By David Wojick
The horrific term “cost crisis” is not from me. It comes down from on high, in this case the mega-conference: US Offshore Wind 2023. Specifically the “DEVELOPER LEADERS KEYNOTE PANEL” which features this chilling title: “Tackling The Cost Crisis Through Assessing Investment Risks”. See https://events.reutersevents.com/renewable-energy/offshore-wind-usa/agenda
Mind you I could not attend, given the tickets cost $4,000 with schmoozing or a mere $3,000 without. This just shows how gold plated the offshore boom has become.
But now they have a cost crisis. Could the bust be at hand? The evidence is piling up.
Here in America one major developer has agreed to pay $48 million to get out of their power purchase agreement (PPA) because it no longer would pay for the project. That project is now dead in the water because no one will finance a billion dollar project with no PPA.
Conversely, another project is dead for now because the candidate electric utility rejected the newly proposed (and very costly) PPA. In some cases the existing PPA is with the local State, not a utility. These are obviously subject to political risks as well. Other developers have petitioned their host State for MORE MONEY.
Moreover, many of the projects in the Bidenesque 30,000 MW offshore wind queue have no PPA at this point. They are at deep risk for sure.
The cost crisis is global and here is a telling example that just happened. The giant developer Vattenfall just halted a huge project in the UK. Here is the headline from the offshore wind loving newsletter https://www.offshorewind.biz:
“BREAKING: Vattenfall Stops Developing Major Wind Farm Offshore UK, Will Review Entire 4.2 GW Zone” (Maybe the industry is breaking, as well as the story.)
That is 4,200 MW of projects, about $16 billion worth before the cost crisis, now on ice. Vattenfall is clear about its reasons, albeit with some artful jargon. They say this:
“Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable. Overall, we see cost increases up to 40%.”
So there are three converging factors. Higher material and equipment costs, higher interest rates and political resistance. For example it has not gone unnoticed that the House Republicans are trying to roll back the lush subsidies granted under the amusingly named Inflation Reduction Act.
Local resistance is growing as well. The biggest developer offshore America is Ørsted and they are now suing New Jersey’s Cape May County and Atlantic City for withholding local permits needed to bring a big project’s power ashore. Anti-offshore wind demonstrations are becoming a common occurrence in coastal towns.
Of particular interest is the Dominion Energy project off Virginia. This is a huge 5,200 MW, 300 square mile, proposal just 15 miles off the world’s biggest naval base at Norfolk. Unlike the other projects this one is being built by the regulated utility itself, so there is no PPA. Instead the books are open to a degree. This includes some required cost estimates.
Dominion’s pre-crisis cost estimates for the first 2,600 MW were about $10 billion for construction and a bit over $20 billion including financing. The latter is called the “revenue requirement” which means this is the bill their customers will have to pay.
Presumably Dominion will now be required to do new, crisis-laden estimates. If these come in at, say, $14 billion and $28 billion the political reaction could be quite strong. And this assumes things will get no worse, which they easily could. We await with great interest.
Offshore wind has been booming so is this the bust? Time will tell so stay tuned to CFACT as this story unfolds.
Author
David Wojick, Ph.D. is an independent analyst working at the intersection of science, technology and policy.
For origins see http://www.stemed.info/engineer_tackles_confusion.html For over 100 prior articles for CFACT see http://www.cfact.org/author/david-wojick-ph-d/ Available for confidential research and consulting.
For more on offshore wind and Intermittent wind and solar, go to our ClimateTV page
Offshore wind has an end user cost crisis.
Very true. The question now is whether the wind developers will be able to pass these new costs through to the poor ratepayers? Hopefully not, but something to watch.
It will be either the ‘poor’ ratepayers, or the ‘poor’ taxpayers, or the ‘poor’ investors. There’s no such thing as a free lunch.
The poor do not pay income taxes or invest much but electricity is a big part of their budget, making price increases highly regressive.
