Trying to turn our oceans into sprawling, on-again/off-again electric stations is becoming even more prohibitively expensive. In August, I linked to several reports about the skyrocketing costs of offshore wind. On average, expenses associated with offshore wind developments had increased by 57 percent — since 2021.
Unlike other businesses faced with rising costs, offshore wind developments get to dump their costs on electricity consumers, who are given no choice in their electricity providers and are at their mercy as to the expense of the generation sources they use (and their reliability as well). Politicians are increasingly involved in telling utilities which generating sources to use. Electricity being a basic human need, it’s not something people can choose to avoid.
This setup — captive consumers, critical consumer good, and politicians and bureaucrats imposing their preferred sources on utilities — is a crony’s playground. The costs are getting so big, however, that playtime looks like it’s about over.
For example, the Associated Press reported on August 31 that, during a recent earnings call, Orsted has announced delays in its Ocean Wind I project off the cost of New Jersey, at least till 2026, and even admitted the company had “considered simply abandoning” the project. The announcement comes even after “New Jersey Gov. Phil Murphy signed a law allowing Orsted to keep federal tax credits it otherwise would have been required to pass along to ratepayers.”
The offshore wind developer also announced “reconfiguring” its Ocean Wind II project and its Skipjack Wind project off the coast of Delaware and Maryland. The AP stated that Orsted “did not give details of what that reconfiguration might entail.”
It’s worth noting that the delays are even more surprising given the generous levelized revenues guaranteed to those projects: over $92 per megawatt-hour (MWh) for Skipjack and over $98/MWh for Ocean Wind.
On October 12, Reuters reported that New York had rebuffed requests from Orsted and other offshore wind energy developers “to charge customers billions of dollars more under future power sale contracts.” Reuters reported that the denial could cause some developers to “scrap plans.”
On October 25, the Telegraph (UK) reported that the head of the UK’s biggest offshore wind energy developer, RWE, said that electricity prices need to increase by 70 percent before any more offshore wind projects would be built off British shores. The offshore wind executive blamed electricity prices for “the disastrous result of the last offshore wind allocation round in September, which ended in a humiliation for ministers with not one company offering to build new offshore wind farms.” (Around the same time, the U.S. Department of the Interior fielded “paltry interest” in an auction for three offshore wind leases in the Gulf of Mexico, with only one site even getting bids — the other two going unsold.)
Why All This News Is Important for North Carolina
North Carolina law has long required least-cost, reliable electricity at the flip of a switch. In 2021, lawmakers applied those least-cost and reliable guardrails to law calling for reducing carbon-dioxide (CO2) emissions from electricity generation to reach “carbon neutrality” by 2050. That law is helping to keep utilities in North Carolina from jumping overboard on high-cost (increasingly-higher-cost) offshore wind.
Forcing offshore wind in North Carolina, as Gov. Roy Cooper wishes, would hike electricity rates significantly, cost tens of thousands of jobs outside of fishing and tourism, wreck coastal fishing, and cripple local tourism with coastal views spoiled by visible, flashing turbine arrays. It would cause irreversible damage to critically endangered and threatened marine animals and avian species, including North Atlantic right whales and loggerhead turtles. The massive size of the turbines being discussed means they would instantly become the tallest man-made structures in North Carolina, be extremely disruptive to U.S. military operations, facilities, and training off the coast, and also be uniquely endangered by being placed in the most hurricane-prone waters in the East Coast.
