Costly New Bedford terminal eyes wind energy tenants

Dong Energy, which has offshore wind farms like this one, is one of the companies interested in a possible bid on a recently released RFP.

Built at a cost of $113 million during the Patrick administration, the 26-acre New Bedford Marine Commerce Terminal has three new potential users who public officials hope will help grow a new industry in Massachusetts and enable the state to begin clawing back a return on its investment.

DONG Energy, Deepwater Wind and OffshoreMV have signed a letter of intent with the Baker administration to lease the terminal as a staging area for future projects, state officials announced Tuesday.

“Massachusetts has achieved another major milestone in securing a clean energy future for the Commonwealth’s ratepayers,” Gov. Charlie Baker, who traveled to New Bedford to make the announcement, said in a statement. “With this agreement, Massachusetts stands to recognize jobs and economic benefits from this emerging sector within the clean energy industry, and will continue to lead the nation in offshore wind development and renewable energy innovation.”

In a city known for its whaling past, state officials boarded the RV Ocean Researcher. DONG is using the vessel, owned by Guardline, to conduct a geophysical survey of waters 15 miles off Martha’s Vineyard that developers hope to one day turn into energy fields.

The three wind power developers hold federal leases in the waters south of Martha’s Vineyard and are expected to compete when the state launches a procurement for offshore wind power generation under a law that Baker signed in August. The law requires utilities to competitively solicit and contract for 1,600 megawatts of offshore wind and 1,200 megawatts of other clean energy, such as hydropower.

In the letter of intent, company officials said offshore wind would help Massachusetts meets its statutory clean energy targets, address the need for new generation due to plant retirements, and create hundreds of clean energy jobs.

“In order to realize these benefits, the Massachusetts offshore wind industry must be of sufficient scale to support at least several project developers, each competing with one another to construct multiple projects over a period of years,” company officials wrote. “We proposed this Letter of Intent in anticipation of such an offshore wind industry soon being realized, so that together we can ensure strong competition among developers while also ensuring maximum job creation here in Massachusetts.”

The Massachusetts Clean Energy Center owns and operates the terminal. Its interim director, Stephen Pike, told the News Service Tuesday that he expects payments on a $5.7 million annual lease to be made by whichever company begins its project first. That company would gain access to the use of the Blackmer Street terminal, which was built to handle large vessels and heavy loads, including cranes of all sizes.

Massachusetts invested in a marine commerce terminal in New Bedford in large part to make it attractive to the offshore wind energy industry. [Photo Courtesy: Massachusetts Clean Energy Center]

In 2015, the clean energy center received three responses to its request for proposals from a prospective terminal operator. Pike told the News Service on Tuesday that center officials spoke to each of the potential operators and concluded that “none of those proposals were in the Commonwealth’s best interests.”

For now, the center is operating the terminal. Pike said center employees are not on site every day but are there a couple of times per week and are being assisted by engineering consultants.

“It’s as much as business dictates,” Pike said. “It’s a team effort at this point in time.”

Asked about the level of activity at the commerce terminal, Pike said it was “very typical of a startup business” and that activity was “slowly but hopefully surely ramping up.”

“One challenge has been finding tenants that can use the facility without in any way sort of preempting the offshore wind opportunity down the road,” said Pike, noting a wind energy developer would probably not start using the facility for three or five more years.

In addition to addressing cooperative use of the terminal by lessees, the letter of intent addresses the possibility that the clean energy center may select a terminal operator and includes language stipulating that “the terminal operator may not also be a Developer or other offshore wind developer.”

The substantially completed three-year-old terminal can also be used for cargo imports and exports, but it was built with the primary intent of becoming an offshore wind staging area, with a pier solid and large enough to accommodate wind turbine infrastructure.

Originally, the terminal was expected to serve the Cape Wind project, which has faltered. Officials in Gov. Deval Patrick’s administration announced the terminal plans in 2010, citing an expected $35 million in construction costs and the potential for hundreds of jobs.

The Patrick administration in 2013 described the terminal facility as the first of its kind in North America and said multiple offshore wind projects would be able to make use of the terminal.

In September of 2014, Cape Wind signed a two-year, $4.5 million lease for the terminal with plans to begin operations the following January. Instead, in February 2015, the offshore wind developer backed off the lease after utilities National Grid and NStar terminated power purchase agreements for the project, saying Cape Wind had failed to meet development deadlines. Cape Wind then informed the clean energy center that it would not be able to occupy the terminal as planned.

While offshore wind energy development is years away, the National Wildlife Federation, Environmental League of Massachusetts, Mass Audubon, Environment MA, MA Sierra Club, and Clean Water Action issued the statement Tuesday reflecting their optimism.

“It’s appropriate that the Whaling City, which once lit the world, will now help launch America’s next clean energy chapter from its Marine Commerce Terminal,” the groups said. “New Bedford is a model for cities and states up and down the Atlantic Coast looking to grow their economies while acting to protect their communities and wildlife from the worsening impacts of climate change. We applaud the visionary, collaborative, and bipartisan leadership at all levels of government that has made it possible for New Bedford, and the Commonwealth as a whole, to be a guiding light for America’s next energy chapter. The developers are ready to get to work and we look forward to rolling up our sleeves alongside them to ensure this clean energy industry and its local, high-quality jobs swiftly and responsibly come to fruition.”

Lt. Gov. Karyn Polito called the letter of intent “a big step forward in establishing a supply chain that will produce quality jobs and long-term economic growth on the South Coast and throughout Massachusetts.”