Woke Democrats are in favor of regressive taxes
Their approach is: We have a government program for that
US/UK 56,000 MW OF OFFSHORE WIND BY 2030; AN EXPENSIVE FANTASY
https://www.windtaskforce.org/profiles/blogs/biden-30-000-mw-of-offshore-wind-systems-by-2030-a-total-fantasy
EXCERPT
The US government, not the US people, has the insane fantasy of wanting to build 30,000 MW of offshore by 2030, i.e., just 7 years, but several companies, building projects for Massachusetts, will be allowed to walk away from the signed PPAs, and rebid at much higher prices next year.
The UK government, not the UK people, has the insane fantasy of wanting to build 26,000 MW of offshore by 2030, i.e., in just 7 years, but Vattenfall, a Swedish company, is putting 4,200 MW on hold, because Vattenfall spreadsheets show a “net revenue shortage” of about 40%, meaning the prices, c/kWh, offered by the UK auctions are about 40% too low.
BTW, about 7,000 MW offshore was accepted after the 4th Auction bids in 2022.
The continent-based European big wind companies have only one third of the capacity per year for building 56,000 MW offshore in seven years, or 8,000 MW/y.
These companies will concentrate on the U.S. market, because the Biden “Inflation-Reduction-Act” subsidies are at least 50% higher than in the UK
NOTE: The EU, the UK and the Fed central banks just increased interest rates, which will make everything more expensive.
Oh they will, even the regulator are eco warriors in suits
Regulators are politicized government employees that will do what their out-of-control masters tell them. It is telling that regulated utilities are most involved in unstoppable green schemes.
“It comes down from on high” – The UNhinged
Everything gets qualified by the term crisis nowadays, because if it isn’t a crisis of some kind it doesn’t get a look in. It’s the latest example of what I term ‘word dilution’. Put simply, the word in question, eg racist etc, loses it’s meaning – and consequently its potency.
In a free market renewables have no chance. With huge generous subsidies renewables still have no chance.
I saw today that Tony Bliar has had a conversion…
“Britain should not obsess about cutting its carbon emissions, Sir Tony Blair said yesterday.
In a break with Labour policy, the former prime minister suggested it was futile to make big sacrifices to drive down the UK’s emissions when they are dwarfed by those from countries such as China.
He said even if the UK did a ‘huge amount’ it was ‘not really going to impact climate change’. His comments fuelled a growing debate in both main parties about how far to pursue costly green policies.”
https://www.msn.com/en-gb/news/uknews/tony-blair-warns-britain-cant-stop-climate-change-alone-ex-pm-suggests-costly-green-policies-are-futile-when-uks-emissions-are-dwarfed-by-chinas-as-he-makes-break-with-labour-policy/ar-AA1erXZW
Now, that is significant. The man whose government exhorted people to drive down CO2 emissions by getting a diesel car etc is telling us now that it’s all rather pointless, really.
Uxbridge has thrown the cat among the pigeons.
“Now, that is significant.”
Maybe UK politicians will wake up before the whole UK economy is trashed over trying to implement “Net Zero”.
Some people seem to be coming to their senses slowly. Maybe there’s still hope.
In a sane world they probably would wake up, but the investment is that big….
.. and the sleep is very deep. But the ability to shamelessly U-turn on a policy is an essential art for a politician (Starmer and Sunak are masters of the art) so if all the green nonsense does become a consistent vote-loser then who knows – perhaps it’ll be a case of who blinks first.
They are already awake to the money grab con, that’s why they’re complicit in it – operation Carbon Tax is here and shares in nut zero trinkets are lucrative business
There was no hope for the British Empire even prior to World War One.
It sank, because of the stiff upper lip disease migrating to the brain
The British should have dissolved their British Empire before WW one.
It was no longer making a NET positive contribution to the UK, because it took a huge, costly, defense establishment to defend it.
The same happened with the American Colonies.
Initially, it was a plus, but later the defense costs far exceeded the benefits
Finally, in 1815, the British Empire gave up.
