Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, we've been talking a lot of electricity lately.
Speaker 3: Actually, yeah, it's been what energy months here on Odd Lots.
Speaker 2: Not really intentionally, but yes, it's sort of becoming energy
Speaker 2: month here on Odd Lots. I find like understanding any markets,
Speaker 2: any understanding any commodity markets or whatever is sort of
Speaker 2: extraordinarily difficult, But I find power and electricity to be
Speaker 2: sort of like orders of magnitude. Like it just sort
Speaker 2: of like my mental model how it all works is
Speaker 2: so still like in co it and immature, and I'm
Speaker 2: just sort of understanding it. Like it feels like so
Speaker 2: much more complicated, all these auctions and micro auctions and
Speaker 2: mini markets, and you know, it's it feels a lot
Speaker 2: more complicated in my mind than say, like trading oil.
Speaker 3: My mental model for how it all works is that
Speaker 3: meme from It's Sunny in Philadelphia with the posting notes. Right,
Speaker 3: It's like this weird pseudo government private thing where on
Speaker 3: the one hand, you have natural monopolies in the form
Speaker 3: of the grid and then on the other hand, you
Speaker 3: have all these private individual actors who are trying to
Speaker 3: do all these new things, and it just it seems
Speaker 3: enormously complicated. And in some ways it's becoming more complicated
Speaker 3: because you do have efforts to hasten the energy transition
Speaker 3: in the form of things like the Inflation Reduction Act.
Speaker 3: This network of tax credits and subsidies seems very difficult
Speaker 3: to understand to me as well.
Speaker 2: Right, and we had this grid that for years sort
Speaker 2: of operated with gas and coal and some nuclear, and
Speaker 2: now you know, over the last several years and the
Speaker 2: Inflation Reduction Act has tried to accelerate it get more
Speaker 2: renewable clean energy on the grid. So we're sort of
Speaker 2: putting a new model of production onto an existing model
Speaker 2: of distribution. Creates all kinds of new things. One thing
Speaker 2: in particular, though, you know, we're here in the northeast
Speaker 2: and you know, we don't get a lot of sunlight,
Speaker 2: or we do, but you know.
Speaker 3: We get it's erratic.
Speaker 2: It's erratic, and for much of the year there's hardly
Speaker 2: any and so if we're going to sort of decarbonize
Speaker 2: a lot of the northeastern part of the grid, the
Speaker 2: bet is that a big chunk has to come from
Speaker 2: wind and in particular offshore win Yes.
Speaker 3: Absolutely, and this is something that we've touched on before
Speaker 3: in an episode with Chelsea Jean Michelle, the wind industry
Speaker 3: analyst for Bloomberg nef SO, one of our colleagues here
Speaker 3: at Bloomberg. And I think, to me, the big question
Speaker 3: is we have all these projects and there have been
Speaker 3: some hiccups over the past year. So we've seen projects
Speaker 3: can sold, We've seen a bunch of big energy companies
Speaker 3: take impairments on wind projects. We've seen energy stocks, you know,
Speaker 3: fall quite a bit. There's the potential return of a
Speaker 3: known wind energy disliker, let's put it that way, in
Speaker 3: the form of Donald Trump. All these different headwinds for
Speaker 3: the industry, and to me, the question is still, are
Speaker 3: these growing pains for something which requires enormous upfront investment
Speaker 3: and the creation of a lot of really really big
Speaker 3: structures in the form of turbines and complicated supply chains
Speaker 3: are needed to build those and huge investment outlays and
Speaker 3: all of that. Or is this something more fundamental about
Speaker 3: the business that's the big question in my mind, Like,
Speaker 3: is this just a question of transition and getting started,
Speaker 3: or is this maybe saying something more long term about
Speaker 3: the industry.
Speaker 2: I think that's a great way to frame it. And
Speaker 2: you know, the only thing I would add is further
Speaker 2: complication to this question is that the IRA and this
Speaker 2: like particularly aggressive imperative right now is coming at a
Speaker 2: time when like every industry saw supply chain disruptions and
Speaker 2: every industry saw rising cost of capital thanks to the
Speaker 2: raid hikes and inflation, etcetera. You know, you know, we
Speaker 2: if we had to do over, maybe we would have
Speaker 2: started this done an IRA like act in two thousand
Speaker 2: and nine or twenty ten when we had significant unemployment
Speaker 2: and commodities were dirt cheap, but we didn't. Can't go
Speaker 2: into the past. And so answering these questions, how much
Speaker 2: is growing pains, how much is the bad timing with
Speaker 2: supply chains?
Speaker 3: How much?
Speaker 2: Very complicated, but that fits the theme of how complicated
Speaker 2: the energy markets are, power markets are in general. So
Speaker 2: we continue our process of discovery of learning about how
Speaker 2: it all works.
Speaker 3: I am excited. We do, in fact have the perfect
Speaker 3: guest for this episode.
Speaker 2: We do have the perfect guest. We are going to
Speaker 2: be speaking with David Hardy. He is the CEO of
Speaker 2: the America's division at ORSTED, which is the huge fish company,
Speaker 2: one of the global leaders in wind power. He had
Speaker 2: previously been the CEO of the offshore business at ORSTED
Speaker 2: after joining the company in twenty twenty, so the right
Speaker 2: in the sweet spot to help us disentangle all of
Speaker 2: this stuff. So, David, thank you so much for coming
Speaker 2: on the podcast.
Speaker 4: Thanks Joe and Tracy. Great to be here.
Speaker 2: Absolutely, So why don't we start off twenty twenty three
Speaker 2: I think was sort of overwhelmingly recognized as a very
Speaker 2: challenging year, both for offshore wind and also ORSTED specifically.
Speaker 2: And we can get into some of the projects, but like,
Speaker 2: why do you give us the sort of like high
Speaker 2: level summary of like what we saw unfold over the
Speaker 2: last year eighteen months or so.
Speaker 4: Yeah, I appreciate, appreciate the question. I also appreciate the
Speaker 4: introductory dialogue you had with each other thinking about how
Speaker 4: complex it all is, and I have to echo that
Speaker 4: it is a it is a complex industry. I actually
Speaker 4: enjoy that because you know, with complexity you can differentiate.
