America’s offshore wind industry is collapsing, both figuratively and literally. Offshore turbines have grown in capacity and size to the point where they simply collapse into the ocean. As do the financial prospects of those seeking to profit from them.
One of the key players offshore – GE’s renewables division – backed up a solid $2.24 billion loss in 2022, with a $1.44 billion write off last year. Much of it due to the insane cost of trying to generate occasional electricity miles offshore, in a highly corrosive marine environment.
Notwithstanding countless $billions in subsidies, rent-seekers simply can’t make a go of it. And, as the Wall Street Journal outlines below, for America’s crony capitalists, the worst is yet to come.
Gone With the New York WindWall Street JournalEditorial22 April 2024
Is offshore wind a perennial infant industry? Despite receiving countless billions of dollars in subsidies over the last few decades, these energy projects are still failing to launch. On Friday three New York offshore wind projects hit the rocks owing to rising costs and technical snafus.
The New York State Energy Research and Development Authority called off contract negotiations with three wind developers after turbine manufacturer GE Vernova said it couldn’t deliver 18-megawatt turbines for the projects. As a result, the projects would have to be redesigned with more and smaller turbines that would make them noneconomic.
GE’s renewable business had planned to produce the 18-megawatt turbines but last year decided to limit turbines to a maximum of 16.5 megawatts, according to Bloomberg News. Bigger and more powerful turbines have recently been toppling over, requiring expensive repairs. This is one reason GE’s renewable business lost $1.44 billion last year, which was an improvement on its $2.24 billion loss in 2022.
The offshore wind industry received a strong tailwind from the Inflation Reduction Act, which included tax credits that cover 30% or more of a project’s cost. The law also subsidized the domestic manufacturing of components, which New York’s wind developers and their suppliers planned to exploit by making parts at new plants in the state.
But the industry has also faced significant economic headwinds. More than a dozen projects in the U.S. and Europe have been canceled or delayed in the last year owing to rising labor and material costs and higher interest rates. The cost of building an offshore wind project rose by about 60% between 2021 and 2024.
New York regulators recently struck agreements with offshore developers at prices of around $150 per megawatt hour, more than a third higher than those in 2019. For comparison, the wholesale price for natural gas power is around $30 a megawatt hour.
New Yorkers will get stuck paying excessive prices for offshore wind for 25 years to meet their political class’s climate goals. So even if offshore wind costs drop, the state will be locked into exorbitant long-term contracts. Meantime, the state’s grid operator has warned that New York City could face power shortages as soon as next summer owing to the shutdown of gas and nuclear power plants. Another climate-policy fiasco.Wall Street Journal
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