That was a wise decision
The US is in the same conundrum; adding more and more to national debt, by running greater than $trillion federal deficits, plus greater than $trillion trade deficits to “buy allies” on a world scale
If Bliar said it was raining, I’d go outside and check – he’s only interested in getting Labour back in Govt next year and knows nut zero is a turn off for voters, so he will say what he needs to, to help them in, then, get ready for nut zero on steroids as Starmer recently said
Bliar is interested in 2 things – getting Labour into power and getting the UK back into the EU. If Labour win the next election it will be despite his clumsy meddling, not because of it – there’s a fair few voters that will take their votes elsewhere rather than vote for the Bliar/Starmer disaster. Sad to say but the Lib Dems might do quite well for a few more seats if Ed Davey can manage to keep his stupid mouth shut.
I wonder what Teflon Tony’s game is. He did as much as anyone to trash the UK economy and society and now like a vulture he seems to be coming back to prey on the remaining carrion
Debating how far to pursue the ridiculous.
Barrons has picked up on this. “Financially, the industry is teetering” has a nice ring to it.
https://www.barrons.com/articles/offshore-wind-power-energy-costs-24a9b387
“But behind the scenes, the news about wind power is more sobering. Financially, the industry is teetering, with a parade of companies planning to renegotiate or pull out of contracts, jeopardizing plans for projects that were expected to provide electricity for millions of homes. Inflation is erasing profits, causing some of the largest energy firms in the world to back away. “Returns on offshore wind are becoming more and more challenged,” Shell CEO Wael Sawan told Barron’s last month, just days after a Shell joint venture said it would pull out of a power contract in Massachusetts. Shell won’t build renewable projects that can’t earn initial returns of 6% to 8%, he said.
At least eight multinational companies in three states have quietly started to back out of wind contracts, or ask to renegotiate deals in ways that will pass more costs to consumers. Beyond Shell (ticker: SHEL), they include BP (BP), Denmark’s Orsted(DNNGY), Norway’s Equinor (EQNR), Spain’s Iberdrola (IBDRY), Portugal’s Energias de Portugal (EDPFY), and France’s Engie (ENGIY) and state-owned Electricite de France. The projects those companies are building will collectively cost tens of billions of dollars to construct and connect to the grid. The cost problems they’re facing make offshore wind a dicey investment proposition today, with the potential for substantial write-downs ahead.”
Stock prices should take a hit.
Reality dawns.
No, they just have to become more creative in using Leftist governments to wring more money out of taxpayers and ratepayers as any good crony capitalist would do.
The defects in bearings etc is also hitting the bottom lines hard – these things are dropping to bits within 12 months
“…that were expected to provide electricity for millions of homes.”
Oh yes? Not by me.
David,
Someone else posted this but I will put it here too. Sweden is now backing out from the same company’s wind farm deal as well. From a day ago. When I clicked on your link to the UK backing out, instead it had several stories, one of which was this:
https://www.offshorewind.biz/2023/07/27/breaking-sweden-nixes-vattenfalls-offshore-wind-project/
Just the expansion of Vattenfall’s existing wind farm. Interesting note on the environmental issues – I noticed Orsted, I think, have built some seabird sanctuaries near their offshore windfarms in the UK, presumably a requirement to signal a minimum amount of environmental concern. https://electrek.co/2023/07/21/giant-bird-nests-orsted-offshore-wind-farm/
Vattenfall are simply fishing for more money – on fairly solid ground (haha ‘offshore wind’) because Government has mandated it.
And (certainly) UK Government at all levels is utterly utterly paralysed by its own self-importance and the fear of being seen to have ‘Got something wrong‘
Stupid stupid silly (male) pride.
Meanwhile (1): A new ’15 minute scheme’ seems to be on the rocks.
Canterbury
Meanwhile (2): “”Tesla plan for world’s biggest battery plant hits water issues.
It appears that the Germans would rather pump water into and out of a Coal Mine that let Tesla have any to make batteries with.
From an Aussie rag
That one is especially beautiful. They are pumping immense amounts of water to keep the lignite mine working and dumping it into The Nearest River.