Speaker 4: It's a lot harder to differentiate if you're selling a
Speaker 4: cup of sugar to against the other guy. Who's selling
Speaker 4: a cup of sugar. But and likewise, I think the
Speaker 4: question from Tracy about, you know, is this growing pains
Speaker 4: or you know, what was the cause? I think it
Speaker 4: is kind of all of the above, but specifically a
Speaker 4: little bit of you know, no one likes to in
Speaker 4: business say bad luck, but a little bit of bad
Speaker 4: timing I would say is there was a lot of
Speaker 4: ambition and expectations and growth expected from from the US
Speaker 4: and offshore wind as as the maturity of the industry
Speaker 4: overall in Europe reflected an opportunity for America. I remember,
Speaker 4: or said, built the world's first offshore wind far more
Speaker 4: than thirty years ago, and as the world leader an
Speaker 4: offshore wind and has you know, nine gigawatts operating, and
Speaker 4: a lot of those were pretty low cost projects prices
Speaker 4: in Europe. The US Northeast states especially who you know,
Speaker 4: don't have a lot of sun, as you guys said,
Speaker 4: and also don't have a lot of space, saw offshore
Speaker 4: win as the kind of panacea for how to get
Speaker 4: large amounts of green energy you know, onto the grid.
Speaker 4: And and so there was a big fast ambition and
Speaker 4: growth and orsted as the leader saw the opportunity and
Speaker 4: and and took an aggressive position of building projects and
Speaker 4: built building, you know, signing up for off take and
Speaker 4: and committing to billions of dollars of capital investment in
Speaker 4: this market, all as COVID hits were in Ukraine, massive inflation,
Speaker 4: rising interest rates, and yes, all industries were affected by that,
Speaker 4: but renewable energy in general is very, very susceptible to
Speaker 4: rising interest rates, and offshore win even the most of
Speaker 4: all of the renewable energy sectors because it's so cap intensive.
Speaker 4: Our fuel is free, we say, but our fuel is
Speaker 4: really the cost of capital because we put so much
Speaker 4: capital out upfront, and so as interest rates rose three
Speaker 4: hundred BIPs, it just fundamentally changed the economics of the projects.
Speaker 4: And then on top of that, we had you know,
Speaker 4: bespoke inflation, not just generic CPI but but industry specific
Speaker 4: inflation that led to thirty forty percent cost increases. And
Speaker 4: those two factors just basically required a reset, and or
Speaker 4: SAT unfortunately, was the most exposed and the most progressed.
Speaker 4: We had some really late stage projects where we had
Speaker 4: already invested you know, up to a billion dollars in
Speaker 4: one project for example, and made commitments for more. And
Speaker 4: when we we were trying to pull all the levers
Speaker 4: and take all of our experience to try to make
Speaker 4: these projects go, and and in the end we couldn't
Speaker 4: make them all go. And you know, we we had
Speaker 4: to make some some tough decisions in twenty twenty three
Speaker 4: to cease development on on a couple of projects. One,
Speaker 4: like I said, was a really late stage project, and
Speaker 4: so it took a big financial impairment and a financial
Speaker 4: provision for the cancelation charges for that project. But on
Speaker 4: the bright side, and we'll hopefully get to this part.
Speaker 4: We have three projects that we're still building which are
Speaker 4: one is completed, actually America's first commercial scale offshore wind farm,
Speaker 4: the South Fork Wind Farm, was just completed a few
Speaker 4: months ago. And we've got two other very large commercial
Speaker 4: projects that we've taken our so called financial investment final
Speaker 4: investment decision, and we're in construction offshore on one of
Speaker 4: them and building the onshore. You build the onshore part
Speaker 4: first or in parallel with these projects. But the second one,
Speaker 4: we're in full construction mode on the onshore part. So
Speaker 4: I think a little bit of being exposed and being overexposed,
Speaker 4: you know, in retrospect, could we have slowed earlier, probably
Speaker 4: in retrospect, you know, could we have not been as
Speaker 4: ambitious and kind of daggered the number of projects we
Speaker 4: were building in the US. Probably Obviously there were some
Speaker 4: you know, market specific challenges that impacted us. A lot
Speaker 4: of these early projects didn't have any inflation protection and
Speaker 4: the off take, the permitting process was slow, et cetera.
Speaker 4: So there's some US specific things, but a lot of
Speaker 4: it is actually global macro supply chain imbalance, global macrol
Speaker 4: cost of capital, et cetera. That just impacted us in
Speaker 4: a negative way in twenty twenty three. Sorry for the
Speaker 4: long answer. I'll be shorter in the future, but.
Speaker 2: That was very helpful. Also, it's good. Could you gave
Speaker 2: us like six follow up questions automatically?
Speaker 3: Yes? So, okay, first follow up question, but just on
Speaker 3: the idea of rationalizing some projects and even some late
Speaker 3: stage ones which you mentioned, and I assume you're talking
Speaker 3: about the farms in New Jersey Ocean wind But how
Speaker 3: do you decide what to continue with and what to cancel?
Speaker 3: Like is it a question of math and the financing
Speaker 3: costs and the interest rates that you just outlined, or
Speaker 3: is it sometimes a question of physical limitations, so things
Speaker 3: like supply chain issues. The lack of this is Joe's
Speaker 3: favorite subject. The lack of transformers or switch gears or
Speaker 3: the lack of this is another traditional odd lots topic,
Speaker 3: the lack of ships to actually build these things.
Speaker 4: Yeah, it's another kind of all of the above answer.
Speaker 4: You know, we we look at everything. Of course, you know,
Speaker 4: our publicly stated ambition is that we you know, try
Speaker 4: to achieve one hundred and fifty to three hundred bit
Speaker 4: spread to whack. So and we are wack weighted average
Speaker 4: cost of capital. We have a WHACK model basically that
Speaker 4: course is funded in our our corporate cost of capital.
Speaker 4: But then we we have whack adjustments to kind of
Speaker 4: create a project specific whack based on the market, the technology,
Speaker 4: project specific risks, et cetera. So we create this whack
Speaker 4: model and then we then we try to achieve you
Speaker 4: one hundred fifty to three hundred spread to whack against that.
