When the breezy dreams of offshore wind giants met the rocky shores of regulation.
In a move that left offshore wind giants like Orsted, Equinor, and BP staggering, New York’s utility regulator has blown away pleas for contract relief.
“Nearly all of New York’s pacesetting 4.3GW of contracted offshore wind capacity is now in limbo following rejection of developers’ pleas for inflation relief by the state’s utility regulator.”
Developers’ Substantial Requests Denied
The developers, caught in the turbulent winds of cost overruns, sought increases to offtake contracts by a staggering 55%. However, the PSC was not swayed by their arguments.
“New York Public Service Commission (PSC) denied petitions by the state’s two offshore wind developers, joint ventures (JVs) of Equinor-BP and Orsted-Eversource, for increases to offtake contracts as high as 55%, which one PSC member reportedly described as ‘breathtaking’.”
Ratepayer Impact: A Central Concern
The PSC stood its ground, prioritizing the interests of ratepayers over the inflation woes of developers. The commission emphasized that the proposed contract increases were not in line with its policy objectives.
“Regulator said cost hikes of up to 55% would have substantial ratepayer impacts and were ‘fundamentally inconsistent’ with commission policy.”
The Uncertain Path Ahead
The decision leaves a significant portion of New York’s offshore wind capacity in a state of uncertainty. The ambitious plans of these offshore developers now seem to be at the mercy of regulatory scrutiny and economic practicality. The future trajectory of these projects remains unclear amidst this regulatory challenge.
Conclusion: Navigating the Regulatory Landscape
The PSC’s decision underscores an interplay of economic considerations and, (finally!) some regulatory prudence in the renewable energy sector. Developers now, perhaps for the first time, face the task of advancing their projects amidst economic fluctuations, having to with regulatory expectations and safeguarding ratepayer interests. We’ll see how many walk away.
Source force this article: https://www.rechargenews.com/wind/blow-to-orsted-equinor-and-bp-as-new-york-rejects-pleas-for-offshore-wind-contract-relief-leaving-4gw-in-limbo/2-1-1534223
HT/david d for sending me official decision below.
The expense still exists if one is willing to ignore the effects on whales and birds. They still should assign as a cost of wind the cost of having spinning conventional reserves, as nothing will eliminate wind being weather dependent.
“We’ll see how many walk away”
“We’ll see mow many persevere” might be a smaller list to track
All Betz are off !!!
It’s all going a bit pear shaped………….
Looks like a bit of a lemon to me.
Bidenomics induced Bidenflation is a biotch
Wouldn’t it be Man Bear Pig shaped?
More Dog-Faced Pony Soldier.
“The ambitious plans of these offshore developers now seem to be at the mercy of regulatory scrutiny and economic practicality.”
Yea…not buying it.
The vendors signed contracts stating that they would provide certain goods and services for a specified amount of money, either up front, or as an ongoing revenue stream.
They failed to sufficiently account for the risk of changing economic conditions when signing the contracts and are now in the position of being unable to fulfill the contracts and remain profitable.
So they ask for changes to the contract terms and are denied.
How is that defined as the vendors being “at the mercy of regulatory scrutiny”?
Seems to me that they’re at the mercy of their own shortsightedness when agreeing to the contract terms.
I work in a project and contract based industry. A customer requests bids, we make a proposal and after agreeing on mutually acceptable terms we sign the contract. A major part of our contract negotiations is risk analysis and mitigation. Our sales and engineering team must take those factors into account before we’ll ever sign onto a contract. If we deem the risks unacceptable and the customer is not willing to incorporate risk mitigation strategies into the contract, we pass.
Doesn’t do any good to sign onto contracts that we lose money on, better to let one of our competitors get those contracts.
My point is, although I’m not a part of the team in my company that does these kind of things, I’m aware of the process and how it works.
