Another Wind Farm Wobbling

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Even with Tuesday’s disappointing news about New Jersey’s verminous governor giving the go-ahead to two more massive offshore wind farms, I knew there’d been such good news in the pipe for so long, this might just be a burp.

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As if to give my optimism as boost, I got a really chipper email yesterday from my girlfriend, TurnMDRed, which consisted of only the subject line. But, oh, man – it was a good one.

ORSTED JUST PULLED OUT OF MARYLAND!!!!

Well, hot dawg.

The projects off the MD coast Orsted had contracted with the state for were going to be called Skipjack 1 and Skipjack 2.

I first covered them – and the environmental damage already occurring during the sonar surveying – back in October. There were rumors floating, as many of Ørsted’s other offshore projects in the US ground to halt or were abandoned completely, that the Skipjack farms would fall to the same economic pressures.

It seems that has come to pass after a fashion. What Ørsted did yesterday was pull out of its contract for electricity with the state of Maryland because the rates they’d agreed to initially were now too low to pay for the project.

Orsted A/S withdrew from an agreement with regulators in the US state of Maryland to sell electricity from a big offshore wind farm it’s planning to build in the Atlantic Ocean.

It’s the latest step for the Danish firm to reconfigure its portfolio of American projects after soaring costs forced it to take billions of dollars of write downs last year. Orsted’s executives plan to update investors on Feb. 7 on how they will reset the company after the setbacks.

The prices set in the power contract for the Skipjack Wind project were no longer viable because of inflation, high interest rates and supply-chain problems, the Danish company said late Thursday. Orsted will still move forward with the almost 1 gigawatt project. Shares rose as much as 1.6% in early Copenhagen trading on Friday before paring gains.

…Last year, Orsted canceled two US offshore wind projects and recorded $4 billion in impairments.
The company didn’t announce any financial penalties for withdrawing from the deal in Maryland. It also didn’t cite any costs related to contracts with suppliers.

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The problem is, Ørsted is still planning to move ahead on Skipjack provided they can find a private investor to partner with. They’re counting on making up whatever financial penalties and supplier hits they take now with the increased rates they’ll charge in any new agreements – counting chickens before they’re hatched, as it were. Of course, private investors might take their time, too, considering how the wind industry is fairing in projects that result in completions lately.

…“We presume at this stage limited supply chain contracts would have been placed given its commercial operation date,” Jenny Ping, analyst at Citigroup Inc., said in an emailed note. “Potentially higher power prices in future contracts could limit any near-term writedowns.”

Of the 4.1 gigawatts of projects Orsted has in the US, 10% have reached a final investment decision, 35% are being rebid and 55% were canceled, Ping said.

Those are some craptastic percentages, no?

I’m not sure if the governor of MD is willing to go to the lengths NJ’s Murphy is to retain wind farms – after all, Murphy is the one who gave away taxpayer federal credits to Ørsted in a desperate under-the-table deal to try to massage the company into staying – when MD has a 100% renewable power goal set for 2030 or something equally as ludicrous.

Whatever the proponents decide to do, they are facing determined opponents banding together from all corners of society. Anti-wind farm advocates run the gamut from a single person writing an op-ed letter to well organized groups who have been battle-tested up and down the East Coast in the past couple of years. They share information and learning curve tips. In some instances, they have the media on their side, and they also know how to research. The innerwebs provide not only data points now, but visual and aural aids to help bolster arguments concerning the impact these abominations have on the marine life in the waters they are intended for.

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For example, in a 2013 study, the University of Maryland – while trying to advance remedies for the impact pile driving the pylons for these turbines has on cetaceans, etc – inadvertently illustrated how truly loud the noise is underwater. Where one could only read about it before, they have sound files with distance readings, and the noise is still pretty horrendous. Imagine if you had to communicate like a whale or dolphin, and that racket was constantly – literally 24 hrs a day – going on. Could you? Could you hear a ship’s motor overhead and avoid it, or find your confused calf?

…“Pile-driving during the construction of offshore wind farms produces an incredible amount of noise,” said Helen Bailey, one of a group of scientists at the University of Maryland Center for Environmental Science who are studying the impacts of wind turbines on the environment. “This is potentially harmful to marine species and has been of greatest concern to marine mammal species, such as protected populations of seals, dolphins and whales.”

Now multiply that one boom-boom-boom times however many pylons for however many turbines. Their recordings were taken (*NOTE: these links pop-up as downloads*) at 500 meters and at 30 kilometers or over 18 miles away!

This video taken while pulling an underwater mic is another terrific illustration:

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All of those impacts on the ocean inhabitants before even discussing the con-job the offshore wind industry is doing on rate-payer who gets stuck with the tab, and the American tax-payer who is subsidizing the whole debacle. And let me repeat again – without subsidies, there is no offshore wind industry. After decades, wind cannot begin to stand on its own.

…The cost of state‐​level mandates for offshore wind does not stay within state borders. Through federal subsidies like the Production Tax Credit (PTC) included in the Inflation Reduction Act, taxpayers across the country are poised to pay for offshore wind. And it will not be cheap—the PTC offers a lucrative tax credit of $27.50/MWh. Returning to the day‐​ahead wholesale prices in New England of $44/​MWh, the federal subsidy alone represents a hefty 62 percent increase in revenue for wind producers.

As previously covered in this space, the final cost of the PTC by the time it phases down—which could take decades—could reach into the multiple trillions of dollars. Offshore wind’s share of that total would be a modest portion of that (but nothing to sneeze at). If the Biden administration achieves its goal of 30,000 MW of offshore wind and those facilities operate for 30 years at a capacity factor of 43 percent, the total federal taxpayer bill for offshore wind would be over $93 billion. (Note: Although each new facility is supposed to claim the PTC for only 10 years, in practice, owners of many facilities “repower” them: they make enough material changes to the facility to continue to qualify for the PTC for subsequent rounds of 10‐​year eligibility.)

Conclusion

Ambitions for offshore wind are easy breezy—mandating offshore wind development seems like smooth sailing. The harsh reality of offshore wind mandates is that they are incredibly costly. Ratepayers and taxpayers will feel the sting of these decisions for years, potentially decades. Policymakers need to understand the full costs of their actions and come back to the shore. The American people simply don’t want to pay more for energy—not in their electricity bills and not in their tax bills.

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So while the good news is the Skipjack project is “down,” the bad news is that it’s not “out.”

Ørsted plans to reposition the 966-MW Skipjack Wind development offshore Maryland’s Delmarva peninsula for future offtake opportunities.

Following consultation with the state of Maryland, the company has withdrawn from the Maryland Public Service Commission orders approving the Skipjack 1 and 2 projects.

It now intends to continue advancing development and permitting for the combined project, including submission of an updated construction and operations plan to the Bureau of Ocean Energy Management (BOEM).

There’s still lots of work for advocates to do to get this thing scuttled permanently.

But, as of today, at least there’s some room to work with.

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