Speaker 4: And so when when we're looking at projects, that's kind
Speaker 4: of our one of our first hurdles or KPIs that
Speaker 4: were that were very very focused on. So as I
Speaker 4: alluded to, is your costs are going up, that spread
Speaker 4: to whack is being compressed. As your cost of capital
Speaker 4: is going up, that whack is going up, and so
Speaker 4: you pretty quickly can get upside down on that spread
Speaker 4: to whack. If if the ambition has only one fifty
Speaker 4: to three hundred and the WHACK went up by three hundred,
Speaker 4: it's pretty tricky. But at the same time, you know,
Speaker 4: we are also trying to be strategic. We were trying
Speaker 4: to make investments in a market, and at some point
Speaker 4: we had some sunk cost and so even though our
Speaker 4: guiding star is this life cycle spread to whack fully
Speaker 4: loaded kind of KPI, we started adjusting a little bit
Speaker 4: and saying like, well, if we cancel, we've got these
Speaker 4: sunk costs we're gonna have to write off anyway, So
Speaker 4: should we just assume them as written off and look
Speaker 4: at ford I rrs And so we started changing our
Speaker 4: parameters a little bit and barometer a little bit as
Speaker 4: we were getting into the tough situation to see if
Speaker 4: it strategically made sense to keep going. And we were
Speaker 4: constantly looking at the supply chain and seeing, okay, well
Speaker 4: what risks are still ahead of us? If we sit
Speaker 4: with a with a target today, you know, how realistic
Speaker 4: is it? We'll be able to hold that. Of course,
Speaker 4: we had our big risk registers, and we have our
Speaker 4: modeling of you know, what things are going to cost,
Speaker 4: and we had contingencies and all that built in, but
Speaker 4: you still kind of have a scientific but not perfect
Speaker 4: scientific probability analysis of outcomes. And if you're you know,
Speaker 4: P ninety nine outcome is really really bad, and you
Speaker 4: know your P fifty looks okay, that's different than if
Speaker 4: your your standard deviations are more narrow between your P
Speaker 4: fifty and your P ninety nine. And so as we
Speaker 4: looked at these projects, there seemed to still be a
Speaker 4: lot of challenges ahead, and so again the management team
Speaker 4: and the board had a discussion and we decided that
Speaker 4: we weren't comfortable with continue to invest in the projects,
Speaker 4: and we thought it was better for the company, for
Speaker 4: the portfolio to go ahead and cancel, take the big hit,
Speaker 4: but hopefully take a little a little bit of risk
Speaker 4: out of the system, a little bit of risk out
Speaker 4: of the supply chain, and a little bit of you know,
Speaker 4: more focus from the organization so that we could make
Speaker 4: these three projects that we did want to keep going
Speaker 4: forward with successful and that's that's been our target. And
Speaker 4: of course this is all from an America's perspective, but
Speaker 4: or said it was doing this you know globally, like
Speaker 4: looking at projects that had in Asia and Europe, et cetera.
Speaker 2: So, first of all, I'm very appreciative that you've gone
Speaker 2: right into things like spread to whack because this is
Speaker 2: exactly you know, what we want to understand better, but
Speaker 2: just to conception rualized sort of like what was or
Speaker 2: is the sort of way to think about like the
Speaker 2: difference between say, the South Fork project and the New
Speaker 2: Jersey project. What was it about one of them that
Speaker 2: it's like, Okay, this makes sense to go ahead and
Speaker 2: complete it, and another one is like, no, we're going
Speaker 2: to take the hit on this and write off some
Speaker 2: of this investment.
Speaker 4: Yeah, without getting into specifics, but conceptually it's about, you know,
Speaker 4: how like how negative is the MPV or how you know,
Speaker 4: how much more risk was there ahead of us, how
Speaker 4: much more unknown? What supply chain challenges were still out there?
Speaker 4: And one of the challenges with Ocean Win one in particular,
Speaker 4: was that as we were approaching kind of the build
Speaker 4: up to this decision, there were new global supply chain
Speaker 4: challenges that were emerging. So potentially, you know, delays in
Speaker 4: our foundations delays, and our turbines delays and vessels, and
Speaker 4: then you have these knock on effects. Right if you're
Speaker 4: planning to to start installing foundations and let's say summer
Speaker 4: of twenty four, which is what our plan was, and
Speaker 4: now you know those foundations aren't going to be ready
Speaker 4: until twenty five, or your vessels, you know, your vessels
Speaker 4: stuck on another project and it's not going to be there.
Speaker 4: Then the whole project has to shift because there's a
Speaker 4: sequence of how these things get built. And so then
Speaker 4: when we had lined up you know, the literally you know,
Speaker 4: hundreds of other contracts to make this whole project sequence,
Speaker 4: and the whole thing was going to have to shift.
Speaker 4: Then we were pretty concerned that as we reopened, as
Speaker 4: we went out to supplier A or supplier B and
Speaker 4: said we now need to shift this project from twenty
Speaker 4: four to twenty six, that all of their pains that
Speaker 4: they were feeling from the macroeconomic challenges we're going to
Speaker 4: be on the table because we had locked in some
Speaker 4: thing's pre the big inflation, and we had actually had
Speaker 4: some very favorable pricing potentially, But as soon as you
Speaker 4: reopen up things then then everybody's clawing back, and so
Speaker 4: I think that that was one of the big, big
Speaker 4: discussions that we had. And at the time, we weren't
Speaker 4: sure how the state was going to respond and you know,
Speaker 4: if they would work with us to to you know,
Speaker 4: to make make the project work. And so we just
Speaker 4: decided to make the call. We're with South Fork for example.
Speaker 4: Yes it's a tight project, but but we didn't have
Speaker 4: those same new supply chain risks that we that we
Speaker 4: saw on the horizon with Ocean Wing one.
Speaker 3: Wait, can you talk a little bit more about those
Speaker 3: supply chain risks because I kind of alluded to this earlier,
Speaker 3: but this is core odd lots thematic content, so things
Speaker 3: like switch gears and transformers and then the ships as well.
Speaker 4: You know, offshore wind is growing rapidly across the world, right,
Speaker 4: It's not just here where people saw this as a
Speaker 4: as a solution to get large renewable energy. And remember
Speaker 4: it in Europe, right, Russian invades Ukraine. Europeans want energy sovereignty,
Speaker 4: and so offshore wind became like even more important as
Speaker 4: they got off Russian gas. And so you all of
Speaker 4: a sudden have this huge supply and demand imbalance, particularly
Speaker 4: on things like HVDC systems, but also vessels, monopiles, et cetera.