If we screw up on our risk analysis and end up losing money on a contract (and it has happened), them’s the breaks. That’s not a result of “regulatory scrutiny”, that’s the result of poor risk analysis on our part. Granted our contracts are generally only paltry projects valued in the tens of millions of dollars, not tens of billions, but still…sounds to me like someone’s trying to portray those poor abused bird blender vendors as the victims here.
I call BS.
This is New York passing the buck to Biden – they probably figure they can get it done on the cheap by sticking to their regulatory guns and waiting to see if Biden steps in and authorises the extra funds so they can get the things built. Brinksmanship.
Bidennomics already addressed this issue. The Inflation Reduction Act (IRA) provided incentives for all manner of renewable fuels production including Wind. But the unintended consequences of excess spending under Bidennomics is inflation which hurts high-cost projects like offshore wind. Not only are costs rising due to inflation, but shortages of raw materials and manufacturing capabilities increase time to delivery and costs as well. I have seen project costs go up by 30% in the last 2 years. Far faster than inflation alone.
All this impacts mega-projects like these massively expensive offshore wind farms.
Richard, of course federally guaranteed loans that will be defaulted on. This was surely always the plan. These people aren’t stupid, ethically challenged maybe.
Sailorcurt: “They failed to sufficiently account for the risk of changing economic conditions when signing the contracts and are now in the position of being unable to fulfill the contracts and remain profitable. So they ask for changes to the contract terms and are denied.”
It’s more likely the senior management of each firm knew from the get-go they were underbidding the projects and made three important risk management planning assumptions in offering their initial bids:
1) Political pressure would force the PSC to renegotiate the contracts when substantial cost increases eventually emerged; and
2) If the PSC didn’t cave to political pressure and instead restarted a new competitive bidding process to save face with consumers, then they and all their ‘competitors’ would incease their bid prices for the next round to cover increasing costs; and
3) The federal government would step in at some point and guarantee financing for the projects regardless of what these projects will actually cost.
What if the federal government chooses not to guarantee the financing of these New York projects and ratepayers are stuck with the costs? How many times can an offshore wind bid/cost-bust/rebid cycle be repeated before New York energy consumers finally catch on and call a halt to it? Three times? Four times? Five times?
Off-Shore Wind was to be the savior of the fuel industry and all of the planet. Direct Air Capture (DAC) and E-Fuels were going to rely on “excess” power from off-shore wind to provide all the power needed to capture CO2 from the air and either inject it underground or convert it to fuels via reduction of CO2 with Green Hydrogen (produced by electrolysis) and conversion of CO + H2 to hydrocarbon fuels.
Without cheap (but unreliable) power, E-Fuels and DAC don’t have a chance of succeeding if they even every had one to begin with.
An interesting example is the tender by Total Energy Decarbonizing Refining: TotalEnergies Launches a Call for Tenders for the Supply of 500,000 tons per year of Green Hydrogen | TotalEnergies.com
Just doing some simple math, this will require essentially 1/2 of the power generation of France to produce that much H2. H2 has 141 MJ/kg energy content (HHV) so requires about 56 KW-h of energy to produce via electrolysis. This is 27,976,190 MW-h of energy or 3,193.62 MW of power.
And this is only one oil company (or is it now Energy Company?). If it is to come from wind with a capacity factor of 30%, the installed capacity will need to be 10.645 MW. Not a trivial amount.
Oops,10,645 MW
Finally a small bit of common sense in NY. Bet the PSC commissioners get put on the hot seat by Hochul for this.
New York’s utility (Public Service) Commission issues a statement that says they are still committed to 9 GW of wind by 2030, and decarbonizing (‘certain sectors’), and keeping rates ‘just and reasonable’.
Agreeing to pay what it would take to simply get the 4 GW would have required a future rate increase of 7 to 10 percent, so that is one reason given for not ‘granting fiscal relief’ to the wind developers.
Apparently these commission members think that they can still get 9 GW of ocean wind, ‘decarbonize’, and not raise rates above that which was projected in the planning schemes, by simply sticking with their ‘competitive procurement process’.
