Owners of the 800 MW Vineyard Wind 1 project, the first commercial offshore wind project in the U.S., closed a first-of-its-kind tax equity package for commercial-scale offshore wind with three U.S.-based banks.
The $1.2 billion dollar investment transaction was reached with J.P. Morgan Chase, Bank of America and Wells Fargo, making it the largest single asset tax equity financing and the first for a commercial scale offshore wind project, according to a release. The investment was announced by Copenhagen Infrastructure Partners (CIP), a green energy investor, and Avangrid, a sustainable energy company and member of the Iberdrola Group. Each owns 50% of the project.
“Closing on a tax equity package has always been a central element to achieving financial success for the first-of-its-kind Vineyard Wind 1,” said Tim Evans, partner and head of North America for CIP. “With this investment, Vineyard Wind 1 moves Massachusetts closer to its goal of reducing greenhouse gas emissions by 50% by 2030.”
Vineyard Wind 1 began on-site construction in late 2021, achieved steel-in-the-water in June 2023, and completed the nation’s first offshore substation in July 2023. Last week, the first E Haliade-X Wind Turbine Generator was installed, CIP and Avangrid announced.
Vineyard Wind 1 located 15 miles off the coast of Martha’s Vineyard and will be the first commercial-scale offshore wind project in the U.S. The project will generate electricity for more than 400,000 homes and businesses in the Commonwealth of Massachusetts under its long-term power purchase agreements (PPAs) with National Grid, Eversource and Unitil.
Rough waters
The offshore wind industry has been grappling with uncertainties recently, with multiple PPAs coming to an end and developers and utilities backing out of projects.
Rhode Island Energy recently pulled out of its PPA with Ørsted and Eversource for the Revolution Wind 2 offshore project — citing higher interest rates, increased expenses and questionable federal tax credits — and concluding that the project had become uneconomical.
In July, Avangrid agreed to pay $48 million to pull out of a PPA with Eversource Energy, National Grid and Unitil for another offshore wind project, the 1,223 MW Commonwealth Wind located 20 miles south of Martha’s Vineyard. Rhode Island Energy, meanwhile, terminated its PPA with Ørsted and Eversource for the offshore wind farm Revolution Wind 2.
However, the U.S. offshore wind industry is making some headway despite the setbacks.
As Vineyard Wind and South Fork Wind sit on the precipice of delivering their first power to the grid, the pipeline of projects approved for construction has tripled in size, with more projects just weeks away from achieving final approval themselves. These findings are detailed in the Business Network for Offshore Wind’s U.S. Offshore Wind Quarterly Market Report, which documents key investments announced over the past three months, growth in state demand for offshore wind and notable policy advancements that drove the U.S. market forward between July and September 2023.