Speaker 4: And some of these companies are not you know, super large,
Speaker 4: well funded balance sheet companies, so they can't just see
Speaker 4: the demand signal and ramp up the way that you
Speaker 4: would think they could. And also just the way the
Speaker 4: industry works, it's long cycle, so we typically don't want
Speaker 4: to like commit in a kind of take or pay
Speaker 4: way for whether that's vessels or equipment until we take
Speaker 4: our final investment decision to tell the projects to your risk,
Speaker 4: how we have our permits, our interconnect agreements, our land
Speaker 4: rights are you know, et cetera. Are are a point
Speaker 4: of interconnect agreements. And so there's a little bit of
Speaker 4: a chicken in the egg on like if the supply
Speaker 4: chain builds, it will there be demand or do they
Speaker 4: want that demand locked in? But we're not we and
Speaker 4: I'm saying we not orsted, but we the industry are
Speaker 4: we even though there's a lot of demand signals, are
Speaker 4: we committing? So they have business case certainty and so
Speaker 4: you kind of have had this challenge on the supply
Speaker 4: chain supply chain ramp up and and so definitely there's
Speaker 4: a global imbalance I would say on some of these
Speaker 4: key offshore when supply chain categories. And you know, the
Speaker 4: plan was that in the US, we were going to
Speaker 4: build our own capabilities here, we wouldn't need the global
Speaker 4: the global supply chain. But then again, the same chicken
Speaker 4: and egg problem. Right. We had a bunch of projects
Speaker 4: that had promised to help contribute to both demand and
Speaker 4: in some cases even contribute to some of the upfront
Speaker 4: costs to build out some of the supply chain. But
Speaker 4: then when the economics or the project didn't work anymore,
Speaker 4: then of course the economics for the supply chain didn't
Speaker 4: work anymore. So we're in a reset period for most
Speaker 4: of the product in the in the US. Other than
Speaker 4: kind of R three and and a couple couple more,
Speaker 4: the rest of the whole industry is basically, you know,
Speaker 4: had to recontract and push out and and we're you know,
Speaker 4: kind of in a re re reset of the macroeconomic conditions.
Speaker 2: I'm going to dive right into a subset of the
Speaker 2: supply chain question that speaks to this that also sort
Speaker 2: of our one of our core topics. Talk to us
Speaker 2: about the Jones Act, how it affects affects your business
Speaker 2: and I think Orsted has a you built your own
Speaker 2: Jones Act compliant vessel, But I think that's right. But
Speaker 2: talk to us about like this particular piece of legislation
Speaker 2: that's been around forever and what it means for basically
Speaker 2: the industry's capacity to build out US offshore wind.
Speaker 4: Yeah, I mean the Jones Act for for those that
Speaker 4: don't know, and I'm just going to make it simple,
Speaker 4: it requires a US flagged which means US owned and
Speaker 4: operated and built vessel to transport equipment from one US
Speaker 4: port to another. These products are built in the US
Speaker 4: Outer Continental Shelf and so they're subject to the Jones Act.
Speaker 4: In general, i'd say, or said, we're supportive of the
Speaker 4: Jones Act. It is, you know, it's it's another challenge
Speaker 4: to starting up the industry and we would love to
Speaker 4: have some you know, some waivers in the beginning and
Speaker 4: then you know, work with with the shipbuilding industry and
Speaker 4: others to build out the fleet because it's difficult to
Speaker 4: build off shore wind with Jones Act requirements when there
Speaker 4: are no Jones Act vessels that exist. We were first
Speaker 4: movers in working with another company to invest in and
Speaker 4: commit create demand for a Jones AC wind turbine installation vessel,
Speaker 4: which is one of the really big expensive spoke vessels
Speaker 4: that actually installs the wind turbines. But there's actually a
Speaker 4: whole lot of other vessels. There's cable laying vessels, dumping vessels,
Speaker 4: foundation installation vessels, service operation vessels, et cetera, et cetera.
Speaker 4: So we were, we were and are committed to trying
Speaker 4: to help build out that fleet. But in the beginning,
Speaker 4: wed they vessels don't exist. It's hard to comply, and
Speaker 4: so we we in the industry have built workarounds where
Speaker 4: we you know, either stage stuff outside of the US,
Speaker 4: or we bring it directly over from Europe, or we
Speaker 4: barge things out with US flagged tugs and barges and
Speaker 4: transfer equipment to European flagged or other than US flagged vessels.
Speaker 4: And so it's been a it's been a it's been
Speaker 4: a hindrance, I would say in at least being able
Speaker 4: to get the most cost effective offshore wind in the
Speaker 4: US on early projects. And so yeah, we're still just
Speaker 4: working through it, both getting first projects built and trying
Speaker 4: to support the maritime industry. You did allude to, like
Speaker 4: I said, we were the first charter for a vessel
Speaker 4: called the Caribdas which Dominion Energy was building for their project,
Speaker 4: and we helped secure the business case for the vessel,
Speaker 4: but the vessel was very very late in being completed,
Speaker 4: and so we had to pivot to this bargin tug
Speaker 4: solution for our three Northeast program projects. So we're not
Speaker 4: using the Charybdis for those. But we have built a
Speaker 4: handful more than a dozen I think crew transport vessels,
Speaker 4: and we just a few weeks ago I was alluded
Speaker 4: to the celebration we're having in Louisiana with Leader Scalise
Speaker 4: where we built a large service operation vessel there which
Speaker 4: is Jones Act compliant, and we're contracting other vessels that
Speaker 4: are under construction for other parts of the offshore wind
Speaker 4: set up.
Speaker 3: So just on this note, you know, building some of
Speaker 3: your own transport vessels. I sometimes wonder is this the
Speaker 3: solution for off shore wind? Is it just that you
Speaker 3: guys become more diversified in terms of what you're doing
Speaker 3: and end up building out your own supply chain of
Speaker 3: the necessary components and tools and transportation that's needed to
Speaker 3: actually build these huge wind turbines.
Speaker 4: Yeah, it's a discussion that we have internally a lot.
Speaker 4: Remember these are super capital intensive projects. You know, a
Speaker 4: gig at twelve hundred megawatt project in the US today
Speaker 4: in the order of magnitude of six billion dollars, I
Speaker 4: would say, just for us to buy all the stuff
Speaker 4: we need and pay for all the stuff we need
Speaker 4: to build a project. So if then we have to
Speaker 4: spend billions of dollars building ships and building factories and
Speaker 4: doing everything ourselves, it starts to become you know, very
Speaker 4: few companies that have the balance sheet to do that,
Speaker 4: And so I don't think that we want to necessarily
Speaker 4: be completely vertically integrated, but there's certain times where maybe
Speaker 4: it could make sense for us or others in the
Speaker 4: end street to do that. What we what we want
Speaker 4: to do is be able to give strong demand signals
Speaker 4: so that the supply chain has the you know, the
Speaker 4: wherewithal to make their own investments and to meet the
Speaker 4: demand for all the components and infrastructure that we need
Speaker 4: for these projects. But it's to be determined still, how
Speaker 4: that you know what the best way forward is to
Speaker 4: do that. Again, we don't want to be a turbine
Speaker 4: manufacturer or a monopile manufacturer. We're an energy company that
Speaker 4: develops projects and operates them and sells electrons. But we'll
Speaker 4: see we've definitely make financial investments to support the supply chain.
