Danish company Orsted A/S is one of the companies involved with a New York offshore wind farm project --Sunrise Wind.
Orsted A/S had a cost adjustment request rejected by New York regulators. This means progress in the project will definitely fall further behind. Reasons for the rising costs include rising materials costs, higher interest rates and inflation.
Lots of other useful details in the article [Edit: link added]
Do you have a link?
DB2
Ooops - try again
Thanks for the alert DrBob2
Ouch! From the article:
"Orsted declined 9.4% in Copenhagen to its lowest price since September 2017. Its shares are down 48% year-to-date.
“Chief Executive Officer Mads Nipper said in September the company was prepared to walk away from US projects without further support. It’s in talks with the White House to secure further subsidies from the Inflation Reduction Act to support its Sunrise Wind, Ocean Wind 1 and Revolution Wind developments.”
Federal subsidies per BTU for wind plantations are already 28x higher than for nat gas & oil and may be headed higher.
DB2
Further subsidies would likely need a budget to be passed, right? Don’t know if continuation of subsidies exist in a CR package - though they might.
Probably, although it might be something like a matter of interpreting the existing tax code. Hope springs eternal.
DB2
Wind turbine manufacturers have been reporting losses from their wind business for quite a while. The contracts have long lead times. Their cost escalators for inflation costs were inadequate so they were forced to fill contracts at a loss.
Its not clear why wind turbine manufacturing is especially sensitive to inflation. Part of it is transportation costs but they seem to have moderated. Part of it is labor costs. Part is energy costs especially if made in Europe. And they cite “supply chain” issues. Not sure what that is. Copper? Ball bearings? Electronics? (Chip shortages?)
Of course they respond by writing better contracts but then customers find themselves signing a blank check. They don’t know what installation will cost or what the cost of its electricity will be. How do you know it will be profitable? How do you get investors to finance such a project?
Govt guarantees? Govt ownership? Govt baleouts? How much do they want green energy? How much are they willing to pay?
Part of the reason might be that wind turbines use more steel, concrete, and other materials per unit of electricity delivered, compared to more traditional electric generators. This is true for renewables in general. Below is some information obtained from the DOE Quadrennial Technology Review, showing the tons of material needed for 4 different types of power generators. The full table in the link provides more information, but this is just a summary of concrete, steel, copper and aluminum needed for wind, solar PV, nuclear and natural gas combined cycle (NGCC).
Tons per TWh
Wind Solar Nuclear NGCC
Concrete 8,000 350 760 400
Steel 1,800 7,900 160 170
Copper 23 850 3 0
Aluminum 35 680 0 1
See Table 10.4 in the following pdf link…
For wind turbines, I believe most of the steel and concrete go into the rather large foundations the turbines need to be anchored into. Solar also uses large amounts of glass, plastic, and cement, which is not shown in my table above.
FWIW, other types of power generation construction are also affected by the recent inflation. The cost estimate for the NuScale SMR nuclear project in Idaho has also gone up significantly. I believe that project is still on track, however.
In addition, I believe those wind numbers are for wind plantations on land rather than out at sea.
Longer lead times? Certainly so for offshore.
So we have a) higher interest rates, b) more expensive labor, c) more expensive inputs (material and energy) and d) supply chain kinks.
The era of ever declining costs for renewables is over. Perhaps the companies were lulled in complacency. At the same time, regulators and governments (hopefully) want to protect end users from huge cost increases. And wind companies want larger subsidies.
DB2
I think the learning curve aspect still applies. As manufacturers gain experience and increase production volume they learn to be more efficient and they spread overhead over a wider base. Plus more automation becomes possible.
I agree, for now inflation is larger, but productivity probably continues to increase.
Yes. I should have written the era of always declining costs… There will be ups and downs. Grid costs will go up. The learning curve will be fighting the coming copper crunch.
Copper—the “metal of electrification”—is essential to all energy transition plans. But the potential supply-demand gap is expected to be very large… …Substitution and recycling will not be enough to meet the demands of electric vehicles (EVs), power infrastructure, and renewable generation…
The chronic gap between worldwide copper supply and demand projected to begin in the middle of this decade will have serious consequences across the global economy…
Projects under development today would likely not be sufficient to offset the projected shortfalls in copper supply, even if their permitting and construction were accelerated.
DB2
This is part of why I’ve started investing in copper. At first I chose some copper companies (like FCX), but rather than investigate so many individual companies, I sold FCX and instead bought the ETF called COPX. I still add shares of it periodically when it drops. I still own RIO, but that predates the electrification+copper thesis.
A similar story from the Netherlands.
^ ^ ^ ^ ^ ^ ^ ^ ^
Part of what is known as ‘grid costs’.
DB2
Think about the clip waterfell posted. Makes the Dutch sound like a bunch of stoners “oh wow, you mean we have to hook the windmills up to the grid?”
Steve
Not only do you have to hook them up, you have to keep them hooked up.
But failure of these cables is all too common, to the point that the cost of insuring them is becoming prohibitive.
<<<>>>
Gulski et al. write that “Cable failures are responsible for up to 80 % of the total financial losses in offshore wind farms” and “20 years of experience shows that the power cables are the largest contributor to the failures of power supply from the offshore plants”.
www.sciencedirect.com/science/article/pii/S1364032121008571#fig3
DB2
That was my point. Subsea cables are not exactly new. The one between the UK and France has operated since 1986. Their costs should be easy to project, except for a stoner who hasn’t thought things through.
Steve
Except clearly they’re not. (Not my field, so I don’t know the differences.)
DB2
Anchors dragging along the bottom must be a problem in shallow water. Shouldn’t all those undersea fiber optic cables have the same risk. What is their failure rate/
Dragging anchors are a threat to pipelines too, like the one running under the Strait of Mackinac. But you should hear the company that owns the pipe cry about the state trying to get them to replace it with one in a tunnel, so it would be better protected.
Steve