1 00:00:00,240 --> 00:00:03,160 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,400 --> 00:00:07,400 Speaker 1: the BNEF podcast. Recently we talked about what's happening in 3 00:00:07,440 --> 00:00:10,240 Speaker 1: the solar industry, So today we're going to pivot to 4 00:00:10,280 --> 00:00:14,440 Speaker 1: another popular clean power solution, that's wind. We're going to 5 00:00:14,480 --> 00:00:17,079 Speaker 1: have a specific focus today on what's happening in the 6 00:00:17,239 --> 00:00:20,599 Speaker 1: United States, and that's because the Biden administration has set 7 00:00:20,640 --> 00:00:24,440 Speaker 1: out an ambitious target of thirty gigawatts of installed offshore 8 00:00:24,480 --> 00:00:28,640 Speaker 1: wind capacity by twenty thirty. While onshore wind has historically 9 00:00:28,640 --> 00:00:32,520 Speaker 1: done well in the US, embracing offshore is relatively new, 10 00:00:32,720 --> 00:00:36,000 Speaker 1: but with a quarter of all US offshore wind deals 11 00:00:36,120 --> 00:00:39,200 Speaker 1: canceled in twenty twenty three, this ambitious goal is looking 12 00:00:39,320 --> 00:00:43,360 Speaker 1: increasingly out of reach. So what lies behind these cancelations 13 00:00:43,760 --> 00:00:47,159 Speaker 1: and is this an issue only facing the offshore sector 14 00:00:47,400 --> 00:00:50,159 Speaker 1: or is the US onshore wind sector in an equally 15 00:00:50,200 --> 00:00:54,000 Speaker 1: precarious position. To find out more, today I'm joined by 16 00:00:54,000 --> 00:00:57,760 Speaker 1: two members of BNF's WIN Team, both based in New York, Chelsea, 17 00:00:57,960 --> 00:01:01,240 Speaker 1: Jean Michel and Atten Jane, and they discuss some of 18 00:01:01,280 --> 00:01:06,320 Speaker 1: their findings from bnfs recently published BNF Onshore and Offshore 19 00:01:06,520 --> 00:01:09,679 Speaker 1: Wind outlooks for twenty twenty three. They share the impacts 20 00:01:09,680 --> 00:01:12,920 Speaker 1: of the two eyes, interest rates and inflation on US 21 00:01:12,920 --> 00:01:16,399 Speaker 1: offshore wind projects, and when a developer cancels one of 22 00:01:16,440 --> 00:01:19,800 Speaker 1: these offshore wind contracts, what actually happens. In many other 23 00:01:19,880 --> 00:01:22,480 Speaker 1: parts of the world, you can't immediately rebid on the 24 00:01:22,520 --> 00:01:25,120 Speaker 1: same project. But in the US, well, we're going to 25 00:01:25,120 --> 00:01:27,520 Speaker 1: find this isn't necessarily the case, and they're going to 26 00:01:27,520 --> 00:01:30,280 Speaker 1: give us a little more color under what circumstances. We 27 00:01:30,360 --> 00:01:33,640 Speaker 1: also return once again to a pod favorite urcut the 28 00:01:33,720 --> 00:01:37,320 Speaker 1: Texas grid, where onshore wind developments have been rolled out 29 00:01:37,319 --> 00:01:40,000 Speaker 1: with far less friction and grid connection wait times are 30 00:01:40,040 --> 00:01:43,520 Speaker 1: significantly shorter than in other parts of the States. So 31 00:01:43,880 --> 00:01:46,280 Speaker 1: what should other parts of the country be learning both 32 00:01:46,280 --> 00:01:48,720 Speaker 1: good and bad from the lone Star state. We'll talk 33 00:01:48,720 --> 00:01:52,360 Speaker 1: about that too. To access are onshore and offshore wind 34 00:01:52,400 --> 00:01:55,720 Speaker 1: outlooks and other related insights and reports. B and EF 35 00:01:55,760 --> 00:01:59,040 Speaker 1: subscribers will be able to find them on BNF dot com, 36 00:01:59,080 --> 00:02:01,920 Speaker 1: on BNF Go on the Bloomberg terminal, or on BNF's 37 00:02:01,920 --> 00:02:05,200 Speaker 1: mobile app. If you like this podcast, make sure to subscribe, 38 00:02:05,240 --> 00:02:07,000 Speaker 1: and if you'd like to share it with others, make 39 00:02:07,000 --> 00:02:08,839 Speaker 1: sure to give us a review, But right now, let's 40 00:02:08,919 --> 00:02:22,519 Speaker 1: jump straight into our conversation with Chelsea and Aton. Chelsea, 41 00:02:22,600 --> 00:02:24,400 Speaker 1: thank you very much for joining the show today. 42 00:02:24,880 --> 00:02:26,240 Speaker 2: Hi Dana, thanks for having me. 43 00:02:26,600 --> 00:02:28,079 Speaker 1: And Aton nice to have you. 44 00:02:28,040 --> 00:02:29,480 Speaker 3: Here as well. Thank you, Dana. 45 00:02:29,840 --> 00:02:32,799 Speaker 1: So we're going to talk about onshore and offshore when 46 00:02:32,880 --> 00:02:35,640 Speaker 1: today and I like to actually think of this particular 47 00:02:35,639 --> 00:02:39,040 Speaker 1: industry as one of the darlings of renewable energy. There's 48 00:02:39,080 --> 00:02:43,799 Speaker 1: been so much positive conversation historically around wind and its 49 00:02:43,840 --> 00:02:48,960 Speaker 1: capacity factors. Why do you think wind has historically had 50 00:02:49,040 --> 00:02:51,880 Speaker 1: such a strong reputation within renewables. 51 00:02:52,200 --> 00:02:54,079 Speaker 3: If you look at the story of the last two 52 00:02:54,120 --> 00:02:57,679 Speaker 3: decades for renewables in the US, wind part actually has 53 00:02:58,000 --> 00:03:01,639 Speaker 3: been the dominant force of clean energy transition in the country. 54 00:03:01,720 --> 00:03:05,000 Speaker 3: And that's because wind has been able to enjoy a 55 00:03:05,040 --> 00:03:07,120 Speaker 3: lot of subsidies in the US in the form of 56 00:03:07,160 --> 00:03:10,600 Speaker 3: production tax credits. Those subsidies started way back in nineteen 57 00:03:10,639 --> 00:03:14,200 Speaker 3: ninety two and continues till today and are going to 58 00:03:14,200 --> 00:03:16,560 Speaker 3: continue at least for another ten years, and there are 59 00:03:16,560 --> 00:03:19,080 Speaker 3: some estimates that maybe it can go all the way 60 00:03:19,160 --> 00:03:22,880 Speaker 3: up to twenty fifty these subsidies. So wind power delivers 61 00:03:22,960 --> 00:03:26,320 Speaker 3: cheap form of eleccity in the country. Developers enjoy the 62 00:03:26,400 --> 00:03:30,680 Speaker 3: subsidy benefits, which means they enjoy a handsome returns. There 63 00:03:30,720 --> 00:03:34,440 Speaker 3: is some concern with the macroeconomic situation today, but overall 64 00:03:34,560 --> 00:03:37,680 Speaker 3: wind has been a profitable business for the developers. We 65 00:03:37,920 --> 00:03:41,480 Speaker 3: have enjoyed a local supply chain for onshore wind in 66 00:03:41,520 --> 00:03:45,800 Speaker 3: the country. That means wind generates jobs. So everyone actually 67 00:03:45,840 --> 00:03:47,040 Speaker 3: loves wind and. 68 00:03:46,960 --> 00:03:51,120 Speaker 1: That's onshore wind. But what is the history in US's 69 00:03:51,200 --> 00:03:53,160 Speaker 1: relationship with offshore. 