By David Wojick
he Atlantic coastal states are painting themselves into a financial corner with offshore wind targets and mandates. These purchase requirements may be creating a seller’s market for offshore power providers. Even worse, given that there are only a handful of developers it may well become an oligopoly market. If so then the question is how high the prices to the states will go?
This alarming possibility is in sharp contrast to how the situation is being reported. Some developers have bought out their existing power purchase (supply) agreements as uneconomical. In New York the State rejected a large scale request from a bunch of developers for price increases averaging over 50%, on the grounds that it violated their competitive procurement policy.
These events have been reported as serious setbacks for the industry, but in every case the developers are expected to rebid the PPAs at much higher prices. In fact these States are rushing to get new procurements underway. Other states are doing likewise.
The New York developers can hardly be expected to bid lower than they already asked for, as that would suggest their ask was dishonest. They may well bid higher, arguing that their costs have continued to increase. Developers for other states are likely to want similar amounts.
The driver here may be the huge targets already set by the states. Reports often cite the Biden target of 30,000 MW but the combined state targets are much bigger. Just New York, New Jersey and Virginia sum to over the Biden target. The combined targets from Maine to North Carolina exceed a whopping 50,000 MW of offshore wind capacity.
Given the huge targets the question is how high a price will these states eat? If I were the developers I would come in very high. As the saying goes, it is easy to go down but hard to go up.
Not only is it a mandated seller’s market, it has the makings of an oligopoly. These are short term procurements so the only viable bidders are those ready to build. That is a very small number of developers, perhaps a dozen or so, if that. For each state there may only be a very small number that can deliver to them.
There are lots of leases but it takes 5 years or more to get to the construction stage. Even though the Environmental Impact Statements are a cruel joke on the environment, they still require a lot of research. Smoke and mirrors take time to build.
So I would not be surprised if the bids on the first state’s procurement were very high and they kept getting higher, state by state and procurement by procurement. Of course the states will scream and squawk. They may even reject these high prices at first, but they have huge targets and mandates to meet. The developers are mostly big, global companies so they can afford to take their time, holding out for their high prices.
This particular issue storm is going to be very interesting. Nor will it be over quickly. Green politics meets green business head on. We are talking about something like $200 billion in offshore wind projects. A titanic struggle.
Of course it is possible the states will simply ditch the targets, or slip them harmlessly into the future, so they can repeatedly reject the high bids. This might even wipe out offshore wind, which is what it deserves. Watching that happen, perhaps even helping it along, could be great fun.
Stay tuned to CFACT as this wacky green drama unfolds.
David Wojick, Ph.D. is an inDr. David Wojick is an independent policy analyst and senior advisor to CFACT. As a civil engineer with a Ph.D. in logic and analytic philosophy of science, he brings a unique perspective to complex policy issues. His specializes in science and technology intensive issues, especially in energy and environment. As a cognitive scientist he also does basic research on the structure and dynamics of complex issues and reasoning. This research informs his policy analyses. He has written hundreds of analytical articles. Many recent examples can be found at https://www.cfact.org/author/dwojick/ Often working as a consultant on understanding complex issues, Dr. Wojick’s numerous clients have included think tanks, trade associations, businesses and government agencies. Examples range from CFACT to the Chief of Naval Research and the Energy Department’s Office of Science. He has served on the faculty of Carnegie Mellon University and the staff of the Naval Research Laboratory. He is available for confidential consulting, research and writing.
If they bid too high then they won’t win the contract.
I think the developers who already won bids and now have now come back crying poverty, are just trying to take advantage of the current price crazy-stupidness. Supply chains are slowly returning to normal and the developers are hoping to lock in higher rates.
Of course with every idiot government falling over itself to hand out climate-cash, its likely to cause a log-jam with suppliers and resources and so drive prices higher – one would hope that once the governments see that the “cheap renewable energy” was a failed intelligence test, they’ll pull back from the brink.
Thanks to the global boom in targets the supply chain cannot stabilize. For example they are an estimated 200 construction boats short. I think the demand for minerals is impossibly great. Likewise monopile fabrication sites, etc. Just saw an industry article saying these shortages are investment opportunities. Point is they are very real.
David,
Your very first word is missing a letter.
🤗
David,
You did not mention, almost the entire oligopoly is European.
These companies will be colluding, “on an informal basis”, to definitively screw the US to their global-warming Cross (strike the iron, while it is hot), due to idiotic US and state bureaucratic mandates to “save the world”, which are aided and abetted by the subsidized, lapdog media and academia
It is unspoken EU POLICY to saddle the US economy with high energy costs, using IPCC, WEF, etc., global warming scare-mongering, to prevent European companies from relocating in the US, etc.
