What's going on with offshore wind?

In this episode, wind industry analyst Samantha Woodworth speaks
to the growing pains of the offshore wind industry and what its
future may hold.


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transcript)


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transcript)


Text transcript:


David Roberts


Last week, for the first time ever, a commercial offshore wind
farm delivered power to the US grid. It was an important
milestone — and also the rare bit of good news for an otherwise
beleaguered industry. Everywhere else, costs are up, contracts
are being renegotiated, and projects are getting canceled. It all
sounds pretty bad, especially for a sector that barely even
exists yet.


What’s going on? How much of this turmoil is temporary and how
much reflects lasting structural changes? Is the US offshore wind
industry going to die before it even leaves its crib?


To gain a little clarity on these questions, I contacted Samantha
Woodworth, a senior wind industry analyst at Wood Mackenzie. We
talked about the converging difficulties facing the industry
right now, efforts to renegotiate contracts that were signed in
the Before Times, the odd role that ships play in the whole mess,
and the industry's prospects in coming years and decades.


Samantha Woodworth, welcome to Volts. Thank you so much for
coming.


Samantha Woodworth


Well, thank you so much for having me. I'm happy to be here.


David Roberts


This is exciting. I have 411,000 questions. The more I dig, the
more questions I have. So I'm excited to get into this. It seems
like we're really at a hinge point here for offshore wind in the
U.S., and there's lots of sort of contradictory signals
happening. On the one hand, literally today, the day we're
recording, we heard that the first power from an offshore wind
turbine is being delivered in New York today. So I think, unless,
correct me if I'm wrong, that marks the first actual power from
offshore wind being used in the U.S.


Is that correct?


Samantha Woodworth


Essentially, yeah. I mean, it's the first commercial-scale
offshore wind farm in the U.S. flowing power to the grid. It is a
super-duper exciting day.


David Roberts


Yeah, that is exciting. And also, I think just a couple of days
ago or maybe yesterday or very recently, there were some
announcements of new offshore wind procurement. But then on the
other hand, we have all these other stories coming. So let me
just, in terms of the quote unquote crisis of U.S. offshore wind,
let me summarize quickly what it seems like what I've gathered is
going on, and you can fill in the details and tell me if I'm
missing anything.


Samantha Woodworth


Absolutely.


David Roberts


Basically, a bunch of contracts were signed for offshore wind
amidst a period of great enthusiasm in the Before Times, like
pre-2019, back when things were normal, I don't know.


Samantha Woodworth


Yeah.


David Roberts


Were they normal?


Samantha Woodworth


More or less.


David Roberts


What's normal? But economic circumstances, let's say, were a lot
better back then. So you sign these contracts, you sign up, and
these projects take a long time to build. So in between the
signing and today, we've had a pandemic. Inflation. Russia
invaded Ukraine and screwed up the entire globe's supply chains.
Now everything looks much, much, much more expensive than it did
then. And so now these wind companies are stuck with these
contracts premised on much lower prices, much lower inflation,
much lower interest rates, et cetera, et cetera. And they're sort
of scrambling.


Some of them are getting canceled, they're trying to renegotiate,
et cetera, et cetera. Is that roughly accurate as a summary?


Samantha Woodworth


Yeah, yeah, definitely the shortlist of things that has kind of
compounded to be a perfect storm of issues within the U.S.
offshore space. And unfortunately, it's hitting hard everywhere.
It's not just the U.S. offshore wind space that's getting
absolutely derailed by these issues, but because the U.S.
offshore wind space is so new and so young and doesn't have the
robust foundation like even U.S. onshore wind does, they're
definitely feeling the effects a lot harder with a higher
magnitude.


David Roberts


Got it. So this is a global phenomenon, though. These are not
U.S. specific trends here?


Samantha Woodworth


That's correct, yeah. Inflation, the pandemic recovery. There's a
couple of U.S. specific things related to treasury guidance and
that sort of thing. But for the most part, offshore wind is
feeling these effects globally. Onshore wind is feeling these
effects globally. It stinks — the timing for U.S. offshore, just
because we were so close to getting all of these projects
greenlit, and it just was the perfect storm of poor timing.


David Roberts


Really terrible. Really, really terrible timing for this industry
in particular. They were just like a toddler, just sort of
standing up and taking their first steps and like, now this.


Samantha Woodworth


Yeah.


David Roberts


We're talking about all these different things converging. If you
had to rank them, what's the sort of biggest? Is it interest
rates that are the main thing here, or could you rank them? Is it
all just a mess?