70 00:03:52,720 --> 00:03:55,320 Speaker 2: Wind bin Yeah, thanks Tina, and I guess if I 71 00:03:55,360 --> 00:03:57,600 Speaker 2: could also add on a little bit more as well 72 00:03:57,640 --> 00:04:00,680 Speaker 2: on the wind side of things. For being alling child, 73 00:04:00,760 --> 00:04:03,240 Speaker 2: I think that if you compare the generation profile of 74 00:04:03,280 --> 00:04:06,120 Speaker 2: a wind farm to a solar farm, right, wind's not 75 00:04:06,200 --> 00:04:08,400 Speaker 2: going to cut out at night. When you're looking at 76 00:04:08,440 --> 00:04:10,840 Speaker 2: the capacity factor of a wind farm, So a capacity 77 00:04:10,840 --> 00:04:14,040 Speaker 2: factor being essentially you know how efficiently that wind farm 78 00:04:14,080 --> 00:04:16,160 Speaker 2: works over the course of a year, Basically how much 79 00:04:16,200 --> 00:04:18,760 Speaker 2: does it generate versus how much is possible for it 80 00:04:18,839 --> 00:04:21,640 Speaker 2: to generate. Wind farm capacity factors tend to be closer 81 00:04:21,680 --> 00:04:24,480 Speaker 2: to around thirty percent versus for solar when you're looking 82 00:04:24,520 --> 00:04:26,960 Speaker 2: at closer to twenty percent, and so you're basically able 83 00:04:27,040 --> 00:04:29,680 Speaker 2: to generate a lot more renewable electricity with the same 84 00:04:29,720 --> 00:04:33,520 Speaker 2: installed capacity. Also, what wind has is it has scale, 85 00:04:33,680 --> 00:04:36,200 Speaker 2: and so for onshure wind you might see projects in 86 00:04:36,360 --> 00:04:38,800 Speaker 2: you know, the hundred megawat side of things, whereas for 87 00:04:38,839 --> 00:04:41,720 Speaker 2: solar they're usually a lot smaller. If you go offshore, 88 00:04:41,800 --> 00:04:44,760 Speaker 2: then you start to look at gigawatt scale, And for context, 89 00:04:44,880 --> 00:04:48,400 Speaker 2: in the US, one gigawat project offshore can power around 90 00:04:48,400 --> 00:04:50,760 Speaker 2: three hundred and fifty thousand homes. So that's a lot 91 00:04:50,760 --> 00:04:53,640 Speaker 2: of renewable electricity that you're generating at a large scale 92 00:04:53,760 --> 00:04:56,120 Speaker 2: at higher efficiencies. Now, if we take a look at 93 00:04:56,160 --> 00:04:59,240 Speaker 2: the history of offshore wind in the US, it has 94 00:04:59,320 --> 00:05:02,240 Speaker 2: been a series of stop go stop, go, stop, go, 95 00:05:02,320 --> 00:05:05,640 Speaker 2: stop go, basically a lot of false starts. For context, 96 00:05:05,720 --> 00:05:09,120 Speaker 2: today there are only seven turbines operating in the waters. 97 00:05:09,240 --> 00:05:11,920 Speaker 2: So there's thirty megawats off the coast of Rhode Island 98 00:05:11,960 --> 00:05:14,680 Speaker 2: and there's twelve megawats off the coast of Virginia. That 99 00:05:14,800 --> 00:05:17,800 Speaker 2: being said, there are also two projects currently under construction 100 00:05:17,920 --> 00:05:21,080 Speaker 2: right now that's over nine hundred megawats, almost a gigawatt 101 00:05:21,120 --> 00:05:23,200 Speaker 2: that's going to be commissioning all next year into twenty 102 00:05:23,240 --> 00:05:25,440 Speaker 2: twenty four, and so we started to see kind of 103 00:05:25,520 --> 00:05:28,320 Speaker 2: the first really good signs of the US offshore wind 104 00:05:28,360 --> 00:05:31,800 Speaker 2: industry to start kicking off when the Biden administration began 105 00:05:31,880 --> 00:05:34,680 Speaker 2: to take over. So we saw lots of federal approvals 106 00:05:34,680 --> 00:05:38,000 Speaker 2: come through. The first large scale offshore wind farm in 107 00:05:38,040 --> 00:05:41,000 Speaker 2: the US was approved by the Biden administration. And we've 108 00:05:41,080 --> 00:05:44,000 Speaker 2: also seen I mentioned that the first few projects start 109 00:05:44,040 --> 00:05:47,320 Speaker 2: to get constructed. So that's kind of the overall history 110 00:05:47,360 --> 00:05:49,920 Speaker 2: of the US about lots of false starts, but now 111 00:05:49,920 --> 00:05:52,160 Speaker 2: we're starting to see some construction. And Atton hinted a 112 00:05:52,160 --> 00:05:54,640 Speaker 2: little bit more about like the macroeconomic environment that we're 113 00:05:54,680 --> 00:05:56,320 Speaker 2: in right now, which is meant that we've started to 114 00:05:56,320 --> 00:05:58,279 Speaker 2: see a lot more struggles in the industry. 115 00:05:58,680 --> 00:06:01,719 Speaker 1: Well, let's go into that, go into the macroeconomic environment. 116 00:06:01,760 --> 00:06:04,840 Speaker 1: I think everyone is very used to thinking about inflation 117 00:06:05,360 --> 00:06:07,440 Speaker 1: and higher interest rates at the moment, but this is 118 00:06:07,520 --> 00:06:10,359 Speaker 1: hitting the wind industry in particular in the US quite hard. 119 00:06:10,720 --> 00:06:15,080 Speaker 1: What are some of the obstacles that currently granted winners 120 00:06:15,080 --> 00:06:18,360 Speaker 1: of auctions are being faced with and really questioning whether 121 00:06:18,400 --> 00:06:20,440 Speaker 1: or not to move forward with some of the projects. 122 00:06:20,440 --> 00:06:22,719 Speaker 1: That they have been granted the rights to do and 123 00:06:22,760 --> 00:06:23,200 Speaker 1: to build. 124 00:06:23,560 --> 00:06:25,560 Speaker 3: Yeah, I guess there are the two eyes which are 125 00:06:25,600 --> 00:06:28,479 Speaker 3: the big problems right now for the project developers, the 126 00:06:28,520 --> 00:06:31,280 Speaker 3: inflation and the interest rates. The inflation has come down 127 00:06:31,320 --> 00:06:33,480 Speaker 3: from the peaks that we saw last year, but the 128 00:06:33,480 --> 00:06:36,039 Speaker 3: interest rates are still very high. At the time of 129 00:06:36,160 --> 00:06:38,800 Speaker 3: the recording of this podcast, I just had a quick 130 00:06:38,920 --> 00:06:43,160 Speaker 3: check and the secured overnight financing rate the SOFA, which 131 00:06:43,200 --> 00:06:45,799 Speaker 3: is like a benchmark to price loans in this country, 132 00:06:45,920 --> 00:06:48,440 Speaker 3: that was at about five point three percent compared to 133 00:06:48,680 --> 00:06:52,599 Speaker 3: near zero levels we saw during the pandemic. So developers 134 00:06:52,600 --> 00:06:56,360 Speaker 3: are really feeling the pinch of these interest rates and 135 00:06:56,720 --> 00:06:58,960 Speaker 3: they all have their backs to the wall because there's 136 00:06:59,080 --> 00:07:02,200 Speaker 3: very little they can really do around the inflation and 137 00:07:02,240 --> 00:07:06,080 Speaker 3: the interestate situation. And we actually did some analysis earlier 138 00:07:06,080 --> 00:07:09,479 Speaker 3: this year around what has been the impact of inflation 139 00:07:09,840 --> 00:07:13,400 Speaker 3: and interest rates on the US offshore wind project lcoees, 140 00:07:13,600 --> 00:07:16,960 Speaker 3: and what we found was there's a near fifty percent 141 00:07:17,080 --> 00:07:20,640 Speaker 3: increase in the costs of the US offshore wind Elecxcity 142 00:07:20,840 --> 00:07:23,960 Speaker 3: just because of these challenges we have seen. If I 143 00:07:24,000 --> 00:07:26,720 Speaker 3: have to run you through the math around it, I 144 00:07:26,760 --> 00:07:29,080 Speaker 3: would go about by asking you to first remember there 145 00:07:29,080 --> 00:07:31,600 Speaker 3: are a lot of sevens involved here. Back in twenty 146 00:07:31,640 --> 00:07:35,520 Speaker 3: twenty one, the levelized cost of flexity for a subsidized 147 00:07:35,680 --> 00:07:38,520 Speaker 3: offshore wind farm basically a project that had access to 148 00:07:38,640 --> 00:07:41,679 Speaker 3: the federal tax credits, that number was about seventy seven 149 00:07:41,720 --> 00:07:46,240 Speaker 3: dollars per megawata. Now, what has happened is inflation resulted 150 00:07:46,360 --> 00:07:49,560 Speaker 3: in an increase in the KPX and OPIX for these projects, 151 00:07:49,880 --> 00:07:53,000 Speaker 3: and the levelized cost of elixity went up by about 152 00:07:53,080 --> 00:07:57,480 Speaker 3: seventeen dollars per megawata, and then the interest rates led 153 00:07:57,520 --> 00:08:00,320 Speaker 3: to another hike of twenty seven dollars per