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Clean energy developers and the bankers who fund them are all pretty confident that a change in power in Washington, should one occur next year, won’t mean the end of the Inflation Reduction Act or the buildout of renewables across the country — except, that is, when it comes to offshore wind. Trump has special contempt for wind energy in all its forms — to him, all wind turbines are bird murderers, but offshore turbines are especially deadly, adding both whales and property values to their list of victims. He has said he will issue an executive order on day one of his second turn as president to “make sure that that ends.”
While the scope and legal enforceability of any potential executive order remain unclear, the wind industry, environmental activists, and analysts have all found plenty of other reasons to be worried.
“I think it’s safe to say that it’s pretty clear from Trump’s first term in office and everything he’s been saying on the campaign trail that he’s pretty hostile towards offshore wind,” David Rogers, the deputy director of the Sierra Club’s Beyond Coal campaign, told me.
Trump’s first administration exhibited a kind of bipolar attitude toward offshore wind — sometimes issuing press releases bragging about leasing to developers, sometimes dragging out environmental approval for major projects.
In December, 2018, when the Department of the Interior leased some 2 million acres of ocean territory to offshore wind developers for almost $500 million, the office put out a press release bragging about a “BIDDING BONANZA” and quoting then-Secretary Ryan Zinke saying “to anyone who doubted that our ambitious vision for energy dominance would not include renewables, today we put that rumor to rest.”
The next year, the department delayed and expanded its review of what was then the country’s most advanced wind project, Vineyard Wind, a move that many advocates interpreted as tantamount to canceling it. Interior Secretary David Bernhardt, who had taken over the department following Zinke’s ignominious resignation, has since defended the review, claiming that he was trying to put the project on firmer legal footing. Vineyard Wind’s developers eventually pulled their permit application and refiled it under the new Biden administration; the project began generating power off the coast of New England early this year, though not before New York’s South Fork Wind beat it onto the grid.
With the U.S. offshore wind industry now far more mature, advocates worry that similar shenanigans would either delay or effectively deny new wind projects that have yet to come online.
David Stevenson, the director of the Caesar Rodney Institute’s Center for Energy & Environmental Policy, who served on Trump’s Environmental Protection Agency transition team and is a longtime opponent of offshore wind, predicted that should Trump win, he would follow through on his promises. “The first thing there will be a day one executive order,” Stevenson told me. That order would almost certainly stop any new approvals, plus possibly stop new construction. Stevenson also said that a Trump administration could settle lawsuits over approvals given to wind projects by agreeing to halt them.
Other tactics at Trump’s disposal could include ceasing new lease auctions; underfunding and understaffing the Bureau of Ocean Energy Management, the Interior Department agency that handles offshore wind; or simply rejecting permits.
“During the Trump administration’s first term, it banned all offshore exploration off of the southeast Atlantic coast — that included drilling and offshore wind. That put a halt on all offshore wind development,” Rogers said. “It wouldn’t be shocking to see some kind of moratorium put in place.”
Not only might new leasing slow to a halt, but projects that are still waiting for final construction authorization from BOEM for might also find themselves stuck in limbo.
“We consider the primary risk here would relate to new projects, rather than existing ones operational or under construction, for example through a federal ban, delay or moratorium on permitting,” Morgan Stanley analyst Robert Pulleyn wrote in a note to clients. Analysts listed three East Coast wind projects with permitting expected to be completed this year — Sunrise Wind in New York, Atlantic Shores South in New Jersey, and Momentum in Maryland — that may yet survive. But Morgan Stanley also identified some 6,500 megawatts of planned projects that are not yet fully permitted that could be at risk in a more wind-hostile White House.
Slow-walking wind the more roundabout way, by reducing staffing, would be a bit trickier for Trump. But as his past record shows, it would also be far from impossible.
“Agency funding levels — which are an important consideration when it comes to staffing — are the result of a negotiation between the executive and legislative branches. So if there is a Trump Administration, the composition of Congress will also influence staffing,” Paul S. Weiland, a partner at the law firm Nossaman LLP, told me in an email. “That said,” he added, “the administration can, more or less by itself, stop hiring and create conditions where staff attrition increases.”
The industry is fully cognizant of these challenges and is preparing a counterargument that focuses not just on clean energy production, but also on the economic and infrastructure development that comes with offshore wind.
At a conference hosted by the American Council on Renewable Energy, Meghan Schultz, the chief financial officer of Invenergy, which has offshore wind leases in California and New Jersey, said “it will be important that we’re working as an industry to educate this administration on the value these projects will bring.” She also specifically mentioned the buildout of port infrastructure as something that could be appealing to a Trump White House.
In a recent interview on the Odd Lots podcast, meanwhile, the Danish energy company Orsted’s Americas chief executive, David Hardy, mentioned “job creation, the infrastructure and its core things like steel and ports and ships and factories” as “bipartisan” benefits of offshore wind.
