It’s been tough going for wind recently - there have been a number of headlines hilighting the difficulties with wind power projects. Below we show several of them in the order when the aricles were published:
8/31: Equinor, BP seek 54% hike in offshore wind contract prices for NY projects – up to $190/Mwh, due to rising costs
8/30: Orsted considers walking away, booking $2.3 B impairment on U.S. portfolio as NJ wind project delayed 2 years
8/29: In first GOM lease auction, 2/3 of tracts receive no wind
8/27: ERCOT issues conservation request citing among other things, low wind generation
7/20: Work on UK's largest project stops due to cost escalation & capital costs
7/19: Utility cancels plan to buy power from Rhode Island project bc prices came in too high
7/17: Avangrid pays $49 mil penalty to terminate Massachusetts project bc of cost escalation
6/30: SouthCoast Wind seeks to cancel contracts to build offshore RI
In a series of tweets, legendary trader, John Arnold, did a great job distilling what's going on.
“Inflation & increase in financing costs are crushing the renewables sector, reversing decades long trend of lower prices. Renewables are highly sensitive to interest costs given the high capex, low opex characteristics of industry. (Fossil projects are medium capex, medium opex.)
Cost inflation is the most extreme in offshore wind, but it's hitting all renewables. The transition cannot happen without a sole focus on building faster and cheaper. First step is to quit trying to fit social policy into climate policy. Second step is real permitting reform.
Solar is better positioned than wind given there is still resource to be developed near demand centers. The best onshore wind resource is generally congested with not enough transmission to get to market, and transmission is hard to build. The problem is that there are parts of the US, generally mid-Atlantic to NE, not close to good onshore resource (though some mid-tier wind) which is why they're the most aggressive on offshore wind.”