mait what 154 00:08:00,480 --> 00:08:03,800 Speaker 3: are to that number? But between the interest rate hikes 155 00:08:03,840 --> 00:08:07,640 Speaker 3: and the inflation, we also saw the federal government pass 156 00:08:07,720 --> 00:08:11,600 Speaker 3: the Inflation Reduction Act last year, and the IRA has 157 00:08:11,800 --> 00:08:15,160 Speaker 3: provisions for bonus tax credits. Now, if we have a 158 00:08:15,200 --> 00:08:19,840 Speaker 3: conservative estimate on what bonuses these projects can qualify, we 159 00:08:19,920 --> 00:08:23,680 Speaker 3: can actually see the impact. In a minor decline, the 160 00:08:23,840 --> 00:08:26,880 Speaker 3: LCOE goes down by about seven dollars per megawatar, and 161 00:08:26,920 --> 00:08:30,360 Speaker 3: so net and net, what you come to is one 162 00:08:30,440 --> 00:08:34,000 Speaker 3: hundred and fourteen dollars per megawatar. Number in twenty twenty three, 163 00:08:34,160 --> 00:08:37,280 Speaker 3: compared to the seventy seven dollar you had. So seventy 164 00:08:37,280 --> 00:08:40,880 Speaker 3: seven goes up by seventeen because of the inflation, goes 165 00:08:40,960 --> 00:08:44,240 Speaker 3: up by another twenty seven because of the interest rates, 166 00:08:44,559 --> 00:08:47,560 Speaker 3: goes down by seven because of the bonus tax credits, 167 00:08:47,600 --> 00:08:49,720 Speaker 3: and net you reach at about one hundred and fourteen 168 00:08:49,720 --> 00:08:50,720 Speaker 3: dollars per macota. 169 00:08:50,800 --> 00:08:52,600 Speaker 1: Now, to put this in context, and I want to 170 00:08:52,640 --> 00:08:55,120 Speaker 1: keep this show about wind, I mean, that's that's what 171 00:08:55,160 --> 00:08:58,720 Speaker 1: we're here to discuss. But if the LCOE for wind 172 00:08:58,800 --> 00:09:02,760 Speaker 1: is worsening compare to other industries, does it remain competitive 173 00:09:02,920 --> 00:09:06,720 Speaker 1: and does it remain lower? Is that one fourteen that 174 00:09:06,760 --> 00:09:09,760 Speaker 1: you pointed out per megawat hour? Is that cost competitive 175 00:09:09,800 --> 00:09:13,200 Speaker 1: with natural gas in the US or coal in the US? 176 00:09:13,720 --> 00:09:16,720 Speaker 3: Yeah, it still is quite competitive. You have to also 177 00:09:16,760 --> 00:09:20,160 Speaker 3: think about it from this perspective that wind really has 178 00:09:20,559 --> 00:09:24,600 Speaker 3: zero variable costs. Some of the variable costs associated with 179 00:09:24,679 --> 00:09:29,400 Speaker 3: operating a gas turbine is quite high. Sometimes the fuel 180 00:09:29,440 --> 00:09:31,760 Speaker 3: cost could be as igh as just the energy costs 181 00:09:31,920 --> 00:09:34,920 Speaker 3: from an offshobin project. If your fuel costs are very high, 182 00:09:35,160 --> 00:09:39,240 Speaker 3: and there is volatility associated with fuel prices as well, 183 00:09:39,360 --> 00:09:42,880 Speaker 3: so it's not really a likeful like comparison. To make 184 00:09:42,960 --> 00:09:45,680 Speaker 3: with say a gas or a coal project. But I 185 00:09:45,720 --> 00:09:48,600 Speaker 3: think that one hundred and fourteen dollars per megota number, 186 00:09:48,760 --> 00:09:51,760 Speaker 3: put in the right context is still quite competitive. 187 00:09:52,040 --> 00:09:54,199 Speaker 2: And I guess if I could also just add something 188 00:09:54,679 --> 00:09:56,640 Speaker 2: that one hundred and fourteen dollars per megawat hour that 189 00:09:56,679 --> 00:09:59,760 Speaker 2: attens talking about, that's for offshore wind. So for onsure wind, 190 00:09:59,800 --> 00:10:02,840 Speaker 2: this is lower. For solar this is lower. And so 191 00:10:03,080 --> 00:10:04,720 Speaker 2: you know, I kind of want to make that distinction 192 00:10:04,880 --> 00:10:08,560 Speaker 2: that offshore wind and onshore wind. They are still wind generation, 193 00:10:08,760 --> 00:10:12,760 Speaker 2: but offshore is significantly more expensive and also just has 194 00:10:12,760 --> 00:10:16,400 Speaker 2: a different generation profile. It has significantly higher capacity factors. 195 00:10:16,440 --> 00:10:18,840 Speaker 2: So I mentioned thirty percent earlier on in the podcast. 196 00:10:19,000 --> 00:10:21,319 Speaker 2: Offshore in the US can reach as high as forty 197 00:10:21,320 --> 00:10:23,880 Speaker 2: five percent forty eight percent in some cases, And so 198 00:10:24,360 --> 00:10:27,480 Speaker 2: with that in mind, there is a distinction between the two. Also, 199 00:10:27,520 --> 00:10:29,720 Speaker 2: I think it's important to clarify that what Atten has 200 00:10:29,720 --> 00:10:32,320 Speaker 2: been saying about interest rates and inflation, this isn't just 201 00:10:32,440 --> 00:10:36,040 Speaker 2: impacting wind. This has impacted renewables and other technologies, other 202 00:10:36,080 --> 00:10:39,480 Speaker 2: industries across the board, and so yes, while the price 203 00:10:39,520 --> 00:10:41,360 Speaker 2: of wind is going up, we've also seen the price 204 00:10:41,360 --> 00:10:43,440 Speaker 2: of solar go up. We've seen the price of so 205 00:10:43,559 --> 00:10:46,440 Speaker 2: many different technologies go up and the last few months 206 00:10:46,559 --> 00:10:48,800 Speaker 2: or the last year or so, and so yes, it 207 00:10:48,880 --> 00:10:52,480 Speaker 2: might not necessarily be as competitive now as it was 208 00:10:52,520 --> 00:10:55,280 Speaker 2: in the past. But I guess the opposite of the 209 00:10:55,679 --> 00:10:59,640 Speaker 2: idiom rising tide lifts ale boats, but rising interest rates 210 00:10:59,760 --> 00:11:02,080 Speaker 2: raise the cost of capital for everyone. And then the 211 00:11:02,160 --> 00:11:04,880 Speaker 2: last piece on offshore wind that I think is important 212 00:11:04,920 --> 00:11:07,440 Speaker 2: to mention is that it has the highest levelized cost 213 00:11:07,480 --> 00:11:10,880 Speaker 2: of electricity across renewable technologies. So if you compare it 214 00:11:10,880 --> 00:11:12,480 Speaker 2: to on sure wind, and you compare it to on 215 00:11:12,600 --> 00:11:15,040 Speaker 2: your solar, offshore wind's a lot higher. And if you 216 00:11:15,080 --> 00:11:17,600 Speaker 2: take a look at why it is that states are 217 00:11:17,760 --> 00:11:20,680 Speaker 2: building offshore wind, it's not because it's the cheapest source 218 00:11:20,679 --> 00:11:23,720 Speaker 2: of power, right, It's because you see sometimes really high 219 00:11:23,800 --> 00:11:26,360 Speaker 2: price spikes in the winter due to high gas prices 220 00:11:26,440 --> 00:11:29,120 Speaker 2: or gas shortages in the Northeast. And so offshore wind 221 00:11:29,120 --> 00:11:32,000 Speaker 2: as a technology, because it generates a lot during the winter, 222 00:11:32,200 --> 00:11:34,120 Speaker 2: it can kind of offset that price spike, so that 223 00:11:34,160 --> 00:11:38,240 Speaker 2: provides additional benefits. These are also massive billion dollar infrastructure projects, 224 00:11:38,240 --> 00:11:41,440 Speaker 2: so there's a lot of economic development opportunities associated with it. Also, 225 00:11:41,520 --> 00:11:44,400 Speaker 2: environmental benefits as well. I mentioned the scale that offshore 226 00:11:44,440 --> 00:11:46,960 Speaker 2: wind has gigawatt scale that you can build, and so 227 00:11:47,240 --> 00:11:50,760 Speaker 2: there's all of these other pieces that aren't necessarily contextualized 228 00:11:50,800 --> 00:11:53,559 Speaker 2: within an LCOE that adds the benefits to offshore wind 229 00:11:53,600 --> 00:11:55,600 Speaker 2: and can make it more competitive in certain respects. 