Hardly surprising to anyone except for Climate Scientists, groundwater levels, aquifers and farmlands are drying out for miiiiiiles around causing A Drought – in turn caused by CO₂.
And the water goes, the Heat Domes arrive. What A <expletive> Mess
And here’s another mess they made:
https://www.theepochtimes.com/opinion/why-did-mental-health-professionals-go-along-with-lockdowns-5424809
…. and climate science is doubling down on that disaster. (as per Canterbury above, Oxford and London’s ULEZ expansions)
You. Can. Not. Treat. People. Like. That.
To quote New Labour- There isn’t any money…:
To quote Liebour – there isn’t any money and welcome to our dystopian regime where you will be forced, coerced, targeted, silenced, censored, ridiculed and harassed until you comply and agree that 2+2=5
Good to see a politician (Tony Blair) say the quiet part out loud. Even if the CAGW nonsense were a valid theory destroying your economy for nothing is obviously not advised. Meanwhile, nuclear is patiently waiting in the wings, stage right, ready to get the show on the road.
They don’t take advice that is heretical
“Meanwhile, nuclear is patiently waiting in the wings, stage right, ready to get the show on the road.”
That’s right. They will figure this out one of these days. Let’s hope they figure it out before they bankrupt all of us trying to make things work with windmills and solar.
He’s no politician – whatever trips out of his mouth is for his world view benefit, not yours – he did nothing to ensure the UK had reliable, plentiful, affordable indigenous energy for the decades ahead, nothing
Exactly. Bliar and Brown had an opportunity to build up nuclear generation but refused as the timescale was too long – they’d be delivered after they left office and someone else would get the credit.
Tony Blair and his buddy Bill Clinton speak with forked tongue. Both are out of power
The bureaucrats and IPCC cabal will never admit they were wrong, come hell or high water.
Bring out the guillotines and roll them in front of Parliament and the Congress
Piano wire and streetlamps are more democratic.
Nah everbody knows renewables are cheapest but it just doesn’t feel like it-
Power prices on east coast ‘tripled’ over the last decade (msn.com)
It’s a feel kinda thingy aint it lefties and struggletown has the most feelings.
The same has happened here on our East Coast managed by the Regional Greenhouse Gas Initiative (RGGI) https://www.rggi.org/
Living in a RGGI state, I have seen my electricity bills go up ~3.3 fold. I am supplied by a cooperative without any in-house source, until they saw the light and built their own Solar Farm. Right after that my bill doubled.
Renewables are cheaper Don’cha know????!!!
At some point, not too distant in the future, the value of convenience and CONTROL will overlap the pain of forever rising electricity prices. Y’ano another conversion to off-grid might occur?!
ROI be damned!
The grass root left might start to get it when they’re sat in a dark, cold house, with no money for luxuries, no transport, no hope
No. They will say too little too late. They will never admit Blame.
From the article: “Specifically the “DEVELOPER LEADERS KEYNOTE PANEL” which features this chilling title: “Tackling The Cost Crisis Through Assessing Investment Risks”.”
Reality is starting to smack them in the face, now.
I think it is all over but the shouting tryjng to replace conventional power generation with windmills, solar and hydrogen.
One of these days, it will dawn on these people that nuclear is the path forward. But, it may take a while because these people are seriously deluded.
It may be the start of the end, but I think there is still much damage to come to the industrialised west yet.
In Australia Chris Bowen is still the minister and there is a essentially Labor light opposition. State governments all greeny left.
As the damage to business and consumers get worse, as renewable projects and companies continue to fail, as the cost of energy continues to rise, Bowen will fold like a deck of cards, Nut-Zero will be consigned to where it belongs.. landfill.
There’s been calls for some time in Australia to extend the RET.
Perhaps just the end of the beginning. Churchill, of course, was pretty adept at U-turns during his political career.