Samantha Woodworth


Project costs and the effect of inflation are probably the
biggest issue that we've been seeing with the offshore space.
That's obviously what's causing the projects to come to the table
and ask to renegotiate contracts or even just eating those
massive termination penalties with a plan to rebid in subsequent
tenders. Even local governments, the states that are soliciting
offshore wind, are beginning to include clauses in these
solicitations that allow for projects to index their bid price
with inflation as a way —


David Roberts


Interesting.


Samantha Woodworth


Yeah, to help mitigate that potential for, God forbid, inflation
keep going up.


David Roberts


Yeah, I want to get back to those tenders and the renegotiations
and all that in a little bit. There's some interesting details
here, but I guess one of my big questions is, if you listen to a
skeptic, an offshore wind skeptic, what they will say is this
shows basically that offshore wind was an artifact of weirdly low
interest rates. The sort of weirdly low interest rates that held
sway for the past decade. And basically, they can't compete in a
world of normal interest rates. Does that seem true to you? And
did no one see interest rates coming?


Was all this done on the assumption that interest rates were
going to stay weirdly low, near zero, forever?


Samantha Woodworth


I would disagree with that. I mean, we've had the sort of
foundational pieces in place to make offshore wind into a
successful industry, including tax credits, financing regimes and
that sort of thing. It is not unreasonable to think that interest
rates would increase, but I don't think anyone could have
predicted that they were going to just so rampantly go out of
control post pandemic. The magnitude to which this issue happened
is really what was causing the projects to no longer be viable.
Interest rates fluctuate a lot anyway, but it's one of those
things where I think this isn't something that anybody could have
really predicted or should have been able to predict.


It's obviously going to cause a good amount of revisiting of how
these contracts are scoped and how they're written, whether that
is including index bids and whatnot. But it really is one of
those things where I don't think anybody could have possibly
predicted, you know. 7%, 8%, 9% —


David Roberts


Right. The severity of it.


Samantha Woodworth


Yeah. And if you look at Europe, too, you have commercially
viable projects there that have similar remuneration mechanisms
to what's being set up in the U.S., and they remained
economically viable. So again, it just has to do with the
nascence of the industry and not having as robust of a foundation
or backbone or infrastructure as, say, in locations in Europe.


David Roberts


Right. Speaking of that infrastructure, let's talk a little bit
about the supply chain. So there's sort of two supply chain
stories, and I'm curious how they apply to offshore wind. One is
just Russia invading Ukraine, you know, and then cut off the gas
from Russia, and then everybody's scrambling for clean energy,
and basically supply chains get jammed up in a way that is
screwed up everybody for a while, screwed up all industries for a
while, but particularly this industry. That's one story. And then
the other story is just specific to offshore wind in the U.S.,
which is just, we don't have the supply chain in the U.S. yet,
just because, as you say, the industry is nascent.


And now we have these laws sort of mandating that we have to use
domestic content or use domestic manufacturing or use domestic
ships, which we'll return to later. So now the industry is having
to wait on a supply chain standing up. Which of those is
responsible for the current woes?


Samantha Woodworth


I think it's a combination of both, really. I mean, like I had
said, the whole renewables industry is feeling the effects of the
supply chain disruptions caused by the pandemic, as well as
caused by the conflict between Russia and Ukraine. As you
mentioned, the local supply chain, especially for offshore wind
in the U.S., is pretty non-existent. As it stands now, there are
a number of idle facilities and newly proposed facilities that
are being thought of to help address that. Unfortunately, even if
all of those come online, we would need more to be able to meet
demand.


But it's a very good start. That being said, I think it was
Siemens Gamesa announced that they're no longer planning on
building a blade manufacturing facility in the U.S. because of
just how volatile the offshore wind market has become here and
how —


David Roberts


Ugh.


Samantha Woodworth


Yeah, I know, it's a huge bummer — how projects are no longer
guarantees at this point.


David Roberts


Well, this is a chicken and egg thing, right? I mean, the problem
with the supply chain.


Samantha Woodworth


Yeah. And no one wants to spend millions of dollars to create a
new manufacturing facility if the demand isn't going to be there
for several years later if the project's delayed, God forbid, the
project gets canceled. Right. So that's definitely one of the big
issues that we're running into in the U.S. as far as just even
establishing that local supply chain. We have a decently robust
supply chain for onshore, but obviously we really don't have
anything that can quite cater to offshore yet, just the scale and
the scope. So we really need to make sure, especially this latest
tranche of projects that are getting awarded, like New York's
third auction, that the preliminary winners were announced a
couple months ago, I think.