The all-in capital cost of Biden’s 30,000 MW of offshore wind will be at least $180 billion to sea-to-shore, which has a levelized cost of energy of at least 38 c/kWh, without subsidies, at least 19 c/kWh, with subsidies, according to latest data presented by bidders to New York State
plus at least $25 to $30 billion of onshore grid extension/reinforcement, which has a levelized cost of energy, c/kWh, and requires extra O&M, c/kWh
plus the on-going cost, c/kWh, of a fleet of power plants to counter the ups and downs of wind output, on a less than minute-by-minute basis, and fill in for whatever is missing to meet demand, 24/7/365, year-after-year
plus the cost of curtailments during higher wind conditions, c/kWh
BTW, China has restricted the export of graphite, a key ingredient for making batteries.
Graphite will be scarce and expensive in the future.
Thank the Lord for giving us fossil fuels, for without them we would be way up the creek without a paddle.
Tens of thousands of items used every day are made from coal, oil, and gas derivatives
Wind and solar only produce troublesome, expensive electricity
Yep. In June 2022 Wind Europe warned that a shortage of the three types of construction vessels needed to build offshore windfarms was going to pose “risk for project execution worldwide”. If anything the situation has now worsened with “Offshore foundation manufacturers and installation vessels fully booked for several years”
It takes up to 5 years to build new construction vessels – meanwhile more and more countries are trying to join the offshore wind club!
I wish I shared your optimism. These states are caught in a vise between foolish targets and a powerful green lobby intent on offshore wind at any price. If they choose to stall, the developers and green lobby will scream their outrage in every public outlet, followed by legal cases for failure to deliver on mandated targets. It will get very ugly and very bitter but the 2024 elections may offer a glimmer of hope.
Optimism? Oops didn’t mean to convey that. My first thought is that we’ll end up like Sri Lanka before there’s real, permanent political and economic change – I’m in Canada, eh!, Klaus Schwab’s love child.
I see the revolution has come to NZ so maybe there’s hope for the rest of us.
“I’m in Canada”
You’re probably horrified that the temperature has gone up a degree or so in the past 150 years! You Canadians just love frigid weather. 🙂
You do know that there are parts of Canada south of several US states don’t you.
Biden the s
“… offshore wind at any price…”
But… but… I thought clean, renewable, green energy would be SO much cheaper and cheaper every day! /sarc
PCman999 says “If they bid too high then they won’t win the contract.”, but that’s the sort of thinking that goes with open competitive markets. The point that the article makes is that this isn’t an open competitive market, it’s a command operation and not really a market at all. The main issue is about when it all collapses. The more the states agree to pay in order to obey the federal government’s command, the more the people will suffer and the more dramatic the collapse will be. The only thing beyond doubt is that it will collapse. The disturbing thing is that all of the authorities are going to go into frantic wriggles to avoid blame, and if the media don’t do their job then we could see no-one ever being held to account.
In Britain, the attitude of the Greens and their insane supporters in the British media is that no price is too high to save the planet. This is the line being pushed by the vast majority of the British media right now. There are still a few lunatics in the media pushing the lie that renewable energy is cheap but this is rapidly becoming unsustainable. Now the media are trying to convince the British public that we must make sacrifices to save the planet. A few dissenting voices are starting to appear in the media which are pointing out the truth so perhaps there is some hope.
Somebody needs to tell the British public that the UK is so tiny it’s hard to find on a globe- so destroying your economy and ecology will not save anything.
Somebody needs to tell the British politicians that same thing.
Yes, the attitude in the political class is they need to reduce CO2 regardless of any costs. There’s no evidence that CO2 needs to be reduced, but that doesn’t stop the politicians.
Western politicians are delusional when it comes to CO2.
Just think: Tens of millions of people are right now living in a shared CO2 false reality, that is scaring them to death. It’s bad for them, and it’s bad for the rest of us living in the Real World, too.
Just because the UK once dominated much of the globe – so much that “the sun never sets on the British Empire”- they must really think that going net zero is going to have a worldwide influence, even assuming there is a problem with CO2.
Same for my extremely tiny Wokeachusetts, which has had an an outsized influence on American culture. It’s now absolutely under control by the most extreme climatistas who really think they’re going to save the planet. I feel like I’m living in an insane asylum.
Human beings spend a huge amount of their time murdering fellow human beings over superstitions, delusions, and ideology. The climate cult has all three.
And the guaranteed output is ZERO. What a massive waste of resources.
Ever noticed how the ITCZ wanders during each year. Notice how it seeks out the wet lands of the Amazon and Central Africa – the result of high surface moisture and lower thermal inertia than oceans. The land stays moist by creating the most powerful convective towers that support the low and mid level convergence of ocean air. (The current drought in the Amazon may be a developing condition whereby the ITCZ will track further north)
Similar processes are involved at higher latitudes and lower surface temperature. Advection of ocean air to land is vital for precipitation over land.
