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Q&A

U.S. Offshore Wind Investment is Essentially Dead, Analyst Says

A conversation with Biao Gong of Morningstar

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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.

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Q&A

Will Blue States Open Up Their Wallets for Renewables?

A conversation with Heather O’Neill of Advanced Energy United.

The Fight Q&A subject.
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This week’s conversation is with Heather O’Neill, CEO of renewables advocacy group Advanced Energy United. I wanted to chat with O’Neill in light of the recent effective repeal of the Inflation Reduction Act’s clean electricity tax credits and the action at the Interior Department clamping down on development. I’m quite glad she was game to talk hot topics, including the future of wind energy and whether we’ll see blue states step into the vacuum left by the federal government.

The following conversation has been lightly edited for clarity.

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Spotlight

The Anti-Renewables Movement is Coming for Your Wires

The Grain Belt Express was just the beginning.

Oklahoma.
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The anti-renewables movement is now coming for transmission lines as the Trump administration signals a willingness to cut off support for wires that connect to renewable energy sources.

Last week, Trump’s Energy Department with a brief letter rescinded a nearly $5 billion loan guarantee to Invenergy for the Grain Belt Express line that would, if completed, connect wind projects in Kansas to areas of Illinois and Indiana. This decision followed a groundswell of public opposition over concerns about land use and agricultural impacts – factors that ring familiar to readers of The Fight – which culminated in Republican Senator Josh Hawley reportedly asking Donald Trump in a meeting to order the loan’s cancellation. It’s unclear whether questions around the legality of this loan cancellation will be resolved in the courts, meaning Invenergy may just try to trudge ahead and not pick a fight with the Trump administration.

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Hotspots

Vineyard Wind Is Besieged Again

And more of the week’s most important conflicts around renewable energy.

The United States.
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1. Nantucket County, Massachusetts – The fight over Vineyard Wind is back with a vengeance. But can an aggrieved vacation town team up with conservative legal activists to take down an operating offshore wind project?

  • The offshore wind project, which is under construction and currently provides power to Massachusetts, was threatened this week when Nantucket signaled it may sue Vineyard Wind over a laundry list of demands related to the facility and last year’s blade breakage. Then less than 24 hours later, the Texas Public Policy Foundation – a conservative legal advocacy group – filed a petition to the Interior Department requesting it not only reconsider previous permits issued for Vineyard Wind but also halt operations at the site.
  • It’s hard to ignore the timing here: before this flurry of activity, the Interior Department released a new secretarial order that laid out many ways it would potentially go after wind facilities. One method would be potentially settling lawsuits filed against both offshore and onshore wind projects in favor of plaintiffs.
  • We are still waiting to see if Interior will take up the Vineyard Wind petition. But this activity suggests that opponents of offshore wind feel increasingly emboldened by the anti-renewables direction that Trump has taken in recent weeks, and we may soon find out if their aspirations for killing operating projects are well-founded.

2. Henry County, Virginia – A fresh fiasco around a solar farm is renewing animus against solar projects in the Commonwealth of Virginia.

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