The Industrial Policy Debacle
Governors in the Northeast are lobbying the White House to bail out their states’ offshore wind projects, which have hit a gale of ballooning costs, reports the WSJ.
Danish developer Orsted is warning it may have to write down its projects off New Jersey, Rhode Island, Connecticut, and New York.
It’s Very Simple
Developer Orsted CEO Mads Nipper recently told Bloomberg News: “It’s ‘inevitable’ that consumers will have to pay more for renewable energy. And if they don’t, neither we nor any of our colleagues are going to build more offshore. It’s very simple.”
In a letter to President Joe Biden, the governors of CT, NJ, NY, MA, and RI caution:
“Offshore wind faces cost increases in orders of magnitude that threaten States’ ability to make purchasing decisions. Without federal action, offshore wind deployment in the U.S. is at serious risk of stalling because States’ ratepayers may be unable to absorb these significant new costs alone.”
Inflationary pressures, Russia’s invasion of Ukraine, and the lingering supply chain disruptions resulting from the COVID-19 pandemic have created extraordinary economic challenges.”
The pandemic and Ukraine are only excuses and not the real problems, challenges the WSJ:
The real problem is government policies that have increased demand for wind equipment and ships, which has inflated prices at the same time interest rates have climbed. Wind turbine makers are having to replace defective equipment, which is leading to order backlogs.
The U.S. lacks specialized ships for assembling turbines at sea that comply with the 1920 Jones Act, which requires cargo vessels that run between U.S. ports to be built and crewed by Americans. Offshore wind developers are having to resort to expensive work-arounds like ferrying parts from Canada.
A 48% Price Adjustment
Large offshore developers are asking New York for an average 48% price adjustment on contracts to cover rising costs. Two have moved to scrap contracts for projects off Martha’s Vineyard. Danish developer
The Governors are looking to make offshore wind transmission lines eligible for tax credits, which would socialize the costs of building out the green grid, warns the WSJ.
All of this exposes the folly of government industrial policy that force-feeds an energy transition that makes no economic sense, and won’t matter to the climate in any case. The corporate welfare demands will keep coming, and consumers will pay one way or another.
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