Vattenfall, the Swedish state company has just lost another offshore wind project on home turf. The newish government has swung policy behind dispatchable capacity, calling for extensions to the lives of nuclear plants. Green opposition to the refusal of permission for the project was skewered by using the environmental card.
https://www.reuters.com/business/energy/sweden-rejects-vattenfalls-planned-stora-middelgrund-wind-farm-2023-07-27/
All wind & solar farms have a cost crisis, the blob just don’t acknowledge it – without taxpayer subsidies & green levies, they wouldn’t get built, just ask Dale Vince! – the business model is only viable with subsidies, CfDs and heavy constraint payments, all funded of course by fleeced consumers
Ah no. Wind and Solar have a ‘pricing crisis’ – it’s the rest of us that view it as a cost crisis.
Even Fortune magazine agrees:
https://fortune.com/2023/07/22/offshore-wind-projects-nixed-due-to-costs-despite-clean-energy-needs/amp/
Great article, David
Right on “the lack” of money
The UK government, not the UK people, has the insane fantasy of wanting to build 26,000 MW of offshore by 2030, i.e., in just 7 years, but Vattenfall, a Swedish company, is putting 4200 MW (of the 7000 MW accepted bids last year) on hold, because Vattenfall spreadsheets show a “net revenue shortage” of about 40%, meaning the prices, ckWh, offered by the UK auctions are about 40% too low.
BTW, the EU and UK central bank just increased interest rates, which will make everything more expensive
The US government, not the US people, has the insane fantasy of wanting to build 30,000 MW of offshore by 2030, i.e., just 7 years, but several companies, building projects for Massachusetts, will be allowed to walk away from the signed PPAs, and rebid at much higher prices next year.
BTW, the Fed just increased interest rates
The continent-based European big wind companies do not have even one third of the capacity per year for building 56,000 MW offshore in seven years.
These companies will concentrate on the U.S. market, because the Biden-idiocy subsidies are at least 50% higher than in the UK
To quantify this a bit. A while ago over at Judith’s I guest posted True Cost of Wind. Redid the obviously faulty EIA LCOE for on shore wind and CCGT. ‘Correct’ CCGT $58/MWh compared to wind at $146/MWh. EIA says offshore wind is 3x onshore (maybe low). That makes off shore wind at least 7.5x CCGT.
Its here
https://judithcurry.com/2015/05/12/true-costs-of-wind-electricity/
and a very thorough and convincing piece it is.
Rud, what does a little suffering actually mean when you are saving the world?
Yes. Suffering makes one feel more virtuous.
I’m so happy to have a wood stove to heat the house. Between all these renewable projects and Russia driving up the cost of gas I think a lot of people are in for a surprise this winter.
Yes, let’s blame it all on Russians.
Where is Li’l Nicky? I am shocked, shocked I tell you, that he and his buddy’s haven’t chimed in disputing these claims!
They must all be attending a seminar on how to use make-up to cover your Dark Tetrad!
Yep – was wondering the same. Usually he’s all over these articles, explaining his unique take on CfD’s!
At some point power cost escalation will overcome state incentives to attract industry and existing firms will also fall behind on competitiveness. It may break rate burden efforts by wind promoters in NJ as well.
For the prices you cite, could not an equal capacity of nuclear power be built which would actually deliver 24/7 at the rated capacity?
Any investment involves the element of risk. In the case of offshore wind there are already many elements of risk. One that doesn’t seem to be mentioned anywhere is the fact that any offshore power facility will be a very attractive and accessible target. If the Baltic Nordstream pipeline, hidden beneath the sea, was fairly easily put out of action, what would be the situation with a phalanx of giant, visible turbines?
In reality, western nations should be expanding their existing power and distribution networks and hardening them with physical and digital defenses against both natural and human interference. How much do you suppose an insurance carrier would want to cover every risk to an offshore power production facility? No one would write such a policy. In the event of a major outage how would a shortage be remedied? The progress of so-called renewable energy is a meal-ticket for hustlers that won’t be able to stand by their product and will quickly disappear when things grind to a halt.