That as well as New Jersey, Massachusetts, Connecticut, Rhode
Island, you know, the onus really is to get the pricing of those
contracts right so that we can have that certainty in the project
pipeline again, and therefore convey that certainty into
establishing a robust supply chain of labor, of manufacturing, of
port infrastructure, of ships, of everything we could possibly
need to really foundationally have it.


David Roberts


At the same time, if you're proposing a project whether and how
much that stuff will be available is very germane to the price
you can ask. Right, this gets back to the chicken and egg thing.
In a sense, you need that stuff around, or at least some idea
that it's going to be around before you can properly assess your
own project.


Samantha Woodworth


Yeah, but you know, we kind of knew going into creating this
industry that we were going to be heavily reliant on Europe for
not even just best practices, but being able to source these
components because they have most of the offshore wind
manufacturing in Europe and we were already going to be reliant
on them for vessels, installation vessels anyway. So you can kind
of get an idea of what these projects are going to cost. Just
knowing where you would have to source supply chain at first,
really the kind of question becomes, "all right, if we were to
build these in the U.S., how would the costs be different? And
what certain standards do these local supply chain and these
local manufacturers have to adhere to?"


Actually, with regard to that Siemens Gamesa cancellation of that
facility, they're still planning on honoring all their contracts
and their firm orders with U.S. projects. They're just saying
that they're going to have to be imported from Europe.


David Roberts


Interesting. So on the one hand, you have this perfect storm,
right? You have interest rates making everything more expensive,
you have inflation making parts, et cetera, more expensive, all
this stuff. But on the other hand, you also have, just a couple,
a year ago, the passage of IRA, which contained — the Inflation
Reduction Act — which contained kajillions of dollars for green
projects, I assume has a lot of money available for offshore
wind, a lot of money available for onshoring of manufacturing.
Like all that stuff is getting showered with money right now. Is
that money just not enough to — is the support in IRA just not
enough to sort of offset the severity of all this stuff that's
happening?


Samantha Woodworth


There's definitely a piece of that. I think, again, nobody wants
to be the 100% footing the bill for all of this. Right? And I
don't think that the way that the feds are looking at it is
necessarily the same way that each state individually is looking
at funding and getting all of these programs and infrastructure
in place. And a lot of states are kind of acting in a vacuum too.
Until very recently, with that three state, at least procurement,
consortium that Rhode Island and Massachusetts and Connecticut
are doing. That's the first regional agreement to actually do
these projects together and will likely spur regional supply
chain development, as opposed to just state by state supply chain
development, which is going to be really good.


But it seems like in trying to get all of this stuff established
again, nobody wants to be the only one footing the bill, but it
seems like each entity that's trying to get it established is
operating kind of within its own vacuum.


David Roberts


Yes. For a policy head like me, when I hear this, like, all these
chicken and egg problems like, this can't happen until this
happens. This can't happen until this happens. I think, hey, what
about government?" What about some planning? What about some
policy here? This seems like a great. But I thought IRA would
have done some of that.


Samantha Woodworth


Yeah, and that's the thing. It obviously promised a whole bunch
of money towards it, but ultimately, we haven't really seen
anything like an offshore wind working group or like a supply
chain working group, or there haven't been any sort of results
like that that have stemmed from the Inflation Reduction Act. So
I would agree and say there needs to be more actual action taken.
I mean, yes, you can try and throw money at problems and hope
they go away, but really, there needs to just be a whole bunch of
stakeholders sat down at this table to figure out, okay,
realistically, how is this going to work?


And realistically, where is the money going to come from?


David Roberts


It's like, the bill looks a lot bigger than it did, and now you
got to get back together and figure out how to divvy it up. I
want to return to policy in a little bit, but in the context of
all this other stuff, how big a problem is NIMBYism for offshore
wind specifically? I know sort of legendarily the first offshore
wind project off of Cape Wind.


Samantha Woodworth


Oh, the Cape Wind project yeah.


David Roberts


Just got mired in NIMBY BS for years and eventually died.


Samantha Woodworth


Yep.


David Roberts


And I know there's been fights like that. Is that a big piece of
the puzzle in the current woes?


Samantha Woodworth


So actually, it's kind of funny you bring Cape Wind up. I was an
intern at the New Bedford Economic Development Council back when
that project ultimately got mothballed. And I had asked the same
questions, too, because it seemed like policy wise, everything
was in place; they were ready to break ground. This was going to
be such a boon for the New Bedford economy, and then, as you
know, it just kind of fizzled out and died. And NIMBYism was a
large piece of that. The reason that it is a bit less of a piece
now when we're talking about U.S. offshore wind today is just
purely based on the location of the projects.