Speaker 4: So that's a big part of what we're doing to
Speaker 4: try to secure our own success.
Speaker 2: I feel like in all of the conversations we have
Speaker 2: about energy, and in particular it seems to be renewable energy,
Speaker 2: but energy in general, it's just like off take off,
Speaker 2: take off, take the consistency, the importance of that the
Speaker 2: demand and that demand signal, and so whether it's the
Speaker 2: demand for electrons that are produced by wind and then
Speaker 2: the demand from companies like ORSTED for the Jones Act
Speaker 2: compliant vessels or the infrastructure for the foundations, just like
Speaker 2: that sort of continuity of the demand signal seems to
Speaker 2: be really critical. I just want to go back to
Speaker 2: one thing you said, just real quickly. I think you
Speaker 2: said you're supporters of the Jones Act. But why it
Speaker 2: does not sound like it's been helpful. What did you
Speaker 2: did you? What did you mean by that?
Speaker 4: I think we're supporters of building an American supply chain
Speaker 4: which includes vessels which then inherently would be Jones Act compliant.
Speaker 4: So even though we're a Danish company, even at the
Speaker 4: very top of the organization, but definitely at my level.
Speaker 4: We're trying to build an American industry, not just build
Speaker 4: offshore projects with you know, Asian or European supply, and
Speaker 4: so to the extent that we can help build more
Speaker 4: Jones Act compliant vessels and create you know, that part
Speaker 4: of the economy, the economic stimulus et cetera for Americans,
Speaker 4: or support of that, it is difficult. You know, the
Speaker 4: Jones Act makes it difficult to get this industry off
Speaker 4: the ground. For sure. I won't say that that's not true,
Speaker 4: but in the end we know that, you know, part
Speaker 4: of the value proposition of offshore wind is the economic
Speaker 4: benefits to Americans and job creation, et cetera.
Speaker 3: So, just on the question of off take and sort
Speaker 3: of persistent sources of long term demand, Joe and I
Speaker 3: recently had a conversation with Brett Christophers, who just published
Speaker 3: a book called, what is it called The Price is Wrong? Yeah,
Speaker 3: The Price is Wrong basically about why the current market
Speaker 3: mechanisms being used to courage the green energy transition aren't
Speaker 3: necessarily working. And one of his points is that there's
Speaker 3: a difficulty here. You know, if you're trying to finance
Speaker 3: a renewable energy project. There's a lot of uncertainty around
Speaker 3: future pricing and future demand, and so it makes securing
Speaker 3: that funding very difficult. People in traditional finance might be
Speaker 3: a little bit reluctant to give money to something that
Speaker 3: is more than likely going to be volatile in the
Speaker 3: future and might be difficult to model for various reasons.
Speaker 3: I'm curious from your perspective, how do you model out
Speaker 3: that demand picture? And then do you feel like in
Speaker 3: terms of the federal government or maybe some states that
Speaker 3: you're getting support for that sort of long term demand outlook.
Speaker 3: Is there a recognition that people have to provide that
Speaker 3: demand signal to you as well as maybe help with
Speaker 3: some of the initial financing.
Speaker 4: Yeah, I'm going to actually start with the latter question
Speaker 4: first and then come back to the first question if
Speaker 4: that's okay, because you know the demand and I'm talking
Speaker 4: about offshore wind now, but in onshore renewables, they've been
Speaker 4: around for a while. There's a big, big marketplace, and
Speaker 4: the financing is working right, and we've built probably over
Speaker 4: two hundred gigawatts of onshore wind and solar in the US.
Speaker 4: So so I'm not sure I one hundred percent agree
Speaker 4: that that it's hard to finance renewable energy. Obviously, that's
Speaker 4: been on the back of some incentives, federal incentives that
Speaker 4: have been in place throughout the whole period of time,
Speaker 4: which eventually we need to wean off of. And likewise
Speaker 4: it's been on the backs of some you know, kind
Speaker 4: of probably state state policies, rps's renewal portfolio standards, et cetera, right,
Speaker 4: that have driven this. But it increasingly it's CNI customers
Speaker 4: that are providing the off take and they're in their
Speaker 4: desire to have green electrons. When I pivot off shore win,
Speaker 4: it's really the same, except that it's just more immature
Speaker 4: and so you don't have like a third party CNI
Speaker 4: market yet. And the price the prices are higher still
Speaker 4: because we're making all these upfront investments in infrastructure that
Speaker 4: need to be carried by the by the megawatt hour
Speaker 4: price embedded in a project. And so again it's the
Speaker 4: states demand and the states off take that are driving
Speaker 4: the surety that we've got a revenue stream that then
Speaker 4: we can finance. But also it's the tax incentives that
Speaker 4: are all offsetting some of the of the cost. And
Speaker 4: so I think between the the IRA and the federal
Speaker 4: incentives that we have and the states that are driving
Speaker 4: the demand for offshore win that we can we can
Speaker 4: finance these these projects. Unfortunately, it's the tax credits are
Speaker 4: pretty large because they're itcs on this big six billion
Speaker 4: dollar project. I'm just using that a round number. But
Speaker 4: then you know, it's a tax credit that we can't
Speaker 4: self monetize because we don't have enough taxable income. Or
Speaker 4: we could, but it would take a long time to
Speaker 4: work that off, and so typically you have to use
Speaker 4: a third party monetization method and then there's you know,
Speaker 4: intermediators who are making some money along the way, so
Speaker 4: it's not always the most efficient way. We were advocating
Speaker 4: for direct pay, which could have cut out, you know,
Speaker 4: some of the cost to have third party monetization of
Speaker 4: tax credits, but that's probably a whole another topic we
Speaker 4: could spend a different podcast on.
Speaker 2: Yeah, we've been meaning to do a tax credit episode.
Speaker 2: So at some point, well but anyway, keep going because
Speaker 2: that market seems interesting, but keep going.
Speaker 4: Yeah, but the it wasn't necessarily the lack of off
Speaker 4: take that has caused these projects to have to stop
Speaker 4: or to be unfinanciable. It was the change in the
Speaker 4: cost of capital, and it was the change in the
Speaker 4: cost quite frankly. So now we just need an adjustment
Speaker 4: to the off take, you know, willingness to pay what
Speaker 4: it will take for someone like us to earn a
Speaker 4: return or not trying to be greedy, but we need
Speaker 4: to earn a return for our investors. And is our
Speaker 4: states willing to pay the cost and make the investment.