230 00:11:55,920 --> 00:11:58,640 Speaker 1: Now, these increased costs have led some developers to think 231 00:11:58,679 --> 00:12:01,480 Speaker 1: about whether or not to proceed with certain projects, and 232 00:12:01,520 --> 00:12:04,640 Speaker 1: my question really comes down to what happens then, What 233 00:12:04,760 --> 00:12:06,840 Speaker 1: is the process of pulling out of a project, How 234 00:12:06,880 --> 00:12:10,959 Speaker 1: prevalent is this across the different developers who have won auctions, 235 00:12:11,200 --> 00:12:13,880 Speaker 1: and are they likely to then stay in the game 236 00:12:13,960 --> 00:12:14,600 Speaker 1: for the future. 237 00:12:15,040 --> 00:12:17,400 Speaker 3: Well, at the time of the recording of this podcast, 238 00:12:17,679 --> 00:12:21,040 Speaker 3: we've just heard that the total projects that have been 239 00:12:21,040 --> 00:12:24,120 Speaker 3: canceled so far this year is at about five point 240 00:12:24,120 --> 00:12:27,160 Speaker 3: five gig awart, including the two point three gigawaut of 241 00:12:27,240 --> 00:12:30,959 Speaker 3: projects that osted recently canceled. The other developers that have 242 00:12:31,080 --> 00:12:35,320 Speaker 3: canceled some capacity include a Van Grade that have canceled 243 00:12:35,440 --> 00:12:37,680 Speaker 3: I mean they have canceled around two gigaout of projects, 244 00:12:37,880 --> 00:12:40,960 Speaker 3: and shall Ocean Winds they have canceled at another one 245 00:12:40,960 --> 00:12:44,559 Speaker 3: point two gig awut so I think what essentially all 246 00:12:44,600 --> 00:12:47,680 Speaker 3: these developers are now trying to look at is can 247 00:12:47,679 --> 00:12:51,200 Speaker 3: they rebid in future auctions? And most states allow this 248 00:12:51,320 --> 00:12:53,640 Speaker 3: levey for their developers essentially. 249 00:12:53,800 --> 00:12:57,440 Speaker 2: So to contextualize, we've seen over twelve gigawatts of US 250 00:12:57,480 --> 00:13:01,600 Speaker 2: offshore wind projects seek to either cancel or renegotiate their 251 00:13:01,600 --> 00:13:05,520 Speaker 2: off take contracts. To put that into context, twelve gigawatts 252 00:13:05,559 --> 00:13:08,440 Speaker 2: of offshore wind can power around four point two million homes, 253 00:13:08,640 --> 00:13:12,560 Speaker 2: and that represents over half of all contracted US offshore 254 00:13:12,600 --> 00:13:16,359 Speaker 2: wind capacity. Now what I mean when I say contracted capacity, 255 00:13:16,440 --> 00:13:19,680 Speaker 2: So these are projects that have won contracts via a 256 00:13:19,760 --> 00:13:24,160 Speaker 2: competitive solicitation in state auctions. So a state like New York, 257 00:13:24,160 --> 00:13:26,600 Speaker 2: which has a target of nine gigawatts by twenty thirty five, 258 00:13:26,800 --> 00:13:30,880 Speaker 2: will have these solicitations or these auctions to procure power, 259 00:13:31,080 --> 00:13:33,160 Speaker 2: and developers will bid in and say, oh, I can 260 00:13:33,160 --> 00:13:34,760 Speaker 2: provide it at this price, I can provide it at 261 00:13:34,760 --> 00:13:37,320 Speaker 2: this lower price, and then usually some other elements like 262 00:13:37,360 --> 00:13:41,240 Speaker 2: economic development, environmental benefits, et cetera, and then these contracts 263 00:13:41,280 --> 00:13:43,360 Speaker 2: will be awarded. Now what's been happening is a lot 264 00:13:43,360 --> 00:13:46,000 Speaker 2: of these contracts have been awarded in twenty nineteen and 265 00:13:46,080 --> 00:13:49,640 Speaker 2: twenty twenty, where developers were making assumptions on what interest 266 00:13:49,760 --> 00:13:52,280 Speaker 2: rates would be like, what inflation would be like, and 267 00:13:52,320 --> 00:13:54,840 Speaker 2: we've seen over the last year or so how this 268 00:13:55,000 --> 00:13:57,800 Speaker 2: reality has shifted, and so when they bid at their 269 00:13:57,800 --> 00:14:00,800 Speaker 2: contract prices. In the US, this is union because these 270 00:14:00,800 --> 00:14:03,959 Speaker 2: contracts aren't indexed to inflation. So in the UK you 271 00:14:04,040 --> 00:14:06,600 Speaker 2: might have a fifteen year off take contract and then 272 00:14:06,640 --> 00:14:09,040 Speaker 2: it'll go up by inflation each year. This is also 273 00:14:09,040 --> 00:14:12,080 Speaker 2: the case for Poland partially for Ireland. In the US 274 00:14:12,160 --> 00:14:14,040 Speaker 2: this is not the case, so you'll receive a flat 275 00:14:14,040 --> 00:14:16,959 Speaker 2: price over the entire contract term, be that twenty twenty 276 00:14:16,960 --> 00:14:19,640 Speaker 2: five years, or you'll receive a flat escalator, so it 277 00:14:19,720 --> 00:14:22,280 Speaker 2: might go up by like one percent, two percent, three percent, 278 00:14:22,320 --> 00:14:24,720 Speaker 2: et cetera. And so what has happened is that developers 279 00:14:24,760 --> 00:14:27,960 Speaker 2: baked in certain assumptions on what the macroeconomic environment would 280 00:14:28,000 --> 00:14:30,360 Speaker 2: be like when they needed to reach financial close. So 281 00:14:30,440 --> 00:14:32,400 Speaker 2: this is around now for a lot of these projects 282 00:14:32,400 --> 00:14:34,640 Speaker 2: that bid in twenty nineteen and twenty twenty. But the 283 00:14:34,680 --> 00:14:37,320 Speaker 2: reality has shifted so much that it's put the economic 284 00:14:37,400 --> 00:14:38,320 Speaker 2: viability of their. 285 00:14:38,240 --> 00:14:39,400 Speaker 1: Projects at risk. 286 00:14:39,600 --> 00:14:41,480 Speaker 2: And so that's what Atten was talking about a little 287 00:14:41,480 --> 00:14:44,040 Speaker 2: bit earlier in terms of the rise in LCOE. Now 288 00:14:44,080 --> 00:14:47,160 Speaker 2: developers are you know, kind of doing the maths and saying, wait, 289 00:14:47,400 --> 00:14:49,240 Speaker 2: this isn't checking out in this way. And so in 290 00:14:49,320 --> 00:14:51,720 Speaker 2: terms of the penalties data that you asked about, like 291 00:14:51,760 --> 00:14:54,200 Speaker 2: what exactly happens when you want to cancel, there might 292 00:14:54,280 --> 00:14:58,160 Speaker 2: be requests to renegotiate. So this happened in the case 293 00:14:58,280 --> 00:15:01,600 Speaker 2: of Orsted and VP Equinora in New York, where they 294 00:15:01,600 --> 00:15:04,600 Speaker 2: ask for off take price increases of around twenty seven 295 00:15:04,640 --> 00:15:08,120 Speaker 2: to sixty six percent. The New York Public Service Commission said, no, 296 00:15:08,280 --> 00:15:11,200 Speaker 2: we will not increase your prices. And so now the 297 00:15:11,240 --> 00:15:13,520 Speaker 2: developers are at a place where they need to decide 298 00:15:13,560 --> 00:15:16,400 Speaker 2: if they're going to cancel their contracts or if they're 299 00:15:16,440 --> 00:15:18,880 Speaker 2: going to try and figure out other pieces to make 300 00:15:18,920 --> 00:15:21,360 Speaker 2: the projects work. New York has also come out and 301 00:15:21,400 --> 00:15:24,920 Speaker 2: said that they are willing to put forward a backfill auction, 302 00:15:25,200 --> 00:15:27,680 Speaker 2: So in the case that these contracts are canceled, they'll 303 00:15:27,680 --> 00:15:30,720 Speaker 2: put forward another solicitation, say sooner than usual, in order 304 00:15:30,760 --> 00:15:32,800 Speaker 2: to try and backfill those projects and make up for 305 00:15:32,840 --> 00:15:35,120 Speaker 2: some of that lost capacity. That's around four point three 306 00:15:35,160 --> 00:15:38,440 Speaker 2: kigwats in New York in the case of Massachusetts Avon 307 00:15:38,520 --> 00:15:42,280 Speaker 2: Grid and Shell Ocean Winds, the developers that Atton had mentioned, 308 00:15:42,440 --> 00:15:45,400 Speaker 2: they have canceled their off take contracts entirely, and so 309 00:15:45,680 --> 00:15:49,840 Speaker 2: they are paying forty nine million dollars and sixty million 310 00:15:49,880 --> 00:15:53,800 Speaker 2: dollars in fees for canceling those off take contracts. And 311 00:15:53,840 --> 00:15:56,240 Speaker 2: in the case of Oristed's Ocean Wind one in two 312 00:15:56,240 --> 00:15:58,760 Speaker 2: projects in New Jersey, this is recent news, so we 313 00:15:58,800 --> 00:16:00,560 Speaker 2: still have yet to see what's going on in there. 