had robust offshore wind for decades, a recent solicitation in Britain drew no bidders.

Cost is seen as the culprit. To that end, Gov. Ned Lamont was among a group of six Atlantic coast governors who sent a letter to President Joe Biden last month requesting federal assistance to address concerns about rising offshore wind costs and keep progress on the East Coast from stalling. The Biden administration has a target of 30,000 megawatts of offshore wind by 2030, a goal many see slipping away. The state is also one of 11 states participating in a new Federal-State Offshore Wind Implementation Partnership announced by the White House in June.

“We look forward to seeing continued progress in the offshore wind industry more broadly and here at home, as construction begins on our Revolution Wind project and as operations at State Pier continue to ramp up,” Lamont said in a statement.

Jan Ellen is CT Mirror's regular freelance Environment and Energy Reporter. As a freelance reporter, her stories have also appeared in The New York Times, The Boston Globe, Yale Climate Connections, and elsewhere. She is a former editor at The Hartford Courant, where she handled national politics including coverage of the controversial 2000 and 2004 presidential elections. She was an editor at the Gazette in Colorado Springs and spent more than 20 years as a TV and radio producer at CBS News and CNN in New York and in the Boston broadcast market. In 2013 she was the recipient of a Knight Journalism Fellowship at MIT on energy and climate. She graduated from the University of Michigan and attended Boston University’s graduate film program.