Of course, the powers that be might view the vulnerability of offshore power as a feature rather than a bug. An attack on it might be an excuse to blow up some perceived adversary.
Why on earth would anyone want to blow up an offshore wind farm? Firstly they’re a liability to the users and secondly they’re probably a great place to put a sub – all that vibration is likely to play merry hell with sonar!
All 5 of Europe’s wind turbine makers have been making losses for well over two years. Factories manufacturing turbines and components have closed in Germany, Spain and Denmark. 50,000 jobs in the industry in Germany alone were lost in the six years to 2022.
The massive build out of offshore wind that the EU and UK are calling for is not helping. In June 2022 Wind Europe warned that a shortage of the three types of vessels needed to construct offshore wind farms “posed a risk for project execution worldwide”
More recently in a press release ‘NZIA :act now or Europe’s wind turbines will be made in China’ (14 June 23) they noted that “Offshore foundation manufacturers and installation vessels are booked for several years”
A recent offshore wind auction in Germany for 7GW of capacity saw the project developers having to pay for the right to build the WFs – 12.6 bn euros which will have to be passed on to the supply chain or consumers. ‘German offshore auctions award 7GW of new wind: future auctions must avoid negative bidding’ (12 July 23)
https://windeurope.org/newsroom/
From the above article:
“Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable. Overall, we see cost increases up to 40%.”
— Vattenfall
If that’s what Vattenfall will admit to publicly, you can bet-your-bottom-dollar that the real situation is at least half-again worst!
I read both their quarterly report and the transcript of their presentation and Q&A.
Helene Biström Vattenfall AB – Senior VP Business Area Wind
Yes. Thank you, Andreas. I will say that the offshore wind industry is in the middle of a perfect storm today, we do see, of course, an
increased demand of more offshore wind. But at the same time, we also see steep price increases, as Anna said, up to 40% according to
industry estimates. And that is coming from, of course, inflation, but mainly from the geopolitical situation causing severe problems in
the global supply chain for offshore wind. So what we see here now is key suppliers withdrawing from binding agreements. We see
delayed deliveries, and that is, of course, very troublesome for projects in development.
Wow- Dominion paying $7600/ kw BEFORE having to add 40%? You could put in 36GW of nat gas or several MW of nuclear for that. Oh, and that is before you have to debate that 4200MW to 1400MW for capacity factor.
Offshore wind: Very expensive, AND like all wind it requires virtually 100% backup capacity. As real interest rates begin to head back toward normalcy after many years of zero to negative rates, the capital cost of backup power begins to hit home.
Everything the new radical left gets their grubby little corrupt totalitarian paws on turns to crap- I have tried for years to figure out a nice way to tell my leftist friends that all these candidates and policies they support are not viable at best and a pathway to loss of liberty at worse- all to no avail. Kinda depressing.
The solution is simple – they just need more money!
If we don’t act (pay more and more) then what sort of world will Susan Wheadon’s kids inherit! /sarc
So much fuss; down on your luck?Just ask Chuck how to pass the buck…
Schumer’s $2.4 Trillion Tax IncreaseThe Senate Majority Leader lobbies FERC to socialize green-energy costs onto red states.
The WSJ article is mainly about transmission costs, which will be huge. We’ll all pay.
https://www.wsj.com/articles/chuck-schumer-ferc-green-energy-red-states-reliable-transmission-458c0337
Better bring in an outsider to deliver the message to the policy blind in the UK.
Bernanke Tapped to Find Out Why U.K. Central Bank Misjudged Inflation (yahoo.com)
It’s apparently not a cost crisis any more; it’s a financial boiling.
Story tip
It’s good to know those experts at the UK DESNZ have their finger on the pulse
https://www.energylivenews.com/2023/07/28/uk-household-electricity-and-gas-demand-plunge/
When you price utilities so high people can’t afford them, they tend to use less!
Our future is safe in their hands
Build new fossil fuel and nuclear generators and remove all wind and solar from the grid.
You can build several nuclear power plants for these costs that run for 50+ years with 90% capacity factors of generation.