Speaker 4: The federal government is doing its part, or you know,
Speaker 4: maybe the states would say they need to do more still,
Speaker 4: but you know, everybody needs to do their part to
Speaker 4: get these first projects off the ground, get the supply
Speaker 4: chain bilk at the upfront cost bilk at the ship's built,
Speaker 4: and then I'm very confident the levelized cost of energy
Speaker 4: will come down because you can see when you look
Speaker 4: across the Atlantic, you can see much much lower cost
Speaker 4: offshore wind than we have. But they've got thirty years
Speaker 4: of investment in supply chain ships ports that we're trying
Speaker 4: to to do it at much faster pace, and those
Speaker 4: costs need to be born somewhere and carried somewhere, so
Speaker 4: they're being carried in the megawatt hour price that that
Speaker 4: you see for offshore win?
Speaker 3: Is there a point at which we could see subsidy
Speaker 3: free projects in the US like the ones we've seen
Speaker 3: in Europe and I guess specifically the Netherlands. How far
Speaker 3: away would that be.
Speaker 4: For on shore I think it could be relatively quickly.
Speaker 4: I mean, some of my colleagues in the industry, you know,
Speaker 4: don't don't want me to say that, but I mean
Speaker 4: the industry is fairly mature. The price of solar and
Speaker 4: wind are very competitive with the incentives still and would
Speaker 4: still be reasonably competitive without them. For offshore win, Yes,
Speaker 4: eventually we can get there as well, but we've got
Speaker 4: we've got a ways to go, you know, just because
Speaker 4: there is so much upfront investment that needs to be made.
Speaker 4: For example, you know, we invested we in our JV partner,
Speaker 4: ever Source and the state of Connecticut jointly invested over
Speaker 4: two hundred million dollars to build one port. Others in
Speaker 4: the industry are investing in ports and massive use. It's
Speaker 4: New York, you know, we invested before we left New
Speaker 4: Jersey it's over one hundred million dollars into a monopile
Speaker 4: manufacturing facility. One ship the Dominion built. I don't know
Speaker 4: the exact number, but half a million plus minus I
Speaker 4: mean sorry, half a billion plus minus on that ship.
Speaker 4: So there's a there's a lot of upfront startup costs
Speaker 4: in this in this industry, which you could say, hmm,
Speaker 4: that's going to be expensive, but in it and it is.
Speaker 4: But it's also it's also creating economic development, right, all
Speaker 4: this all this investment in these factories and these ships,
Speaker 4: in these infrastructures creating jobs and and and actually making
Speaker 4: the US you know, more robust. This port that we
Speaker 4: invested is not just for offshore win it's now a
Speaker 4: much better port for other things, for multimodal asset for
Speaker 4: for the state of Connecticut for example.
Speaker 2: Real quick question. You know you're talking about the higher
Speaker 2: higher interest rates or high cost of capital, particularly I
Speaker 2: don't know if lethal is the right word, particularly damaging
Speaker 2: to the renewable sector. Is it less? Just to sort
Speaker 2: of conceptualize why that is, is the European wind industry
Speaker 2: or offshore industry less sensitive by virtue of the fact
Speaker 2: that it's been around so long and thus has less
Speaker 2: core infrastructure that needs to be built out right now, I.
Speaker 4: Would say that yes, because the same you know, twelve
Speaker 4: hundred MEGAWAP project in Europe doesn't cost six billion, it
Speaker 4: costs less. And so the reason it's so susceptible is
Speaker 4: because of the high the high upfront costs. The more
Speaker 4: the more you need to invest upfront, the more interest
Speaker 4: rates matter, right, And so you can build a project
Speaker 4: for less CAPEX in Europe than here. And part of
Speaker 4: it is the infrastructure difference, as part of it is
Speaker 4: scope difference. We build you know, the we build the
Speaker 4: generating plant, but we also build the bespoke transmission from
Speaker 4: the generating plant to shore. Then we also are upgrading
Speaker 4: the onshore grid, the existing grid in order to accept
Speaker 4: the offshore win. And then we're building the infrastructure, the ports,
Speaker 4: the vessels, the supply chain. And then we also are
Speaker 4: having to import everything from Europe, so just cost more.
Speaker 4: The transportation, installation costs are significantly higher. And then we've
Speaker 4: got you know, our Jones Act, which is not super efficient,
Speaker 4: and we've got other things that make it more expensive
Speaker 4: to build here. So the interest rates affect us more,
Speaker 4: but the interest rates affect them too. I mean, the
Speaker 4: cost of offshore WIN has gone up in Europe as well,
Speaker 4: it just was much much lower, and so it's gone
Speaker 4: up to a point it's still significantly attractive from my perspective,
Speaker 4: especially compared to US.
Speaker 2: I want to go back to something you said early on.
Speaker 2: You know, almost the day after the Inflation Reduction Act
Speaker 2: was passed, then a bunch of people was like, oh, well,
Speaker 2: it's great, all this money is going to build things,
Speaker 2: but permitting and you mentioned permitting, and you know, in
Speaker 2: my mind is like, guys, you should have put that
Speaker 2: in the bill itself some way. What specifically with permitting,
Speaker 2: How is that impaired timeline? Like what comes up in
Speaker 2: the permitting process that slows down these projects.
Speaker 4: I think there's a couple different ways I could answer that.
Speaker 4: One is that you had an administration that wasn't so supportive,
Speaker 4: and so I think, you know, maybe there were delays
Speaker 4: that were happening by design for prior prior to the
Speaker 4: current administration. Then you have a really ambitious and supportive
Speaker 4: administration who wanted to see everything go, but they they
Speaker 4: had a huge backlock they had to work through, probably understaffed,
Speaker 4: and it's new they had to you know, no one
Speaker 4: had permitted offshore wind projects in the US, and so
Speaker 4: people are trying to figure it out, and so you
Speaker 4: know that's caused some delays. In general. I'm I'm a
Speaker 4: big fan of you know, current current administration and Boehm
Speaker 4: and everything they've done. They've completely one eighty degree. You know.
Speaker 4: Now there's I think six or seven permitted offshore win
Speaker 4: projects and so you have to really give them, give
Speaker 4: them credit for that. But it's it's not running, you know,
Speaker 4: like a Swiss Swiss watch yet. Right there's still ideally
Speaker 4: supposed to be a twenty four month process. That's more
Speaker 4: like a forty eight month process. So and that's you know,
Speaker 4: hope hopefully can improve if we can keep some consistency,
Speaker 4: but we'll have to see.