Building vast numbers of wind turbines along ocean shorelines is the worst possible activity for local climate. Robbing wind energy will make these locations drier. I doubt that is a desirable outcome. We can only hope that the green fantasy dies quickly before it inflicts any more damage.
On the news front, cyclone Tej heading for Gulf countries. Self-sustaining convection that creates impressive weather.
The enormous investments in these projects are based on presumed capacity factors over 40%. If not they will all drown in red ink. Might be fun to watch.
I’m surprised that I have not heard of any wind plants going up in the Roaring Forties or other high wind areas.
Yes, it’s generally far from land, but you would figure that South Africa and New Zealand would be pestered with requests for wind plantations.
I’m avoiding using the word “windfarm” in solidarity with another WUWT commentor, who pointed out there’s nothing farm-like about an industrial scale wind harvesting plantation. Greenies think wind turbines are warm and fuzzy and it’s time to disavow them of that stupidity.
Maybe the best example is The Falklands, which has the world’s largest fleet of off-grid wind turbines. They have them on-grid too in the Capital, Stanley, and while there are significant problems they do so far appear to have done way better than anywhere else.
I started to use the term ‘array’ for these things, as in ‘wind turbine array’ or ‘solar panel array’. Makes it sound a bit more disturbing than the warm and fuzzy ‘farm’.
I suppose you could call a group of wind turbines a “blight”.
wind turbine system
Just send the gold bars to their homes and don’t worry about decadal scale indictments, if it even gets that far.
This kind of a mess was inevitable. Perhaps the science can be argued but that’s a waste of time. The economics are incontrovertible. It’s impossible to get even close to “Net Zero” by any form of financial magic. Those opposed to bankrupting society need to ignore the CO2 myth and concentrate on the costs. Today’s WSJ has an article on the skyrocketing legal fees in the DC beltway. Without a doubt a large percentage of them are being charged to the offshore wind debacles. At some point the cost of legal services will put even big renewable actors in the hole, especially when the environmentalists attack. The supply chain for the equipment must come into operation quickly before adverse court decisions idle their equipment and crews, that must be productive. No corporation will retain idle employees. The investment potential of this fraud is circling the drain, which is the key problem, new money will be harder to get.
Story tip:
We will decide what is misinformation about such topics and we will be exempt-
Government defends misinformation laws exemption (msn.com)
Story tip
There is a long lead time between contracting and delivery. Lots of opportunity to milk the ratepayers.
Lots of time to stoke scare-mongering, about this and that, among the purposely kept-ignorant population
Reminds me of the standard engineering scam. Bid below cost on a very specific set of deliverables. Once you win the contract, everything becomes a change order because your specs are super restrictive. It is the change orders that make the money.
certainly for Pentagon contracts
Based on my experience, change orders are THE project money maker for ant defense contract, especially those that are cost plus
My late brother-in-law was an auditor in the Pentagon’s Defense Contract Agency (I think that’s what it was called). He couldn’t tell me much since he had a security clearance, but he implied that a lot of shady deals were happening. He and SOME of the other auditors did their best to do what they could using recognized auditing proceedures- but much of decision making was way over their heads. Because he often raised questionable issues- he was told by the higher ups that he had no place in “management”.
Look at nuclear reactors for example. Years and years to construct with thousands of change orders. The contract is fixed price. The change orders are time and materials at market rate. The more changes, the more you make. So even if it isn’t, you are going to argue everything is a change.
A nuclear plant, instead of $5000/kW in Russia, even less in China, it cost $10,000/kW in Europe and the US
“he Atlantic coastal states are painting themselves into a financial corner with offshore wind targets and mandates. These purchase requirements may be creating a seller’s market for offshore power providers. Even worse, given that there are only a handful of developers it may well become an oligopoly market. If so then the question is how high the prices to the states will go?”
That is the plan. In place for quite a while. Noting unintentional about any of it.
Story tip
Here we go again, already.
https://www.reuters.com/business/energy/new-york-throws-support-behind-offshore-wind-with-three-project-awards-2023-10-24/
Article says “… three offshore wind projects as part of a massive renewable energy procurement that will provide 12% of the state’s power needs in 2030.”
So is complete magic-believing Bu11sh1t, except maybe the cost to taxpayers.
These are different projects than earlier rejected ones. Additionally, New Jersey fishermen and others are taking the Feds to court over their approval of a wind project off of Cape May.
I see these new awards as part of Action 3 here. They will be “incorporating inflation indexing” – which I suppose is to accommodate rather than to oppose the next round of increased costs that will inevitably come around.
https://www.nyserda.ny.gov/About/Newsroom/2023-Announcements/2023-10-12-Governor-Hochul-Announces-New-10-Point-Action-Plan-to-Expand
This 10-point action plan was released the same day as the Public Service Commission rejected the proposed cost increases for the previously awarded projects. Presumably those projects will be or already are terminated.