Cape Wind was going to be in state waters within sight of
Nantucket and Martha's Vineyard instead of out on the outer
continental shelf where it'll be visible somewhat, but not as in
your face as the location for Cape Wind would have been.


David Roberts


Yeah, these are like 40 miles out or something crazy like that,
right?


Samantha Woodworth


Exactly.


David Roberts


Surely you can't see a turbine that's 40 miles away, can you? I
don't know.


Samantha Woodworth


Yeah, I'm not sure.


David Roberts


It doesn't seem like it would be particularly oppressive in your
visual field.


Samantha Woodworth


Yeah, I think you would need some binoculars or a telescope or
something if you want to be that mad about it.


David Roberts


Are there problems where — because it does seem like the one
place where NIMBYism could happen is all these farms need cables
going to the shore at some point and that is some degree of
disruption. And I remember reading — I don't remember the
specific project, but I remember reading about a community that
was rallying to fight having a cable from an offshore wind farm
come under their town. Like at the end of the project, it
literally wouldn't even have been visible. Just digging up and
burying it. They fought and fought and blocked. Is that a pattern
or is it?


Samantha Woodworth


Yeah, the NIMBYism has definitely evolved away from the "I don't
want to see the turbines" piece — obviously that still exists.
But a lot of the NIMBYism pieces that we're hearing about are
exactly what you said: Local towns, municipalities not wanting
gigantic cables put underneath their lands, having the disruption
of that construction as well as there have been a whole bunch of
unexplained whale deaths and people are trying to attribute those
to the pre-development sonar activities and things that are done
for site assessment.


David Roberts


I was going to ask later about the whales, but let's just talk
about the whales. Is that BS? Is there anything to that?


Samantha Woodworth


So NOAA has been documenting an unexplained mortality event in
humpback whale populations in the northeast for years and years
and years now, well before even Block Island Wind Farm was
developed. You know, I personally don't believe that offshore
wind farms are killing whales, but you could make the argument
that because a lot of these whale deaths are attributed to ship
strikes, increased construction activities in offshore wind
project areas could, in theory, cause more ship strikes, which
then would cause more whale deaths. There has not been any sort
of research or tracking that has said that that is the case. But
it is also such a new thing that there's also not a ton of data
monitoring ship strikes at offshore wind project sites.


And I mean, no one in the offshore wind industry wants to kill
whales. Let's be real.


David Roberts


Are there ways to — I mean, I guess if we don't have a lot of
data and a lot of science about this we probably don't also have
a great idea how to avoid it. But are there better and worse ways
to do this, ways that are more or less whale friendly?


Samantha Woodworth


All these projects have contracted with biologists and
researchers and that sort of thing to analyze whale migratory
patterns. What sort of marine life of all kinds is going to be
impacted by these activities? It's kind of just more monitoring
and making sure that if all of a sudden you're getting a ping
that there's a whale in the vicinity, you make sure you give it a
wide berth until it's gone on its way.


David Roberts


What about the disruption of fisheries? Because that's been a
thing, too, isn't it?


Samantha Woodworth


Yeah, definitely. And I think, obviously, again, the offshore
wind industry isn't in it to make it so fishermen can't make
their livelihood scalloping — whatever they might be fishing. But
at the same time, there's always going to be some sort of impact,
right, to marine life, to fisheries, to anything in the ocean
when you put up these massive projects. The onus is obviously on
the developer to make sure that they're mitigating as much of the
disruption as possible. And that's why they have — it's called
the NEPA process — that's why all these projects go to open
comments multiple times, they get redesigned multiple times to
try and minimize that impact on user groups as well as actual,
like, the environment.


So obviously, we have to have trust in the developers that
they're doing everything they possibly can here to minimize that
impact on user groups and the environment. But at the same time,
they have a legal responsibility to do that.


David Roberts


And I've heard sort of, like, vaguely over the years also that
sometimes offshore turbine platforms can sort of induce fish. I'm
so out of my depth here. I have no idea what I'm talking about.


Samantha Woodworth


Like, create new marine ecosystems?


David Roberts


Create a habitat. Thank you. That's what I was looking for.
Create a habitat for fish. Is that true?


Samantha Woodworth


It's not something I don't think really gets considered very
often. But you figure in a lot of areas, they will strip down and
sink aluminum car frames to create new reefs. If you're creating
a new stable, kind of unmoving foundation down there, the
ecosystem will adapt. And if it likes the components, I guess
there's no reason to think that the ecosystem wouldn't grow
around the foundation of an offshore wind turbine. It wouldn't
create a new reef somewhere, or that sort of thing is definitely
something that can happen. And I think it will. I think it's one
of those things that it kind of gets overlooked that these will
create additional habitats once they're put in.