Speaker 3: You mentioned gaving out the probability of outcomes earlier, and
Speaker 3: I think you were mostly talking about that in the
Speaker 3: context of interest rates. But I have to imagine the
Speaker 3: political landscape must be on your radar, and so I'm
Speaker 3: curious how you're thinking about, you know, the potential return
Speaker 3: of Donald Trump to the US presidency and how you
Speaker 3: would begin to calculate how that would impact your business.
Speaker 3: How do you actually think about that type of policy risk.
Speaker 4: We always start with the with the macro and we
Speaker 4: all also obviously overlay the political side to things, and
Speaker 4: so from the macro, which we haven't spent a lot
Speaker 4: of time talking about, but you guys alluded to it
Speaker 4: in the beginning. I think there is a significantly increasing
Speaker 4: electricity demand happening in America between ev adoption, electric heating,
Speaker 4: reshoring of manufacturing and probably the biggest thing of all
Speaker 4: AI and data centers required for that. There's a lot
Speaker 4: of electricity demand anticipated in the US. And where is
Speaker 4: that electricity going to come from? And whether you're on
Speaker 4: the left or the right, one of the big waste
Speaker 4: to get big chunks of electricity is through renewables and
Speaker 4: in certain parts of the country offshore wind. Even if
Speaker 4: you don't care about green it's a way to get
Speaker 4: a lot of near boat base load electrons onto the grid,
Speaker 4: which we need as a country. Then you think about
Speaker 4: all the stuff that we have spent a lot of
Speaker 4: time on the job creation, the infrastructure and its core
Speaker 4: things like steel and ports and ships and factories, and
Speaker 4: these are things that are bipartisan right Just in our projects,
Speaker 4: we can trace the supply chain to forty different states
Speaker 4: that are contributing, So it's not just benefiting Rhode Island
Speaker 4: or New York. It's the supply chain goes across most
Speaker 4: of America, and so that's red states, Purple states, Blue states,
Speaker 4: and most Americans value job creation, economic progress. And last
Speaker 4: I would say is that you've got a strong energy
Speaker 4: security argument here, where we want to be a net
Speaker 4: exporter of energy and we are today with L and G,
Speaker 4: but we want to maintain that position. And the more
Speaker 4: renewable energy that we build in America, the more opportunity
Speaker 4: we have to maintain that energy security and that net
Speaker 4: exporter of energy position. And so to me, offshore wind
Speaker 4: renewables is much more bipartisan than than maybe people are
Speaker 4: making it out to be. And of course we're not
Speaker 4: just pushing the hope button. We we've we've got mitigation
Speaker 4: plans regardless of any outcome. But we're you know, we
Speaker 4: we I talked to Republicans all the time, and many
Speaker 4: of them understand everything that I just said and understand
Speaker 4: the importance of this sector. And so yeah, we're we're
Speaker 4: weighing out the the outcomes. We've you know, written board
Speaker 4: papers and had lots of discussions and you know, have
Speaker 4: third party inputs on things. But we believe in the
Speaker 4: in the fundamentals of the industry, and we're confident that
Speaker 4: that offshore winds here to stay.
Speaker 2: Just on this politics point real quickly, or that maybe
Speaker 2: not politics point, but the policy question. You know, we
Speaker 2: talk about the Inflation Reduction Act, and we usually sort
Speaker 2: of talk about it in vague terms tax credit, subsidies,
Speaker 2: et cetera. But actually, can you just give us a
Speaker 2: sort of succinct summary of the specifics what you get
Speaker 2: and how the Inflation Reduction Act changes the math for
Speaker 2: you on any given project. What specifically you know you
Speaker 2: go into a project today in twenty twenty four versus say,
Speaker 2: twenty nineteen, what's different about it today post di ray.
Speaker 4: Yeah, First off, the longevity of it is good. It
Speaker 4: was kind of oftentimes one year or two year kind
Speaker 4: of extension of an existing tax credit historically primarily the
Speaker 4: production tax credit, which was a certain two point three
Speaker 4: cents per megawatt hour of sorry per kill a what
Speaker 4: hour of production? But you you know, you're trying to
Speaker 4: get your start of construction, so you qualified in the
Speaker 4: year that the tax credit was still eligible, and then
Speaker 4: it would get renewed and it was like the stop start,
Speaker 4: you know, drama for the industry, and even in Onshore
Speaker 4: it's it's a medium cycle business and that was really
Speaker 4: disruptive and offshort it's much longer cycle, so it would
Speaker 4: never work. So having the kind of the tenure horizon
Speaker 4: I think was a big big factor. Then in addition
Speaker 4: to the traditional PTC and ITC, the difference Production tax
Speaker 4: credit was this you know, kind of incentive that was
Speaker 4: added that you get for every mega what hour you produce,
Speaker 4: you get an extra tax credit that you can monetize.
Speaker 4: ITC is a percentage of the eligible basis of the
Speaker 4: investment that you make. So there's a certain portion of
Speaker 4: the infrastructure that is eligible for the ITC for the
Speaker 4: investment tax credit, and then you could get the base
Speaker 4: ITC is thirty percent, so you could get the equivalent
Speaker 4: of a thirty percent tax credit for whatever portion of
Speaker 4: your investment qualified. And then you have to go again
Speaker 4: third party monetize that most companies do, so you might
Speaker 4: not get the full thirty percent. You get some hair
Speaker 4: cut on that because there's you know, a bank in
Speaker 4: the middle or or somebody that was you know, taking
Speaker 4: some of that value. And then after the IRA that
Speaker 4: was always a bank typically in the past, but now
Speaker 4: the IRA has something called transferability, So basically any taxpayer
Speaker 4: now can take advantage of these helping monetize these tax credits.
Speaker 4: So you could be a toothpaste company and you can
Speaker 4: basically negotiate with us, and if you've got a tax
Speaker 4: liability and you want to offset that with tax credits,
Speaker 4: you can negotiate with us. Is that ninety nine cents
Speaker 4: on the dollar, ninety cents on the dollar, whatever, we
Speaker 4: can negotiate and they can monetize those tax credits for us.
Speaker 4: So that's that's nice. It creates a larger pool of
Speaker 4: tax investors. And then there are two additional we'll call
Speaker 4: bonus tax incentives. One related to something called energy community.