314 00:16:00,640 --> 00:16:03,880 Speaker 2: But these projects have actually halted development altogether. So in 315 00:16:03,920 --> 00:16:05,960 Speaker 2: the case of Massachusetts, these projects have said that they 316 00:16:06,000 --> 00:16:08,160 Speaker 2: want to rebid at higher prices, but in the case 317 00:16:08,200 --> 00:16:11,160 Speaker 2: of New Jersey, there's no indication of what the future 318 00:16:11,240 --> 00:16:13,800 Speaker 2: of these projects hold. So there are some penalties, there's 319 00:16:13,800 --> 00:16:16,480 Speaker 2: some renegotiation, there's a couple of different things that developers 320 00:16:16,480 --> 00:16:18,800 Speaker 2: can take, but we've seen a couple of different approaches 321 00:16:18,880 --> 00:16:19,880 Speaker 2: at this point. 322 00:16:20,560 --> 00:16:23,040 Speaker 1: Now, wind farm development can take some time to get 323 00:16:23,040 --> 00:16:25,600 Speaker 1: off the ground, and presumably if that moved a little 324 00:16:25,600 --> 00:16:28,520 Speaker 1: bit faster, there would be less time for economic conditions 325 00:16:28,520 --> 00:16:30,480 Speaker 1: to change so much in the amount of time it 326 00:16:30,520 --> 00:16:32,640 Speaker 1: takes to get these things online. So let's talk a 327 00:16:32,680 --> 00:16:35,800 Speaker 1: little bit about time. How long it takes to bring 328 00:16:35,840 --> 00:16:38,480 Speaker 1: things online. There are a number of factors that weigh 329 00:16:38,480 --> 00:16:42,000 Speaker 1: into this, including grid constraints, which we've actually talked about 330 00:16:42,040 --> 00:16:45,320 Speaker 1: on this show in the past, and permitting delays. What 331 00:16:45,480 --> 00:16:47,760 Speaker 1: is the state of play right now in the majority 332 00:16:47,800 --> 00:16:49,760 Speaker 1: of the US, And let's leave Urkot to the side, 333 00:16:49,840 --> 00:16:51,720 Speaker 1: because I actually want to come back to that and 334 00:16:51,800 --> 00:16:55,040 Speaker 1: talk about how this is an outlier both in terms 335 00:16:55,280 --> 00:16:58,840 Speaker 1: of how that electricity system is structured and what they 336 00:16:58,920 --> 00:17:01,880 Speaker 1: have done to be come the leading state in the 337 00:17:02,000 --> 00:17:04,760 Speaker 1: United States when it comes to wind. 338 00:17:04,880 --> 00:17:07,560 Speaker 2: Dana, you highlighted like a really really key issue. So 339 00:17:07,680 --> 00:17:10,000 Speaker 2: for offshore wind, these timelines can take eight to ten 340 00:17:10,080 --> 00:17:12,760 Speaker 2: years in the US, can take as long as fourteen years, 341 00:17:12,840 --> 00:17:15,199 Speaker 2: sometimes even longer as we're waiting to hear about the 342 00:17:15,200 --> 00:17:17,439 Speaker 2: fate of some of these projects. And so with that 343 00:17:17,480 --> 00:17:21,080 Speaker 2: in mind, New York recently awarded four gigawatts of offshore 344 00:17:21,119 --> 00:17:24,800 Speaker 2: wind capacity to very early stage projects. And so these 345 00:17:24,800 --> 00:17:28,480 Speaker 2: were projects that won seabed lease in a federal auction 346 00:17:28,920 --> 00:17:31,640 Speaker 2: just last year and they're hoping to commission by twenty thirty. Now, 347 00:17:31,640 --> 00:17:33,920 Speaker 2: I mentioned eight to ten years and sometimes as long 348 00:17:33,920 --> 00:17:36,080 Speaker 2: as fourteen years, and so for US, we think they're 349 00:17:36,080 --> 00:17:38,600 Speaker 2: going to commission into the twenty thirties, so later on 350 00:17:38,880 --> 00:17:41,320 Speaker 2: than they're hoping for. And this is because of things 351 00:17:41,320 --> 00:17:44,560 Speaker 2: like long permitting timelines, needing to figure out your transmission 352 00:17:44,680 --> 00:17:48,000 Speaker 2: offshore wind again like huge infrastructure projects, and the US 353 00:17:48,040 --> 00:17:51,080 Speaker 2: supply chain is extremely nascent on the offshore side of things. 354 00:17:51,200 --> 00:17:54,840 Speaker 2: And because these projects just secured seabed leases last year 355 00:17:54,920 --> 00:17:57,040 Speaker 2: and they won their off take contracts this year, this 356 00:17:57,200 --> 00:17:59,679 Speaker 2: means that they are locked into pricing for when they 357 00:17:59,680 --> 00:18:01,960 Speaker 2: commit in the twenty thirties, which is like a high 358 00:18:02,040 --> 00:18:04,440 Speaker 2: level of risk that we usually don't see in other markets. So, 359 00:18:04,560 --> 00:18:07,080 Speaker 2: for example, in the UK, you're required to have your 360 00:18:07,080 --> 00:18:09,960 Speaker 2: permits as well as access to a grid connection before 361 00:18:10,000 --> 00:18:12,119 Speaker 2: you bid for off take, and that's usually closer to 362 00:18:12,160 --> 00:18:14,439 Speaker 2: when you'll reach financial close and have a better idea 363 00:18:14,520 --> 00:18:17,080 Speaker 2: of how much your project's actually going to cost. I'll 364 00:18:17,119 --> 00:18:18,560 Speaker 2: pivot to add and to talk a little bit more 365 00:18:18,600 --> 00:18:19,720 Speaker 2: about the onshore side. 366 00:18:19,960 --> 00:18:23,640 Speaker 3: Yeah, the onshore projects come up relatively quicker than offshore, 367 00:18:23,760 --> 00:18:25,560 Speaker 3: but still take a lot of time. In the US, 368 00:18:25,680 --> 00:18:28,440 Speaker 3: I think the average time varies at around four to 369 00:18:28,520 --> 00:18:31,160 Speaker 3: five years, but in some cases can go even high 370 00:18:31,280 --> 00:18:33,439 Speaker 3: as up to a decade or even more. And the 371 00:18:33,560 --> 00:18:36,480 Speaker 3: major challenge that most of the project developers in the 372 00:18:36,600 --> 00:18:40,360 Speaker 3: US phase for onshore is permitting. Researchers at the Columbia 373 00:18:40,440 --> 00:18:43,320 Speaker 3: Law School identified about two hundred and twenty eight local 374 00:18:43,400 --> 00:18:47,560 Speaker 3: and about nine state level restrictions that have impacted projects 375 00:18:47,560 --> 00:18:50,720 Speaker 3: in about forty five states of the country, so we 376 00:18:50,840 --> 00:18:53,679 Speaker 3: almost every state has the same kind of problems. And 377 00:18:53,720 --> 00:18:55,520 Speaker 3: if you have to kind of like break down what 378 00:18:55,640 --> 00:18:59,760 Speaker 3: kind of challenges these projects face, they're essentially like seven 379 00:18:59,800 --> 00:19:02,520 Speaker 3: may types, and then if you have to bucket all 380 00:19:02,560 --> 00:19:05,680 Speaker 3: the other challenges into other