I’m old enough to remember when the green transition was touted as a way of doing well by doing good. . . .
Well, this is a surprise (not really).
The Wall Street Journal:
Soaring costs are pushing up the price of big wind-power projects, challenging the country’s shift to renewable energy and potentially leading to larger-than-expected bills for residents.
New York state officials in recent days unveiled a slate of wind-farm proposals that would result in higher electricity rates for residents than previously approved plans. That has firms behind older bids rushing to see if they can resubmit their plans at or near the new rate.
The projects are among the country’s biggest and are being closely watched because they show how a nascent industry that is key to the U.S. energy transition will work through the upheaval of escalating costs. The struggles are threatening delays in the current pipeline of projects, which analysts say could hamper the Biden administration’s offshore wind ambitions.
So wind is not only unreliable (the wind doesn’t always blow) but also expensive. Progress!
Meanwhile, via Bloomberg:
In 2017, Siemens, already a major builder of offshore wind turbines, bought Spanish rival Gamesa SA to create the world’s biggest installer. Then-Chief Executive Officer Joe Kaeser described the move as having a “clear and compelling industrial logic.”
That logic being that policy-makers have created a demand for a technology which is still not ready for prime time.
Six years later and the sure-fire bet on surging appetite for carbon-free electricity has turned close to catastrophic. A fault in thousands of wind turbines has left Siemens Energy AG, spun out of the mothership in 2020, on the hook for a repair bill of at least €1.6 billion ($1.7 billion) alongside an expected €4.5 billion net loss for the year.
With its biggest shareholder Siemens withdrawing support, the gas turbine and grid technology maker was forced to seek a €16 billion backstop from the government, while it’s still working on how to address the faulty turbines.
Investors responded by wiping out more than a third of the company’s value, the second such move this year. The wind turbine disaster is clouding Siemens Energy’s other profitable businesses and the company’s total order backlog of €110 billion. The strain on the business means it now needs help on financial guarantees necessary to win large-scale contracts to build electricity grids or gas turbines.
I’m old enough to remember when investments in green energy, with their ESG stamp of approval, were touted as a way of reducing risk or, even better still, of doing well by doing good. . . .
Oh yes, “needs help” means asking for taxpayer assistance.
Bloomberg:
To combat rivals like Denmark’s Vestas Wind Systems A/S, Siemens Energy rushed out a new onshore wind turbine, the 5.X. This proved disastrous with the device prone to breaking down because major components twist over time. Despite years of work, it still hasn’t gotten to the bottom of the problems, compounded by the industry-wide crisis battling unprofitable contracts and increasing competition from cheaper Chinese products.
I’m also old enough to remember when the green transition was touted as a way of reducing the West’s energy dependence on authoritarian suppliers.
The Wall Street Journal:
Some firms have already eaten multimillion-dollar termination fees to pull out of East Coast projects or written down investments because of rising costs, battering clean-energy stocks. Analysts say New York’s attempt to find new price points acceptable to developers, regulators and investors suggests the broader market’s adjustment won’t be easy.
“Does the market have the courage to kind of pay these higher prices for clean energy?” David Hardy, chief executive of energy firm Ørsted Americas, said at a conference in New York last month.
He added that ratepayers would ultimately be the ones ponying up. “But the question is, like: What’s the alternative?” he said.
Hardy asked two questions. The first was whether “the market” had the “courage” to pay these higher prices.
And which market would that be, Mr. Hardy?
Essentially the recklessly rushed and mandated switch from existing energy sources has created demand for a form of energy that, in many cases, will struggle to pay its way. That is not a market in anything but name.
And as for this market’s having the “courage” to pay higher prices, well, what Hardy means by that is that he wants customers to be forced to pay higher prices for a form of energy that, in a real market, wouldn’t now be pitched to New Yorkers.
Hardy asks what the alternative could be. The answer, primarily, ought to be natural gas. Nuclear could be another, but that will take time.
Shares in Ørsted, which has projects off the East Coast, Europe and Taiwan, have plunged nearly 80% since early 2021.
In 2022, Ørsted strengthened ESG criteria in its executive team’s short-term incentive remuneration scheme, giving them the same weight as financial KPIs [key performance indicators]. “It’s not salary alone that incentivizes an organization,” Krabek [Ida Krabek, senior director and head of sustainability] said, “but it is a very important tool in showing what we value as an organization.”
How convenient, for management if not shareholders.