Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Climate

Is Offshore Wind Out of the Woods?

2023 was, in a word, bad. But there are reasons to think this year might be better.

A wind turbine.
Heatmap Illustration/Getty Images

Billion-dollar losses, cancelled contracts, accusations of whale murder — 2023 was not a good year for offshore wind. A variety of companies involved in the business, from developers to turbine manufacturers told analysts and investors about how bad it was when it came time to report their full-year earnings. Orsted, the Danish energy company, told investors last week that it would have been $2 billion in the black if it were not for its U.S. business; instead it was $3 billion in the red. The head of General Electric’s renewables business, meanwhile, told analysts that offshore wind was “challenging” in 2023 and reported a $1.1 billion loss. And BP, after one executive called the offshore wind market “fundamentally broken” last fall, said this month that it had written down its offshore wind investments by $1.1 billion and was also getting out of a joint venture with Norwegian wind energy giant Equinor.

But that could very well be the worst of it. “We are bullish [on] Offshore Wind value creation given most 2023 issues were related to new US market and cyclical pressures rather than structural challenges,” Morgan Stanley analysts wrote in a report earlier this month. Or to put it another way, 2023 was a weird — and very expensive — year.

The contracts that fell through in the past year, the analysts said, “relate to a specific vintage of projects, which secured revenues in a lower cost environment in 2018-2021” — that is, they were written for a world without the huge run up in costs due to Covid-era inflation and supply chain issues. “Looking ahead, we believe most of these issues have been addressed,” the Morgan Stanley analysts wrote.

For another thing, offshore wind still plays a key role in several states’ climate policies, particularly in the Northeast. Whatever issues around costs and contracting might still exist, state governments have incentives to work around them. Now, analysts and advocates predict, contracts will be written with today’s cost environment in mind, making it easier to share costs to connect projects to the grid. “A number of states like New York have now adopted mechanisms that help de-risk projects,” Fred Zalcman, director of the New York Offshore Wind Alliance, told me.

If all goes well, New York and other states’ decision not to go forward on some contracts due to cost disagreements with developers will only delay the projects — it was the contracts that were the problem, not the projects themselves. Those same developers can rebid for a new, more comfortable deal.

Later this month, New York is expected to award new contracts as part of a new program to fast track procurement following regulators’ refusal to adjust existing contracts for higher costs; both Orsted and Equinor submitted new bids for their Sunrise and Empire Wind projects. Earlier this year, New Jersey, where Orsted had previously cancelled two projects, awarded contracts for more than 3 gigawatts of new capacity , and Connecticut, Massachusetts, and Rhode Island — all three of which have had offshore wind deals fall through or not go forward because of high costs — decided to coordinate to bid on future offshore wind projects.

Even after the industry’s annus horribilis, utility-scale projects off the coast of New York and Massachusetts are now producing power, expanding the industry past its small-scale existence off Rhode Island and Virginia. 2024 “will be a period for the industry to basically reboot,” Zalcman told me. “We have a number of procurements in process and planned that should hopefully more than compensate for the attrition in the pipeline.”

It is, unfortunately, worth mentioning that even if these projects continue to move forward, neither ambitious states like New York nor the Biden administration — whose 30 GW by 2030 goal analysts have, for months, thought was essentially unattainable — are likely to meet their development timelines.

If 2023 was the year of failure for offshore wind, 2024 might at least be the year of failing better.

Blue

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Politics

How the Shutdown Could Remake the Trump Administration

Republicans have blamed Democrats for unleashing Russ Vought on federal spending. But it doesn’t take much to see a bigger plan at work.

Russ Vought with scissors.
Heatmap Illustration/Getty Images

Russ Vought, the director of the Office of Management and Budget, has been waiting for this moment his whole adult life — or that’s what President Trump and the Republican Congressional leadership would like you to believe. As they put it, Vought is a fanatical budget cutter who, once unleashed, cannot be controlled. Who knows what he’ll cut if the Democrats continue to keep the government shut down?

Substantial staffing cuts that go beyond the typical shutdown furloughs are “the risk of shutting down the government and handing the keys to Russ Vought,” Senate Majority Leader John Thune told Politico on Thursday. “We don’t control what he’s going to do.”

Keep reading...Show less
Spotlight

Data Centers Collide with Local Restrictions on Renewables

A review of Heatmap Pro data reveals a troubling new trend in data center development.

A data center and a backyard.
Heatmap Illustration/Getty Images

Data centers are being built in places that restrict renewable energy. There are significant implications for our future energy grid – but it’s unclear if this behavior will lead to tech companies eschewing renewables or finding novel ways to still meet their clean energy commitments.

In the previous edition of The Fight, I began chronicling the data center boom and a nascent backlash to it by talking about Google and what would’ve been its second data center in southern Indianapolis, if the city had not rejected it last Monday. As I learned about Google’s practices in Indiana, I focused on the company’s first project – a $2 billion facility in Fort Wayne, because it is being built in a county where officials have instituted a cumbersome restrictive ordinance on large-scale solar energy. The county commission recently voted to make the ordinance more restrictive, unanimously agreeing to institute a 1,000-foot setback to take effect in early November, pending final approval from the county’s planning commission.

Keep reading...Show less
Yellow
AM Briefing

H2 No

On Tesla’s record, Britain’s backtracking, and an Antarctic ice warning

A hydrogen plant.
Heatmap Illustration/Getty Images

Current conditions: After walloping Bermuda with winds of up to 100 miles per hour, Hurricane Imelda is veering northeast away from the United States • While downgraded from a hurricane, Humberto is set to soak Ireland and the United Kingdom as Storm Amy in the coming days and bring winds of up to 90 miles per hour • Typhoon Matmo is strengthening as it hits the Philippines and barrels toward China.

THE TOP FIVE

1. Energy Department kills West Coast hydrogen hubs

The Department of Energy is canceling two regional hydrogen hubs in California and the Pacific Northwest as part of a broader rescinding of 321 grants worth $7.5 billion for projects nationwide. Going after the hydrogen hubs, which the oil and gas industry lobbied to keep open after President Donald Trump came back to office, “leaves the agency’s intentions for the remaining five hubs scattered throughout the Midwest, Midatlantic, Appalachia, the Great Plains, and Texas unclear,” Heatmap’s Emily Pontecorvo wrote yesterday.

Keep reading...Show less
Green