category, there's probably an eighth 381 00:19:05,720 --> 00:19:08,240 Speaker 3: one as well. The most common form of wind farm 382 00:19:08,280 --> 00:19:10,600 Speaker 3: limitation that we see in the US is about a 383 00:19:10,640 --> 00:19:14,440 Speaker 3: required distance limit or sometimes called as a set pack 384 00:19:14,480 --> 00:19:18,320 Speaker 3: limit between the turbines and public or private property lines 385 00:19:18,480 --> 00:19:21,199 Speaker 3: imposed by the local councils. And we have seen this 386 00:19:21,320 --> 00:19:24,320 Speaker 3: kind of a challenge really emerge in the Midwest States, 387 00:19:24,400 --> 00:19:26,880 Speaker 3: which is really has become some sort of a hotbed 388 00:19:26,960 --> 00:19:30,160 Speaker 3: for opposition for both onshore wind farms as well as 389 00:19:30,160 --> 00:19:32,480 Speaker 3: solar projects in the country. And if I have to 390 00:19:32,520 --> 00:19:35,639 Speaker 3: talk about some of the states that are really increasing 391 00:19:35,680 --> 00:19:38,440 Speaker 3: the pressure on the developers or like really pushing back 392 00:19:38,480 --> 00:19:40,720 Speaker 3: on wind par One state that comes to my mind 393 00:19:40,760 --> 00:19:45,200 Speaker 3: is Indiana. Indiana has about twenty local counties where there 394 00:19:45,240 --> 00:19:49,200 Speaker 3: is some sort of restriction that wind projects face. There 395 00:19:49,200 --> 00:19:53,560 Speaker 3: are other important states with good wind resource like Nebraska, Ohio, 396 00:19:53,760 --> 00:19:56,919 Speaker 3: Texas as well to an extent where the developers are 397 00:19:56,920 --> 00:19:59,000 Speaker 3: really facing these permitting challenges. 398 00:20:00,119 --> 00:20:03,800 Speaker 1: Pivot to Texas, the island grid for the lone Star 399 00:20:03,880 --> 00:20:06,439 Speaker 1: state urcut. They have been able to get some of 400 00:20:06,480 --> 00:20:10,720 Speaker 1: the projects down to as little as two years. How 401 00:20:10,840 --> 00:20:13,000 Speaker 1: and why have they been able to pull that off? 402 00:20:13,440 --> 00:20:18,159 Speaker 3: Yeah, so Texas is just Texas. As they say, in 403 00:20:18,200 --> 00:20:20,800 Speaker 3: the last five year, wind projects have come faster in 404 00:20:20,920 --> 00:20:24,480 Speaker 3: Texas than many other US par regions. And there's like 405 00:20:24,480 --> 00:20:27,680 Speaker 3: a multitude of reasons for that. First thing. First, much 406 00:20:27,680 --> 00:20:30,320 Speaker 3: of the land in Texas is actually privately owned, which 407 00:20:30,359 --> 00:20:34,399 Speaker 3: means that it simplifies the negotiations that a developer goes 408 00:20:34,480 --> 00:20:37,199 Speaker 3: through for land leases and right of the way compared 409 00:20:37,200 --> 00:20:40,439 Speaker 3: to other regions where land ownership is a little bit 410 00:20:40,480 --> 00:20:44,720 Speaker 3: more complex. ERCOTT also operates as an independent grid, which 411 00:20:44,720 --> 00:20:48,919 Speaker 3: can allow for a faster integration of new renewable energy resources. 412 00:20:49,000 --> 00:20:53,080 Speaker 3: Just because they can control all these permitting studies, technical 413 00:20:53,119 --> 00:20:56,480 Speaker 3: assessments around par injection into the grid, and so on, 414 00:20:56,840 --> 00:20:59,600 Speaker 3: and permitting can also be quick in the state because 415 00:20:59,640 --> 00:21:04,960 Speaker 3: there are relatively simpler regulations. Texas also gets an advantage 416 00:21:05,200 --> 00:21:08,719 Speaker 3: for easy access to equipment for the developers because it 417 00:21:08,800 --> 00:21:12,080 Speaker 3: has a lot of existing wind factories inside the state, 418 00:21:12,119 --> 00:21:14,720 Speaker 3: and also some of the neighbors, like Oklahoma, have a 419 00:21:14,840 --> 00:21:19,120 Speaker 3: robust wind supply chain and a logistics network, so essentially 420 00:21:19,200 --> 00:21:22,840 Speaker 3: getting equipment and getting services that are needed to build 421 00:21:22,840 --> 00:21:26,040 Speaker 3: a wind farm is just easily available there. So while 422 00:21:26,080 --> 00:21:30,440 Speaker 3: we have seen Texas really grow very sharply in terms 423 00:21:30,480 --> 00:21:34,160 Speaker 3: of adding new wind capacity, that could actually change because 424 00:21:34,200 --> 00:21:37,360 Speaker 3: there are risks building in the system. So earlier this year, 425 00:21:37,440 --> 00:21:41,199 Speaker 3: Texas lawmakers tried to pass a bill that, if approved, 426 00:21:41,359 --> 00:21:44,439 Speaker 3: would have allowed large scale wind and solar projects to 427 00:21:44,760 --> 00:21:48,080 Speaker 3: first seek an approval from the state's Public Utility Commission 428 00:21:48,240 --> 00:21:52,080 Speaker 3: before even beginning construction. That bill would have also required 429 00:21:52,119 --> 00:21:55,040 Speaker 3: wind turbines to be at least about three thousand feet 430 00:21:55,080 --> 00:21:58,200 Speaker 3: away from any property line. This could make it extremely 431 00:21:58,320 --> 00:22:01,920 Speaker 3: challenging for the developers to find suitable project sites. There 432 00:22:01,920 --> 00:22:04,480 Speaker 3: were other bill provisions which would have meant that the 433 00:22:04,640 --> 00:22:07,800 Speaker 3: environmental impact of view process also becomes a little bit 434 00:22:07,840 --> 00:22:11,639 Speaker 3: more complicated for the developers. Now, this bill did not pass, 435 00:22:11,880 --> 00:22:14,600 Speaker 3: so right now the developers can have a sigh of 436 00:22:14,600 --> 00:22:18,120 Speaker 3: a relief, but it can't be ruled out that similar 437 00:22:18,119 --> 00:22:21,720 Speaker 3: provisions or similar bills could not be introduced in the 438 00:22:21,760 --> 00:22:23,320 Speaker 3: state's legislature in future. 439 00:22:23,680 --> 00:22:26,440 Speaker 1: So what I want to know is how well received 440 00:22:26,520 --> 00:22:30,000 Speaker 1: or poorly received wind, a new build of wind is 441 00:22:30,200 --> 00:22:33,480 Speaker 1: perceived in the United States. And I'm thinking immediately of 442 00:22:33,720 --> 00:22:36,479 Speaker 1: this term nimbiism, which I'm sure many people are familiar with, 443 00:22:36,560 --> 00:22:39,600 Speaker 1: the not in my backyard, folks, and the fact that 444 00:22:39,680 --> 00:22:42,560 Speaker 1: there were projects in the state of Massachusetts which were 445 00:22:42,560 --> 00:22:45,280 Speaker 1: often opposed by the Kennedys and off the coast of 446 00:22:45,320 --> 00:22:48,719 Speaker 1: Cape cod that really weren't going to get the backing 447 00:22:48,760 --> 00:22:51,320 Speaker 1: that they needed in order to get set up there. 448 00:22:51,560 --> 00:22:54,840 Speaker 1: Are we finding that, as you pointed out, provisions being 449 00:22:54,840 --> 00:22:58,440 Speaker 1: added regarding how close they can be to someone's property line. 450 00:22:58,480 --> 00:23:01,280 Speaker 1: Are we finding that there is a a reticence to 451 00:23:01,280 --> 00:23:06,000 Speaker 1: see wind farms set up in sight of everyday citizens 452 00:23:06,000 --> 00:23:09,240 Speaker 1: and importantly headed into an election your voters, or is 453 00:23:09,280 --> 00:23:12,080 Speaker 1: this something that the country's embracing as a domestic source 454 00:23:12,080 --> 00:23:14,320 Speaker 1: of energy, and frankly, I think wind turbines are a 455 00:23:14,359 --> 00:23:14,960 Speaker 1: bit beautiful. 