In another troubling sign for the offshore wind industry, electric utility Avangrid announced Monday it was backing out of its agreement to provide 400,000 Connecticut homes with power from its Bridgeport-based Park City Wind project.

Avangrid said it had entered into agreements to terminate its contracts with electric distribution companies Eversource and United Illuminating. It will pay $16 million in penalties and submit a new bid detailing a higher electrical cost for consumers to cover the cost of the planned 800-megawatt wind farm off the coast of Massachusetts.

Avangrid said in a statement the financial headwinds made Park City Wind “unfinanceable under its existing contracts.” The company said it would be seeking more favorable terms of a contract to supply power to Connecticut.

Avangrid, which is the parent company of United Illuminating and a subsidiary of Spanish energy company Iberdrola Group, similarly pulled the plug earlier this year on its contract with utility companies in Massachusetts associated with the Commonwealth Wind offshore wind project.

Other offshore wind companies have done the same and like Avangrid have cited financial challenges facing the industry such as record inflation, supply chain disruptions and interest rate hikes.

At 800 megawatts, Park City Wind would have been the biggest offshore wind project to supply power to the state. Connecticut still has an agreement for 304 megawatts of power from the Revolution Wind offshore wind farm though project developer Ørsted had signaled the project and others in the Northeast could be delayed or scrapped altogether because of escalating costs.

Ørsted is further ahead in the development of its project, however, and is using State Pier in New London for a hub its South Fork Wind project under construction east of Montauk, N.Y.

Gov. Ned Lamont, in a statement Tuesday, expressed disappointment in the loss of Park City Wind and its promise to bring “affordable, clean, reliable power to Connecticut ratepayers.” The state has a goal of making the state carbon-free by 2040.

“ Offshore wind remains a critical resource to meet state, regional, and federal clean energy goals and help maintain reliable operations in the wintertime while creating thousands of good-paying jobs.” Lamont said.

Lamont is scheduled to be in New London Wednesday to visit State Pier, the site of a more than $300 million staging and assembly site for Ørsted and Eversource’s offshore wind projects.

Eversource has since exited the offshore wind industry, but the pier upgrade project is expected to be completed by the end of the year with offshore wind turbine components already filling the 40-acre site.

Lamont is slated to be joined Wednesday by Department of Energy and Environmental Protection Commissioner Katie Dykes, Chief Manufacturing Officer Paul Lavoie, and other state and local officials to discuss the future of the offshore wind industry.

Dykes in a statement, said the DEEP worked with Avangrid and industry experts “to understand concerns about the economics of Park City Wind and the significant near-term challenges facing offshore wind projects in general.”

“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,” Dykes said.

Dykes said 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.”

“Offshore wind continues to be a critically important element of our strategy to provide clean, affordable, and reliable energy to the residents and businesses of Connecticut, and to achieve our statutory target of 100 percent zero-carbon electricity by 2040. We continue to work with our federal partners and in coordination with our sister states in the region to foster the development of a robust offshore wind industry in the United States,” she said.

Park City Wind was expected to supply about 14% of Connecticut’s electricity and be operational as early as 2025. Avangrid said it still owns development rights and continues with the permitting and development of the project.

Lamont recently was among six Atlantic state governors to recently urge the Biden administration to address rising costs for offshore wind farm developments and the increase in energy costs associated with offshore wind power.

“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.

g.smith@theday.com