I won’t even sarcastically wish them good luck as they move toward their future goals. One of the goals will obviously collapse, and none of the three will be reached outright.
(These people all need to be remembered and reminded 35 years from now)
They correctly assume Biden will finance the whole thing with federally Guaranteed loans that will never be repaid. Saving the planet requires it don’t you know. Destroying the economy is a small price to pay for such a virtuous endeavor.
Read the order carefully. The PSC denied the requests because it was not part of a competitive solicitation. The developers will rebid their projects at the next auction, at much higher prices. The PSC can then accept those bids because it will have been part of a competitive bidding process.
Yes this is a likely scenario. But other developers could under bid them. And some of their stocks may take a bad news hit, especially Ørsted.
China recently won major orders in Serbia – in part because it offered deferred payment terms which Wind Europe says “companies headquartered in OECD countries are not allowed to offer”
Wind Europe press release ‘Security, jobs and autonomy – why we need our turbine made in Europe’ 25 Sept 23.
https://windeurope.org/newsroom/
From the PSC document: “In its decision, the Commission stressed that it remains fully supportive of the Climate Leadership and Community Protection Act…”
This particular decision is good, helping to highlight the huge issues with the CLCPA program’s completely unrealistic basis. But this fictitious basis includes a huge estimate of bogus GHG reduction “benefits” offsetting the over-optimistic estimate of costs. And the entire scheme assumes the emergence of magical dispatchable emission-free resources to supply the grid when the intermittent sources cannot.
So the PSC is kicking the can down the road toward the eventual realization on behalf of ratepayers that the CLCPA itself cannot be retained. Will the PSC eventually push back and recommend outright repeal? Not holding my breath.
It’s a mess.
The Legislature will slap down the upstart PSC and get Biden to provide federally guaranteed loans that will be defaulted on. Just a little hickup on the journey to save the planet.
Do you want some Snowy2.0 with that? Here in OZ they just toss more magic money and write it off as “sunk costs” at the end.
However, because the climate has not changed, warmed cooled or nothing, it probably won’t make any difference whether they get Florence un-bogged or not.
What drongos they are.
Dr Bill Johnston
http://www.bomwatch.com.au
Snowy 2.0 , just like 1.0 is a fully owned by the Australian Federal government is why there is no arms length private business to be told take a jump
Thanks Duker,
Wilki: “The [Snowy 2] project is led by public company Snowy Hydro Limited”.
Snowy 2 was being constructed by Perth-based construction company Clough, who collapsed into administration in December 2002 (i.e., went broke). Clough has previously flagged financial pressure from Waitsia and the Traveler petrochemicals plant project in Texas. Webuild was expected to consider buying Clough out of the Snowy Hydro project.
What happened after that I’m not sure.
So Snowy Hydro, which did not construct the Snowy Mountains Scheme, is actually a shell that has within it an array of entities and consortia all vying for $taxpayer so they can save the planet. It is vastly more expensive that originally promised and while it should by now be operational, if it gets finished it won’t be before 2030.
Then there is the Snowy Link power cord …. and all the resulting environmental wreckage. They are also dumping huge amounts of ground rock into some of the dams that supply the irrigation areas along the Murray and Murrumbidgee Rivers. Out of sight out of mind, but hey this is millions of cubic metres of displaced fresh water. Snowy 2 is the craziest ill-thought, costly scheme of modern times.
I used to camp, walk and fish occasionally around Tantangara Reservoir. Large surface area but fairly shallow, but I’ve never seen it full!
All the best,
Bill
Tantangara is normally 7% full (93% empty). It grows with snow melt each spring, and the water is then sent down to Eucumbene as fast as possible. In a good Spring, for a short while, the fishing among the flooded bushes can be brilliant.
Thanks Mike,
Yes I know. Used to do some work on the Long Plain Hut. Fix it up a bit so the 4WD rev-heads have some fuel to light the fire with. BTW, they forgot to build a spillway on Eucumbene Dam. It came to within a couple of inches of flowing through the gap in the 1974 flood … then they built one.