Speaker 4: So if a project is built and this goes for
Speaker 4: onshore and offshore, but if a project is built in
Speaker 4: a community that's deemed to be an energy community, either
Speaker 4: primarily like a historically X traditional energy community like an
Speaker 4: X coal mine or an X coal coal factory or
Speaker 4: an X oil and gas you know location. Also there
Speaker 4: are some definitions around if it's a contaminated brown filled area,
Speaker 4: if it had certain contaminations, then it qualifies as an
Speaker 4: energy community. So this is all across America. There's these
Speaker 4: energy communities that you can qualify for, and if you
Speaker 4: build a project in those communities, you can get an
Speaker 4: extra ten percent tax benefit. And then the last one
Speaker 4: is an extra ten percent bonus for domestic content. And
Speaker 4: again the domestic content definitions vary from entoursolar and wind
Speaker 4: and offshore, but there's a certain requirement of what percentage
Speaker 4: of the project needs to be produced domestically. You know,
Speaker 4: in some cases it's there's some other provisions one hundred
Speaker 4: percent US steel this or that. There's also some other
Speaker 4: a lot of a lot, a lot a lot of
Speaker 4: little nuances of about using US labor and having apprenticeship
Speaker 4: programs and other things that they all go into this,
Speaker 4: but it's all designed to help create more of a
Speaker 4: domestic industry. But I guess to sum it up, you
Speaker 4: can get up to fifty percent of your let's say
Speaker 4: ITC's of your eligible basis tax credits, and then you
Speaker 4: need to go monetize that.
Speaker 2: So, David Hardy, that was a fantastic conversation. Really appreciate
Speaker 2: the detail and the explanation. I actually feel like I
Speaker 2: learned something in that. So thank you so much for
Speaker 2: coming out of lock.
Speaker 4: Heh, you're welcome. I'm glad that you think you learned something.
Speaker 2: No, I definitely did know that we continue our process. Yeah,
Speaker 2: we continue our learning group. No, that really was that
Speaker 2: really was excellent and exactly what we're looking for. So
Speaker 2: I appreciate it. Now let's stay entire absolutely Tracy. I
Speaker 2: thought that was great. As soon as like David went
Speaker 2: into like spread to whack in the beginning, I was like,
Speaker 2: all right, we are going to get a good granular conversation.
Speaker 2: That's really good. It's going to be a good conversation,
Speaker 2: totally right.
Speaker 3: No, it was really nice to hear from We've been
Speaker 3: talking a lot about I guess the structure of the
Speaker 3: US energy market from you know, academics or people who
Speaker 3: take an interest in it, but it was good to
Speaker 3: hear from a practitioner of the market. Let's put it
Speaker 3: that way.
Speaker 2: There were many interesting things in there, particularly in the
Speaker 2: supply chain aspect of the conversation that I think, you know,
Speaker 2: sometimes we talk about like the world isn't a neoclassical world,
Speaker 2: like market signals. You know, you have demand for something,
Speaker 2: but the supply doesn't just arise, and you know, he
Speaker 2: had a line about the balance sheet of the suppliers
Speaker 2: to his own company, and how few of them, et cetera.
Speaker 2: And so you think about like this sort of like
Speaker 2: sequence of off take agreements, the demand for the electricity,
Speaker 2: the demand for the ships, et cetera. And then you
Speaker 2: think about, Okay, there's some companies somewhere, maybe probably in
Speaker 2: Europe or somewhere that makes a key component. But they
Speaker 2: don't have unlimited amounts of money. They can't just ramp
Speaker 2: up instantly, or they can't just have excess supply excess
Speaker 2: inventory if they don't know. And so you could see
Speaker 2: how like fragile it is and how important it is
Speaker 2: to get that sequencing right to actually get these things
Speaker 2: done in time.
Speaker 3: Well, it also seems to me that traditional economics is
Speaker 3: especially ill equipped to deal with I guess, industries with
Speaker 3: incredibly long timelines, right. It seems like that's where you
Speaker 3: sort of get the lag between the demand signal and
Speaker 3: the actual supply increase. And as far as I remember
Speaker 3: from like AP microeconomics.
Speaker 2: It'sok AP.
Speaker 3: Yeah, actually I still have grievances about microeconomics AP, but
Speaker 3: as far as I can remember from that, it was like,
Speaker 3: you know, you draw the little demand supply chart and
Speaker 3: the lines cross, and like there's very little discussion of
Speaker 3: the actual like physical constraints around building up that production capacity.
Speaker 3: The companies are supposed to hear like, oh, we want
Speaker 3: more of this thing, and so prices go up and
Speaker 3: they immediately start building it out. But as we've seen
Speaker 3: time and time again since twenty twenty, it doesn't always
Speaker 3: happen that way in practice.
Speaker 2: No, it definitely doesn't. And all I always say is
Speaker 2: I wish we had done the IRA in twenty ten. Well,
Speaker 2: we had abundoned all that stuff. But it does seem
Speaker 2: like I kind of came away from the conversation, so
Speaker 2: actually two things I kind of now come on the
Speaker 2: side of, Like, it does seem to be like a
Speaker 2: mix of bad timing and bad luck and growing pains.
Speaker 2: And I think the best argument for that as simple
Speaker 2: as like, there is a booming offshore business in Europe,
Speaker 2: and it can be done. It can be done cheaply,
Speaker 2: and it can be done economically. But if you're starting
Speaker 2: from zero and you're trying to build an US and
Speaker 2: you have the Jones Act, and you have various incentives
Speaker 2: for domestic steal and domestic labor, and maybe those get
Speaker 2: in the way. I don't know, like this is a
Speaker 2: ramp up process. That.
Speaker 3: Yeah, I was going to say the exact same thing.
Speaker 3: So there was a time, and I think we spoke
Speaker 3: about it with Chelsea and I kind of mentioned it
Speaker 3: in the intro where I thought, maybe wind is basically
Speaker 3: a low interest rate phenomenon like cheap ubers or we
Speaker 3: work or something like that. But speaking to David, I've
Speaker 3: sort of come away thinking it was that extraordinary combination
Speaker 3: of really bad timing in the form of both supply
Speaker 3: chain disruptions and the ramp up in interest rates, and
Speaker 3: the fact that you're at the very beginnings of this
Speaker 3: particular technology, at least in the US, and that, as
Speaker 3: you said, there is a comparative model in the form
Speaker 3: of Europe where there is some subsidy free wind and
Speaker 3: the cost is much much lower.
Speaker 2: So yeah, maybe there's hope.
Speaker 3: All right, shall we leave it there.
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of THEOS podcast. I'm Tracy Alloway.
Speaker 3: You can follow me at Tracy.
Speaker 2: Alloway and I'm Joe Wisenthal. You can follow me at
Speaker 2: the Stalwart. Follow our guest David Hardy. He's at David
Speaker 2: Hardy us follow our producers Carmen Rodriguez at Kerman armand
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