There are even some Republicans in Washington who have supported offshore wind in the past, typically hailing from states that are otherwise friendly to energy development. So while Florida Governor Ron DeSantis staunchly opposes offshore wind development (Florida’s coasts are for tourism and real estate, not industrial development), Louisiana Republicans including House Minority Leader Steve Scalise and Senator John Cassidy have been more supportive. Scalise and Cassidy both signed a bipartisan letter in 2019 encouraging Interior to finish its review of Vineyard Wind, and Cassidy cheered offshore wind leasing in the Gulf of Mexico.
“We’re an ‘all of the above’ energy state,” Cassidy said at the ACORE conference. “I think offshore wind ideally has a tremendous role.”
But offshore wind off the coast of Louisiana may have more physical and economic problems than political ones, thanks to the Gulf’s relatively low wind potential and high frequency of extreme weather, while offshore wind developments on the East Coast have been beset by delays, drastic cost increases, and cancelled projects.
There is a degree to which advocates for wind energy, in addition to going about their usual work, will just have to pray for the best: “We hope that developers who have leases in hand and have responsibly-sited projects that they’re working to get approved will fight to develop those projects,” Rogers told me.
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And more of the week’s top news about renewable energy conflicts.
1. Nassau County, New York – Opponents of Equinor’s offshore Empire Wind project are now suing to stop construction after the Trump administration quietly lifted its stop-work order.
2. Somerset County, Maryland – A referendum campaign in rural Maryland seeks to restrict solar development on farmland.
3. Tazewell County, Virginia – An Energix solar project is still in the works in this rural county bordering West Virginia, despite a restrictive ordinance.
4. Allan County, Indiana – This county, which includes portions of Fort Wayne, will be holding a hearing next week on changing its current solar zoning rules.
5. Madison County, Indiana – Elsewhere in Indiana, Invenergy has abandoned the Lone Oak solar project amidst fervent opposition and mounting legal hurdles.
6. Adair County, Missouri – This county may soon be home to the largest solar farm in Missouri and is in talks for another project, despite having a high opposition intensity index in the Heatmap Pro database.
7. Newtown County, Arkansas – A fifth county in Arkansas has now banned wind projects.
8. Oklahoma County, Oklahoma – A data center fight is gaining steam as activists on the ground push to block the center on grounds it would result in new renewable energy projects.
9. Bell County, Texas – Fox News is back in our newsletter, this time for platforming the campaign against solar on land suitable for agriculture.
10. Monterey County, California – The Moss Landing battery fire story continues to develop, as PG&E struggles to restart the remaining battery storage facility remaining on site.
A conversation with Biao Gong of Morningstar
This week’s conversation is with Biao Gong, an analyst with Morningstar who this week published an analysis looking at the credit risks associated with offshore wind projects. Obviously I wanted to talk to him about the situation in the U.S., whether it’s still a place investors consider open for business, and if our country’s actions impact the behavior of others.
The following conversation has been lightly edited for clarity.
What led you to write this analysis?
What prompted me was our experience in assigning [private] ratings to offshore wind projects in Europe and wanted to figure out what was different [for rating] with onshore and offshore wind. It was the result of our recent work, which is private, but we’ve seen the trend – a lot of the big players in the offshore wind space are kind of trying to partner up with private equity firms to sell their interests, their operating offshore wind assets. But to raise that they’ll need credit ratings and we’ve seen those transactions. This is a growing area in Europe, because Europe has to rely on offshore wind to achieve its climate goals and secure their energy independence.
The report goes through risks in many ways, including challenging conditions for construction. Tell me about the challenges that offshore wind faces specifically as an investment risk.
The principle behind offshore wind is so different than onshore wind. You’re converting wind energy to electricity but obviously there are a bunch of areas where we believe it is riskier. That doesn’t mean you can’t fund those projects but you need additional mitigants.
This includes construction risk. It can take three to five years to complete an offshore wind project. The marine condition, the climate condition, you can’t do that [work] throughout the year and you need specialized vehicles, helicopters, crews that are so labor intensive. That’s versus onshore, which is pre-fabricated where you have a foundation and assemble it. Once you have an idea of the geotechnical conditions, the risk is just less.
There’s also the permitting process, which can be very challenging. How do you not interrupt the marine ecosystem? That’s something the regulators pay attention to. It’s definitely more than an onshore project, which means you need other mitigants for the lender to feel comfortable.
With respect to the permitting risk, how much of that is the risk of opposition from vacation towns, environmentalists, fisheries?
To be honest, we usually come in after all the critical permitting is in place, before money is given by a lender, but I also think that on the government’s side, in Europe at least, they probably have to encourage the development. And to put out an auction for an area you can build an offshore wind project, they must’ve gone through their own assessment, right? They can’t put out something that they also think may hurt an ecosystem, but that’s my speculation.
A country that did examine the impacts and offer lots of ocean floor for offshore is the U.S. What’s your take on offshore wind development in our country?
Once again, because we’re a rating agency, we don’t have much insight into early stage projects. But with that, our view is pretty gloomy. It’s like, if you haven’t started a project in the U.S., no one is going to buy it. There’s a bunch of projects already under construction, and there was the Empire Wind stop order that was lifted. I think that’s positive, but only to a degree, right? It just means this project under construction can probably go ahead. Those things will go ahead and have really strong developers with strong balance sheets. But they’re going to face additional headwinds, too, because of tariffs – that’s a different story.