However …. they are going to pump all this water from Talbingo, through a 27 km tunnel, then pull the plug and let it flow the other way. For a shallow water body, surge through the system potentially through a continuous cycle will be enormous. So much for the flooded bushes.
I have also boated in Talbingo. When they start the Tumut 2 generators, surge there can be 2m in an hour where the road crosses the tailrace. I think a lot can go wrong.
Then there are B1-Bowen’s windfarms. Was it seven just of Manly Beach and 12 off Bondi? The not-in-my-backyard Teals won’t mind I’m sure.
All the best,
Bill Johnston
As a matter of disclosure, I am heavily invested in the energy sector including US electric utilities with a lot of wind. Not because of wind but because they have nuke power plants. I will get back to this.
During a period of low inflation, only two new large nuke plants got built in the US. This is because the Georgia PSC (PUC? allowed construction work in progress. Georgia din not wind, coal, or gas but they had old nuke plants producing cheap power.
So what is the best thing for rate payers in Georgia? Increasing rates as the plant is being built even if the costs are increasing to get a 60 year power plant or building wind farms in OK?
Getting back to my IRA. The standard advise is convert from stocks to cash when you retire. As the baby boomers are retiring the cost of long term loans is going up .
Power plants are built to make electricity to meet demand. Wind farms are being built for political reasons not because the power is needed.
Not so green energy is Mickey Mouse. Not that Disneyland is not fun. We will always have room in the budget for fun things.
I can tell what happens when your power bill goes up $25. No my dividends do not go down $25. You go out for beer and pizza one less time a month.
What do you do when your power bill goes up $1,000-plus?
That is about $4/day.
I heard a manager loudly complain about her electric bill. My all electric 2400 sq ft house had a winter or summer bill of $300.
I could save $1/day by sitting in the dark with no air conditioning and take cold showers.
If Dave did that I would not have to reply to his stupid what questions.
This is good news. It makes me wonder if the folly of net zero is becoming a reality and this is the first step ad an opening for them to ease out of this disastrous plan.
For NY and New England, it was always the idiotic thought that counted. Not going forward will just spawn 10 other bad ideas.
The renewables propaganda is gradually being exposed for the scam that it is, there was a welcome dose of reality on Julia Hartley-Brewer’s show today, in terms that even a politician can understand:
https://www.youtube.com/watch?v=LI05jRnhDz0
From 33:30 to 45:30
The petitions denied today were submitted by Empire Offshore Wind LLC and Beacon Wind LLC, Sunrise Wind LLC, and the Alliance for Clean Energy New York, Inc. (ACENY)
So Gummint public servants reckon they can hold a bunch of private enterprise fine print shell companies set up by the real wind turbine suppliers to unprofitable bidding contracts? Laugh of the week.
Evidently it is so bad, even some of the green news is starting to eat it’s own:
https://heatmap.news/economy/offshore-wind-new-york-public-service-commission
“The developers have a contract,” said Commissioner Tracey Edwards. “The audacity that you would think this commission would grant an additional $12 billion … [it]is just not doable. Walking away is your choice and we certainly hope you do not do that.”
Hope springs eternal Tracey which is a delicious irony for climate doomsters.
When Climate Zealotry and reality clash, reality wins; at least for the moment.
This just means that wind developers will all just offer new contracts with the extreme rate hikes next year and the governments will force utilities to sign them the same way the old overpriced contracts were forced on the utilities. Being slaves to the governments, utilities don’t care if the customers must pay more.
But wind energy is free at the point of source.
So is the rain that falls but then there’s that pesky problem of collecting it and getting it to my taps all the time. Guru Karl was a bit light on with the details about all that.
Pass the popcorn, this will be fun. “Wind energy is free”, “renewables are becoming way cheaper than conventional electrical generation”, “wind and solar will save payers tons of money while protecting the environment”. Hans Christian Anderson would be proud of these social parasites as far as fairy tale telling goes.