Green energy: Is wind-power fizzling out?

In a Wall Street Journal article this week titled "Wind-Powered Projects Hit by Rising Costs" we learn that Big Wind is in trouble and backing away from projects.

Some firms have already eaten multimillion-dollar termination fees to pull out of East Coast projects or written down investments because of rising costs, battering clean-energy stocks. Analysts say New York’s attempt to find new price points acceptable to developers, regulators and investors suggests the broader market’s adjustment won’t be easy.  “Does the market have the courage to kind of pay these higher prices for clean energy?” David Hardy, chief executive of energy firm Ørsted Americas, said at a conference in New York last month. 

He added that ratepayers would ultimately be the ones ponying up. “But the question is, like: What’s the alternative?” he said.

If all you have is a hammer, everything looks like a nail.  There are alternatives that are cheaper and way more reliable and way more safe for sea life and wild life.  Here are the wind numbers that are rising by the week

The new group of projects comes with a projected strike price—a cost index that helps decide residents’ bills—of $145.07 per megawatt hour of electricity over their yet-to-be-finalized 25-year contracts. According to the state, that is about 28% higher than the older proposals’ average but 13% less than the rate developers collectively requested from regulators.

New York’s new proposals will boost ratepayers’ bills by about 2.7%, or more than $35 a year, for the lifespan of the projects, according to state projections. The expected sum is four times more than what officials estimated when the first round of contracts was struck in 2019.

And then the chickens come home to roost as they always do

Equinor last week told investors it wrote down about $300 million from its New York project, or roughly half of its value. Shares in Ørsted, which has projects off the East Coast, Europe and Taiwan, have plunged nearly 80% since early 2021.  Other developers and suppliers have also taken hits. Shares in Siemens Energy, a key producer of turbines and other equipment, crashed to record lows last week after the company said it was in talks with the German government and banks about guarantees to back long-term projects.  General Electric, meanwhile, said in its earnings results last week that it expects to book about $1 billion in losses from its offshore operations this year and next.

As we await the latest rate increases for PG&E at least California isn't going wind-crazy.  I'm always amazed whenever I drive over the Altamont Pass how many wind turbines are still. 

Comments

[Joe Baylock]

It's been a rough month for Green Pork/Energy investing as the news is sprinkled with dead deals on battery plants, wind projects, and ESG branded funds (backing away from the moniker because it is becoming synonymous with underperforming the market). A German court just shut down additional public spending on Green as the budget doesn't exist and they won't allow leftover Covid money to be shifted to Green.

The WSJ had a piece on Monday titled "Americans Fall Out of Love with EVs" that notes Ford and GM have pushed back investments, Volkswagen has put a fourth battery plant on hold and the new UAW contract is going to make cutting EV costs very difficult for the US manufacturers (the ones whose customers get the $7,500 tax credit next year). Only Toyota with its hyrbid-first model is upping investment.

In the meantime, electric grid strain is popping up all over the country driven by data center growth/consumption and higher interest rates pushing out new projects.

Lastly, the public charger business is still foundering with broken chargers, billing software that doesn't work and...higher interest rates. There's more dark clouds on the horizon, but that's enough.

Happy Thanksgiving all!

[Paloma Ave]

Go woke, go broke?

[Ram Emanual]

Why oh why?

https://nypost.com/2023/11/24/news/kamala-harris-roasted-over-thanksgiving-photo-with-gas-stove/

[Joe]

As we listen to the president hype the Earth Day green cash grabs in the Inflation Production Act, I can't help but repost this WSJ editorial from today:

Is offshore wind a perennial infant industry? Despite receiving countless billions of dollars in subsidies over the last few decades, these energy projects are still failing to launch. On Friday three New York offshore wind projects hit the rocks owing to rising costs and technical snafus.

The New York State Energy Research and Development Authority called off contract negotiations with three wind developers after turbine manufacturer GE Vernova said it couldn’t deliver 18-megawatt turbines for the projects. As a result, the projects would have to be redesigned with more and smaller turbines that would make them noneconomic.

GE’s renewable business had planned to produce the 18-megawatt turbines but last year decided to limit turbines to a maximum of 16.5 megawatts, according to Bloomberg News. Bigger and more powerful turbines have recently been toppling over, requiring expensive repairs. This is one reason GE’s renewable business lost $1.44 billion last year, which was an improvement on its $2.24 billion loss in 2022.

The offshore wind industry received a strong tailwind from the Inflation Reduction Act, which included tax credits that cover 30% or more of a project’s cost. The law also subsidized the domestic manufacturing of components, which New York’s wind developers and their suppliers planned to exploit by making parts at new plants in the state.

But the industry has also faced significant economic headwinds. More than a dozen projects in the U.S. and Europe have been canceled or delayed in the last year owing to rising labor and material costs and higher interest rates. The cost of building an offshore wind project rose by about 60% between 2021 and 2024.

New York regulators recently struck agreements with offshore developers at prices of around $150 per megawatt hour, more than a third higher than those in 2019. For comparison, the wholesale price for natural gas power is around $30 a megawatt hour.

New Yorkers will get stuck paying excessive prices for offshore wind for 25 years to meet their political class’s climate goals. So even if offshore wind costs drop, the state will be locked into exorbitant long-term contracts. Meantime, the state’s grid operator has warned that New York City could face power shortages as soon as next summer owing to the shutdown of gas and nuclear power plants. Another climate-policy fiasco.
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For the math challenged: $150/MWh divided by $30/MWh is FIVE times more expensive.

[PalomaAve]

Inflation Production Act - Yes, let us keep voting for our current politicians, because they have been a bang up job?