Worcester Business Journal

10 Worcester Business Journal • August 15, 2016 www.wbjournal.com Worcester avoiding Boston's housing pitfalls New offshore wind requirement leads to price worries ers to bring 1,600 megawatts of offshore wind power and 1,200 megawatts of other clean energy – including hydro- power, onshore wind and solar – to Massachusetts. Combined, the legisla- tion effectively hands over a third of the state's electricity market to offshore wind and hydropower generation over the next few years, which opponents said could lead to a spike in power prices in a state where high electricity costs are already a concern. The power procurement require- ments, though, were only part of a lengthier bill to move Massachusetts toward greater sustainability that – frankly – should have gone farther, said George Bachrach, president of the Environmental League of Massachusetts. Bachrach added the cost implications might be considerably less than what business officials fear, because hydro- power and onshore wind are low-cost sources of power and offshore wind's costs mostly come at the beginning. "Wind is free. The cost is simply the infrastructure," Bachrach said. Offshore wind cost Massachusetts already has some of the highest power prices in the country. In 2015, the Bay State's 16.86 cents paid by end users per kilowatt hour was the fifth highest electricity price in the nation, after Hawaii, Alaska, Connecticut and Rhode Island, according to the U.S. Energy Information Administration. The state's last flirtation with offshore wind was expected to increase those already high prices. That flirtation was with Cape Wind, a Nantucket Sound wind park that has faced many obstacles since state electric utilities National Grid and what is now Eversource Energy both terminated their contracts with the company due to unmet construction obligations. According to a 2010 Department of Public Utilities order, National Grid agreed to purchase energy, renewable energy credits and capacity from Cape Wind for $187 per megawatt-hour for 15 years, with a 3.5-percent annual esca- lation rate. At the time, DPU said the contract could lead to price increases of 1.3 to 1.7 percent for residential custom- ers, and of 1.7 to 2.2 percent for com- mercial and industrial ratepayers. This year's energy legislation explicit- ly forbids Cape Wind from seeking con- tracts under the 1,600-megawatt requirement, but a handful of other developers have leases in Massachusetts waters, including Denmark-based DONG Energy, which built offshore wind farms in Denmark and Germany; Providence-based Deepwater Wind, which is building a wind farm off the coast of Rhode Island; and New Jersey- based OffshoreMW, which is the sister company of German firm building a wind farm in the North Sea. "This has the prospect to be the larg- est rate increase in history in Massachusetts," said Dan Dolan, presi- dent of the New England Power Generators Association, which repre- sents the region's existing power plant owners. In advance of the legislative session, NEPGA produced a report last year from former state energy secretary Sue Tierney saying an earlier version of the energy bill that was eventually passed would cost ratepayers an additional $777 million annually. Dolan said he expects costs from the bill's final version will be even higher since isolating the market will create less competition for other sources of power. Bachrach disagrees, saying while costs could go up initially as infrastructure is built, the long-term savings will come by investing in renewables. "Hydro and onshore wind are low- cost energy sources. Offshore wind is somewhat more expensive at first, as we build out the infrastructure, but after that there's no cost in terms of energy supply," he said. In terms of building new power plants, onshore wind and hydroelectric are the cheapest forms of renewable energy, costing $65 and $68 per mega- watt hour, according to the U.S. Energy Information Administration's 2016 Annual Energy Outlook. That is roughly $10 more than the cheapest fossil fuel plant, which is natural gas. Onshore wind and hydroelectric are less than half of the cost of offshore wind, which is $158, according to EIA. years, said MassHousing Executive Director Tim Sullivan. MassHousing plans to do this by making money available to developers building market-rate apartments. "In order to make housing work, developers need to be able to make the sources and uses balance out," Sullivan said. "What we see in the middle-income space is that the rents aren't high enough to support the loans to make the deal work and the rents aren't low enough to make the subsidies work." Affordability crisis In Boston, the median rental rate shot up more than 48 percent between 2011 to 2016, hitting a $2,580 median, accord- ing to the Zillow Rent Index. Other areas of metro Boston, such as Cambridge and Jamaica Plain, have seen rents climb even higher. This increase has been attributed to a number of factors, including a lack of housing stock as well as younger popu- lations choosing to rent longer before buying, according to the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University in Boston. These rising rates have put an espe- cially strong squeeze on Boston's work- force that does not have the income to cover the growing rates but are not pro- tected by being able to tap into afford- able housing. This has prompted Boston Mayor Marty Walsh to launch an initia- tive to have 44,000 units of workforce housing built by 2030. Worcester has a much more balanced rental stock, with the city maintaining a 14-percent mix of affordable housing as well as a large stock of market-rate hous- ing, Traynor said. These assertions are backed up by the Zillow Rent Index, that shows a relatively constrained 13.6-percent increase in median rent in the last five years up to $1,542. In addition to the existing Worcester market-rate duplexes and triple deckers, there are 1,154 units of market-rate housing either recently completed, under construction or will be finished within the next 18 months,said Traynor. What this market-rate housing, which is by definition for those making 60 to 120 percent of the area's median income, does is help insulate the city against the kind of rental creep that has been hap- pening in Boston, he said. Putting on the glitz All this is to say there is a solid base in Worcester on which luxury housing can be added. It is something the city has never had, and clearly there is a market for if a developer is bringing it in, Traynor said. "You have to start with a community with good bones and a good community, like Worcester, and create a market that doesn't exist," said Andrew Marshall, the president and chief operat- ing officer of Malden developer Roseland, which is building 237 apartments in its first phase at the 145 Front Street at City Square development These luxury units will fea- ture outdoor swimming pool with a sundeck, a courtyard, a full-time concierge, a fitness center with on-demand yoga and spinning services, and a clubroom. All of these are ame- nities do not exist anywhere in Worcester and could draw peo- ple in from as far as Boston who want a luxury lifestyle. "You're not excluding any- body; you're just creating more housing options," Marshall said. This is a model that the com- pany has been pursuing for 30 years, said Marshall, back when there was no such thing as a luxury-apartment building, so everywhere the company went it was a new concept. This concept has a ripple effect through a community, he said, with stores cropping up and people down- town bolstering a community's image. "People want to move back to the city for its urbanity, its nightlife, its restau- rants," Marshall said. "The related effect of having high-end housing is you have higher earners living in your downtown, and they are going to want better restau- rants and they boost that image." >> Continued from Page 1 Onshore wind and hydroelectric are the cheapest forms of renewable energy in terms of building power plants, at $65 and $68 per megawatt hour, the U.S. Energy Information Administration said. >> Continued from Page 1 Construction is underway on the first portion of the 145 Front St. development that will give residents walking access to downtown as well as public transportation into Boston. P H O T O / N A T H A N F I S K E

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