We don’t see anything else going ahead.
Does the U.S. behaving this way impact the view you have for offshore wind in other countries, or is this an isolated thing?
It’s very isolated. Europe is just going full-steam ahead because the advantage here is you can build a wind farm that provides 2 or 3 gigawatts – that’s just massive. China, too. The U.S. is very different – and not just offshore. The entire renewables sector. We could revisit the U.S. four or five years from today, but [the U.S.] is going to be pretty difficult for the renewables sector.
What I’m hearing from developers and CEOs about the renewable energy industry after the Inflation Reduction Act
As the Senate deliberates gutting the Inflation Reduction Act’s clean electricity tax credits, renewable energy developers and industry insiders are split about how bad things might get for the sector. But the consensus is that things will undoubtedly get worse.
Almost everyone I talked to insisted that solar and wind projects further along in construction would be insulated from an IRA repeal. Some even argued that spiking energy demand and other macro tailwinds might buffer the wind and solar industries from the demolition of the law.
But between the lines, and beneath the talking points and hopium, executives are fretting that lots of future investments are in jeopardy. And the most pessimistic take: almost all projects will have their balance sheets and time-tables impacted in some way that’ll at minimum increase their budget costs.
“It’s hard to imagine, if the legislation passes in its current form, that it wouldn’t impact all projects,” said Rob Collier, CEO of renewable energy transaction platform LevelTen.
Even industry analysts with the gloomiest views of the repeal say there’s plenty of projects that will keep chugging along and might even become more valuable to investors if they’re close enough to construction or operation. This aligns with recent analysis from BloombergNEF, which found the House bill would diminish our nation’s renewables build-out – but not entirely end its pace.
“The more useful way to break down which project may be hit the hardest is where the projects are going to fall in their development life-cycle,” Collier said. “Projects that have either started construction or have the ability to start construction … are going to very likely rise in terms of their appeal and attractiveness and those projects will be at a premium, if they’re able to skate through the legislative risk and qualify for tax credits.”
There is a more optimistic industry view that believes increased project costs will just be passed along to consumers via higher electricity prices. The American people will in essence have to pick up the tab where the federal tax code left it. Optimists also cite the increased use of power purchase agreements, or PPAs, between renewables developers and entities who need a lot of electricity, like big tech companies. By signing these PPAs, buyers are subsidizing the construction of projects but also insulating themselves from the risk of rising electricity prices.
The most bullish perspective I heard was from Nick Cohen, the CEO of Doral Renewables, who told me deals like these combined with rising premiums for quick energy on the grid may obviate lost credits in a “zero-incentive environment.”
“It’s not the end of the world,” Cohen told me. “If you’re in construction or you’re going to be in construction very soon, you’re fine.”
But Collier called Cohen’s prediction an “experiment” in customers’ willingness to pay for new energy: “If we’re talking about 40%, 50%, 60% of a project’s capital stack now being at risk because of tax credits, those are pretty large price increases.”
I spoke to multiple companies that have been inking massive deals as this legislation has progressed — although many were not nearly as sanguine about the industry’s future prospects as Doral. Like rPlus Energies, which disclosed last week that it closed a commitment for more than $500 million in tax equity investments for a solar and storage project in Utah. rPlus CEO Luigi Resta told me that the legislation “certainly has posed concern from our investors and from the organization” but the project was so far along that the tax equity investment market wasn’t phased by the bill.
“Many people in my company, myself included, have been doing this for more than 20 years. We’ve seen the starts and stops related to ITC and PTC in solar and wind, in multiple cycles, and this feels like another cycle,” Resta told me. “When the IRA passed, everybody was exuberant. And now the runway looks like it may have a cliff. But for us, our mantra since the beginning of the year has been ‘proceed with caution, preserve and protect.’”
However, crucially, it is important to focus on how that caution looks: Resta told me the company has completely paused new contracting while the company is completing the projects it is currently developing.
One government affairs representative for a large and prominent U.S. renewables developer, who spoke on the condition of anonymity to preserve relationships, told me that “whatever rollback occurs will just result in higher electricity prices over time.” In the near term, the only language that would truly gut projects in progress today would be “foreign entity of concern” restrictions that would broadly impact any component even remotely connected to Chinese industries. Similar language all but kneecapped the entire IRA electric vehicle consumer credit.
“It included definitions of what it means to be a foreign company that were really vague,” the government affairs representative said. “Anyone who does any business with China essentially can’t benefit from the credit. That was a really challenging outcome from the House that hopefully the Senate is going to fix.” If this definition became law, this source said, it would be the final straw that “freezes investment” in renewable energy projects.
Ultimately, after speaking to CEO after CEO this week, I’ve been left with an impression that business activity in renewables hasn’t really subsided after the House bill passed, and that it’ll be the Senate bill that undoubtedly defines the future of renewable energy for years to come.
Whether that chamber remains the “cooling saucer” it once was will be the decider.