456 00:23:15,200 --> 00:23:18,080 Speaker 3: Well, I think it's a mixed bag of a situation 457 00:23:18,320 --> 00:23:21,000 Speaker 3: right now because there are so many people people like 458 00:23:21,080 --> 00:23:22,840 Speaker 3: me who really love wind farms. I may be a 459 00:23:22,880 --> 00:23:26,119 Speaker 3: little bit biased, but there are many people like me 460 00:23:26,520 --> 00:23:29,720 Speaker 3: who really see the economic advantage that a wind project 461 00:23:29,760 --> 00:23:33,320 Speaker 3: brings to the community in terms of additional payments to 462 00:23:33,480 --> 00:23:37,520 Speaker 3: the landowners, local jobs, and just like a creation of 463 00:23:37,560 --> 00:23:40,679 Speaker 3: a new supply chain which wasn't really there earlier. So 464 00:23:40,720 --> 00:23:44,000 Speaker 3: there are clear economic advantages that wind farm bring. 465 00:23:44,320 --> 00:23:46,760 Speaker 1: Are they leading to a surgeon jobs in the US 466 00:23:47,000 --> 00:23:50,160 Speaker 1: and does it have that as something that is making 467 00:23:50,200 --> 00:23:50,760 Speaker 1: it popular. 468 00:23:51,600 --> 00:23:54,560 Speaker 3: Yes, I guess one of the fastest growing jobs in 469 00:23:54,600 --> 00:23:58,120 Speaker 3: the US actually is that of a wind turbine technician. 470 00:23:58,320 --> 00:24:01,159 Speaker 3: So it is really adding to in some of the 471 00:24:01,240 --> 00:24:04,639 Speaker 3: local communities, particularly in the rural parts of the countries 472 00:24:04,720 --> 00:24:08,000 Speaker 3: in Midwest, which is a good thing for economy. So 473 00:24:08,440 --> 00:24:11,240 Speaker 3: just because of all these job growths all the other 474 00:24:11,359 --> 00:24:14,280 Speaker 3: benefits of the wind farm to a community, wind farms 475 00:24:14,280 --> 00:24:18,280 Speaker 3: are actually become a topic which is bringing a lot 476 00:24:18,320 --> 00:24:20,040 Speaker 3: of bipartisan support. 477 00:24:20,440 --> 00:24:21,359 Speaker 1: Really, that's cool. 478 00:24:21,920 --> 00:24:24,600 Speaker 2: I think, just like one thing to know is Dana. 479 00:24:24,680 --> 00:24:27,680 Speaker 2: You mentioned the Cape Cod example. We saw Cape wind 480 00:24:27,880 --> 00:24:29,960 Speaker 2: fall through as a project earlier on in the US 481 00:24:29,960 --> 00:24:32,240 Speaker 2: offshrew win story. I think one key thing to know 482 00:24:32,400 --> 00:24:35,960 Speaker 2: is that the offshore wind farms now are cited further offshore, 483 00:24:36,080 --> 00:24:38,800 Speaker 2: and so people can get a little bit more behind 484 00:24:39,040 --> 00:24:41,320 Speaker 2: an offshore wind farm when it's more of a speck 485 00:24:41,400 --> 00:24:44,000 Speaker 2: in the distance rather than being right up front, close 486 00:24:44,040 --> 00:24:44,600 Speaker 2: and personal. 487 00:24:45,000 --> 00:24:47,800 Speaker 1: So let's talk a little bit about our market outlooks 488 00:24:47,800 --> 00:24:50,800 Speaker 1: for both of these industries. Now, the Biden administration has 489 00:24:50,800 --> 00:24:54,240 Speaker 1: a target of adding thirty gigawatts of offshore wind capacity 490 00:24:54,280 --> 00:24:57,560 Speaker 1: by twenty thirty. Do we see that happening? And more 491 00:24:57,600 --> 00:25:00,840 Speaker 1: simply put, what do our market outlooks tell us regarding 492 00:25:00,960 --> 00:25:03,160 Speaker 1: what we think will be built in the near term 493 00:25:03,240 --> 00:25:04,080 Speaker 1: in the medium term. 494 00:25:04,520 --> 00:25:08,119 Speaker 2: To be blunt, no, we don't think that the target 495 00:25:08,160 --> 00:25:10,520 Speaker 2: is going to be met. In fact, since we've been 496 00:25:10,600 --> 00:25:14,280 Speaker 2: forecasting the US market, we've never once said that thirty 497 00:25:14,320 --> 00:25:16,760 Speaker 2: gigawatts is going to be reached. So this wasn't one 498 00:25:16,800 --> 00:25:19,600 Speaker 2: of those situations where the target came out and we said, 499 00:25:19,640 --> 00:25:21,520 Speaker 2: oh my goodness, like they're going to meet it. There's 500 00:25:21,560 --> 00:25:25,159 Speaker 2: a lot of bottlenecks in the US that stifle this build. 501 00:25:25,359 --> 00:25:28,119 Speaker 2: So we've talked a lot about permitting, mostly from the 502 00:25:28,119 --> 00:25:30,600 Speaker 2: onshore side of things, but for offshore this is also 503 00:25:30,880 --> 00:25:34,160 Speaker 2: very rigorous. So it's not only the federal permitting process 504 00:25:34,200 --> 00:25:36,320 Speaker 2: that you have to go through, but also you're dealing 505 00:25:36,440 --> 00:25:39,680 Speaker 2: with local permits. You know where exactly that cable is 506 00:25:39,720 --> 00:25:42,159 Speaker 2: going to be when it falls onshore. You're dealing with 507 00:25:42,200 --> 00:25:45,920 Speaker 2: state permits. You're also dealing with your transmission service operators 508 00:25:46,040 --> 00:25:48,480 Speaker 2: on a regional basis, and so there's all these different 509 00:25:48,600 --> 00:25:51,760 Speaker 2: entities between the states and the local government and the 510 00:25:51,760 --> 00:25:53,760 Speaker 2: federal government, and you have to get all your ducks 511 00:25:53,800 --> 00:25:56,400 Speaker 2: in a row. That usually working in all of these 512 00:25:56,400 --> 00:25:58,399 Speaker 2: different pieces is not what a lot of more mature 513 00:25:58,440 --> 00:26:00,840 Speaker 2: European markets have been doing as they build offshore wind. 514 00:26:00,960 --> 00:26:03,600 Speaker 2: So this stifles a lot of US offshore wind build 515 00:26:03,680 --> 00:26:06,439 Speaker 2: I also mentioned it's a nascent industry, and so you 516 00:26:06,520 --> 00:26:08,439 Speaker 2: really do have to build up that supply chain. If 517 00:26:08,480 --> 00:26:10,480 Speaker 2: you take a look at the projects that are currently 518 00:26:10,520 --> 00:26:13,440 Speaker 2: under construction right now, Vineyard Wind and South Fork Wind, 519 00:26:13,480 --> 00:26:15,760 Speaker 2: they're receiving a lot of their components from Europe, and 520 00:26:15,800 --> 00:26:19,800 Speaker 2: so you have these foundations, these turbines, making days long 521 00:26:19,880 --> 00:26:22,879 Speaker 2: strips over the Atlantic and that introduces a level of 522 00:26:23,000 --> 00:26:25,080 Speaker 2: risk for delays, and you know it can create a 523 00:26:25,080 --> 00:26:27,920 Speaker 2: domino effect. So this is something that or Steit highlighted 524 00:26:28,119 --> 00:26:30,320 Speaker 2: in a key reason for the cancelation of their Ocean 525 00:26:30,320 --> 00:26:33,240 Speaker 2: Wind one and two projects is that supplier delays caused 526 00:26:33,240 --> 00:26:35,480 Speaker 2: a knock on effect and when you're dealing with components 527 00:26:35,480 --> 00:26:37,920 Speaker 2: being shipped from so far away, this means that you're 528 00:26:37,920 --> 00:26:40,080 Speaker 2: taking on a higher level of risk in this newer 529 00:26:40,119 --> 00:26:43,160 Speaker 2: market rather than compared to a newer market in Europe. 530 00:26:43,200 --> 00:26:45,639 Speaker 2: And so with all of that in mind, we recently 531 00:26:45,720 --> 00:26:48,879 Speaker 2: updated our US forecast and it looks like by twenty thirty, 532 00:26:48,880 --> 00:26:50,960 Speaker 2: we think the US is more likely to install roughly 533 00:26:51,000 --> 00:26:53,000 Speaker 2: half of that thirty gig go out target. 534 00:26:53,400 --> 00:26:56,000 Speaker 3: Yeah, on onshore picture is a little bit more rosier 535 00:26:56,040 --> 00:26:58,480 Speaker 3: than offshore in terms of we're going to see an 536 00:26:58,560 --> 00:27:02,000 Speaker 3: increase in the installers going from next year onwards. So 537 00:27:02,280 --> 00:27:04,920 Speaker 3: we think between now in twenty thirty, you has got 538 00:27:04,920 --> 00:27:07,680 Speaker 3: to add about one hundred and twelve gig of new 539 00:27:07,720 --> 00:27:10,840 Speaker 3: on shore wind projects, which is if you actually add 540 00:27:10,920 --> 00:27:14,119 Speaker 3: both on shore and offshore projects combined, would be nearly 541 00:27:14,320 --> 00:27:18,320 Speaker 3: enough to really double or nearly double the total installed 542 00:27:18,320 --> 00:27:22,159 Speaker 3: wind capacity in the country. So yeah, onshore wind is 543 00:27:22,240 --> 00:27:25,240 Speaker 3: actually going to be a major driver of growth of 544 00:27:25,320 --> 00:27:28,600 Speaker 3: the total wind power sector in the country between now 545 00:27:28,600 --> 00:27:29,680 Speaker 3: and twenty thirty. 546 00:27:29,960 --> 00:27:32,480 Speaker 1: Zooming out to the global picture. As we prepare for 547 00:27:32,520 --> 00:27:34,919 Speaker 1: COP twenty eight, the first week of December, we'll be 548 00:27:35,000 --> 00:27:38,840 Speaker 1: releasing a white paper which focuses on the tripling renewables ambition, 549 00:27:39,119 --> 00:27:41,320 Speaker 1: which is part of the COP twenty eight, part of 550 00:27:41,320 --> 00:27:44,000 Speaker 1: the targets that they're setting forward. Can we talk about 551 00:27:44,080 --> 00:27:48,320 Speaker 1: what percentage of global power generation currently comes from wind 552 00:27:48,680 --> 00:27:51,520 Speaker 1: and well where it was in the not too distant past, 553 00:27:51,560 --> 00:27:52,800 Speaker 1: and where we think it might go. 554 00:27:53,240 --> 00:27:56,760 Speaker 2: Yeah. So, essentially, in twenty twenty two, global wind power 555 00:27:56,800 --> 00:28:01,439 Speaker 2: generation accounted for about eight percent of global generation, but 556 00:28:01,760 --> 00:28:05,199 Speaker 2: that is up from four percent six years prior, so 557 00:28:05,280 --> 00:28:06,960 Speaker 2: I think that's a pretty interesting statistic. 558 00:28:07,440 --> 00:28:10,880 Speaker 1: So, following on to that discussion about tripling renewables, if 559 00:28:10,880 --> 00:28:13,920 Speaker 1: not wind with it, faced with all of these obstacles 560 00:28:13,920 --> 00:28:17,040 Speaker 1: that have cropped up recently and our need to decarbonize 561 00:28:17,160 --> 00:28:20,440 Speaker 1: quickly in order to meet net zero targets which enable 562 00:28:20,560 --> 00:28:24,080 Speaker 1: us to limit planetary warming, what else is there and 563 00:28:24,640 --> 00:28:28,679 Speaker 1: is there anything that you believe can fill that void 564 00:28:28,840 --> 00:28:31,000 Speaker 1: from a capacity standpoint that wind does. 565 00:28:31,280 --> 00:28:34,880 Speaker 3: Yeah, there are very few technologies which are carbon free 566 00:28:35,040 --> 00:28:39,000 Speaker 3: and can deliver electricity at scale and at a relatively 567 00:28:39,040 --> 00:28:41,760 Speaker 3: competitive price, and wind is one of them. Now, solar 568 00:28:41,840 --> 00:28:43,880 Speaker 3: is also another technology if it is discod but like, 569 00:28:43,920 --> 00:28:46,960 Speaker 3: you don't really get solar energy during the nighttime. So 570 00:28:47,240 --> 00:28:50,240 Speaker 3: essentially that if you have to really meet round the 571 00:28:50,320 --> 00:28:55,040 Speaker 3: clock electricity supply, you need a reliable electricity source which 572 00:28:55,080 --> 00:28:58,120 Speaker 3: can provide electricity not just during the daytime but also 573 00:28:58,480 --> 00:29:02,600 Speaker 3: nightas and wind that source. So I guess policymakers do 574 00:29:02,720 --> 00:29:06,200 Speaker 3: really need to understand if they do not really support 575 00:29:06,400 --> 00:29:09,360 Speaker 3: wind power, if they do not make building new wind 576 00:29:09,360 --> 00:29:13,240 Speaker 3: farms easy, if they do not fasten up the permitting process, 577 00:29:13,560 --> 00:29:17,040 Speaker 3: the transmission hurdles, how are you going to meet your 578 00:29:17,240 --> 00:29:21,360 Speaker 3: zero carbon elexicity demands in the future. So if I 579 00:29:21,400 --> 00:29:24,240 Speaker 3: don't really see a lot of options beyond wind at 580 00:29:24,240 --> 00:29:24,800 Speaker 3: this point in. 581 00:29:24,760 --> 00:29:27,720 Speaker 2: Time, and if I could just add one last piece there, 582 00:29:27,760 --> 00:29:30,600 Speaker 2: I mean, I think it's important to remember that wind, like, 583 00:29:30,720 --> 00:29:33,400 Speaker 2: even though you have higher capacity factors and thus you're 584 00:29:33,440 --> 00:29:38,440 Speaker 2: able to generate more renewable electrons with the same capacity 585 00:29:38,480 --> 00:29:41,440 Speaker 2: compared to other renewables. That being said, it's still variable, 586 00:29:41,560 --> 00:29:45,040 Speaker 2: and so when we're talking about the energy transition, battery 587 00:29:45,080 --> 00:29:47,240 Speaker 2: storage is going to become a lot more important. We've 588 00:29:47,240 --> 00:29:49,840 Speaker 2: been seeing a lot more announcements around pairing offshore wind 589 00:29:49,920 --> 00:29:53,400 Speaker 2: with electrolyizers and using that add some flexibility to the 590 00:29:53,440 --> 00:29:56,480 Speaker 2: grid and add some flexibility for developers as well, and 591 00:29:56,560 --> 00:29:58,720 Speaker 2: so thinking about all of the different ways in which 592 00:29:58,760 --> 00:30:01,720 Speaker 2: you can store that power, dispatch it in ways where 593 00:30:01,920 --> 00:30:03,640 Speaker 2: it can be used a little bit more flexibly and 594 00:30:03,720 --> 00:30:05,880 Speaker 2: where the demand is, and you know, upgrading the grid 595 00:30:05,920 --> 00:30:07,880 Speaker 2: and all of that great fun stuff I think is 596 00:30:07,920 --> 00:30:09,520 Speaker 2: going to be key because wind, I think is a 597 00:30:09,520 --> 00:30:12,080 Speaker 2: really important technology in the transition, but it can't do 598 00:30:12,160 --> 00:30:12,720 Speaker 2: it alone. 599 00:30:13,200 --> 00:30:25,680 Speaker 1: Aton Chelsea, thank you very much for joining today. Thank you, Dana. 600 00:30:25,840 --> 00:30:28,880 Speaker 1: Bloomberg n EF is a service provided by Bloomberg Finance 601 00:30:29,000 --> 00:30:32,480 Speaker 1: LP in its affiliates. This recording does not constitute, nor 602 00:30:32,480 --> 00:30:36,680 Speaker 1: should it be construed as investment advice, investment recommendations, or 603 00:30:36,720 --> 00:30:40,240 Speaker 1: a recommendation as to an investment or other strategy. Bloomberg 604 00:30:40,360 --> 00:30:43,640 Speaker 1: n EF should not be considered as information sufficient upon 605 00:30:43,680 --> 00:30:47,320 Speaker 1: which to base an investment decision. Neither Bloomberg Finance LP, 606 00:30:47,520 --> 00:30:50,920 Speaker 1: nor any of its affiliates, makes any representation or warranty 607 00:30:51,000 --> 00:30:53,959 Speaker 1: as to the accuracy or completeness of the information contained 608 00:30:53,960 --> 00:30:57,080 Speaker 1: in this recording, and any liability as a result of 609 00:30:57,080 --> 00:30:59,000 Speaker 1: this recording is expressly disclaimed. 610 00:31:01,760 --> 00:31:01,800 Speaker 3: I