It's not like we're going to be pulling them out every ten years
for maintenance or anything.


David Roberts


One of the things I've been talking about a lot on the pod lately
is this problem of NIMBYism and preparing developers better for
it and how current practice is not great among developers.
They're not particularly sensitive. They're not doing the early
outreach that they need to be doing. They're not cognizant of the
political climate into which they are wandering unprepared. So
they're getting chewed up. What's the story there in the offshore
wind industry? Does it seem like they are sensitive to the NIMBY
issue and doing what they need to do to avoid it? Or are they
kind of like stepping on rakes because they're not clued in about
this?


Samantha Woodworth


It kind of depends, developer to developer. We have definitely
seen some developers that do a better job of it than others. I
think it was really hard for the industry to conceptualize
NIMBYism as it's evolved away from the "I just don't want to see
the turbines." And once that became no longer the issue, I think
there was a little bit of a pause. Kind of a "oh, there are other
issues that people have with this?"


David Roberts


I mean, I can't believe people have an issue with a cable going
under their town, even though I know it. So I can imagine trying
to anticipate that could be difficult.


Samantha Woodworth


Yeah. And I think that's really what it was, is once we all
thought that the turbines were so far offshore you can't see
them, so it shouldn't be an issue anymore. I don't think anyone
was really able to anticipate what other sort of local opposition
stances there would be. Naturally, the grassroots environmental
concerns exist across the board, but that's something that all
renewable energy developers have a decent amount of expertise
with at this point.


David Roberts


Well, also, as I keep pounding the table, this is not spontaneous
resistance that is happening in these places.


Samantha Woodworth


Exactly.


David Roberts


It's very well funded. You just have to assume it's going to be
there because there's a giant well-funded movement making sure it
is there.


Samantha Woodworth


Yeah, and I think there probably was a little bit of the industry
being taken aback by all the new local opposition stances that
came up. But again, the onus is on the developers to make sure
that they are doing an adequate job of mitigating disruptions to
stakeholders due to these projects, as well as making sure that
they are designing their project in a way that tries to make
everyone happy. Obviously, it's not really entirely feasible to
make everyone happy, but you want to get darn close.


David Roberts


Yeah. What would make a wealthy community happy about something
underneath their town? If you can't even imagine why they're mad,
it's hard to imagine what would make them happy.


Samantha Woodworth


That's definitely a piece of it, too. Those sorts of —


David Roberts


Just money? Like, they already have money. Right? They're rich.


Samantha Woodworth


Well, and you figure that's, I think, when you start to see the
developers coming out with pledges as far as, like, economic
development and we'll build a school.


David Roberts


Benefit sharing. I have a whole pod coming out on that. Yeah. I
was just wondering if that, how sort of evolved that thinking is
in this particular industry.


Samantha Woodworth


Yeah, that's, I think, the next step at that point when you're
like, I can't not put the cable underneath your town, but here I
will do something good to bolster the town's economy and the
town's resources and whatever. That's when you start getting into
that benefit sharing piece and honestly negotiating permit
approvals, especially at the local and municipal level, based on
that sort of benefit sharing.


David Roberts


Just for listeners' benefit: So some of these wind farms, the
proposals in various stages, some are in areas with wholesale
energy markets, restructured utilities, as they say, where
there's competition among utilities, and some of them are taking
place in old school, vertically integrated monopoly utilities.
And I think this is an interesting difference. So right now, the
ones that are in the restructured areas, listeners will know if
you're in a competitive wholesale market, you're just bidding
your power, you're offering your power, and the state is choosing
the lowest bid. It's a competitive process. So in those areas —


So what's happened, as we said, is these big farms came in, they
entered these auctions, won these auctions by saying, "we will
offer our power to you, New York, at x per kilowatt hour." And
now everything's gone wrong, and they cannot possibly sell power
at those prices anymore. And they've been trying to renegotiate
those PPAs, those off take contracts that they settled, but,
like, New York, for instance, just said "no," refused to
renegotiate, and now these two projects in New York have gotten
canceled. So I guess one of the things I'm wondering is, what are
the dynamics there?


Why wouldn't New York renegotiate? What is the source of the
resistance? I guess if you have an auction, and someone wins with
a deceptively low price and then comes back to you afterwards,
it's like, "actually, I want more money." It kind of screws the
other participants in the auction. But what are the dynamics
there? Why don't states want to renegotiate?


Samantha Woodworth


To your point: That's a good piece of it is — you don't want to
discourage the competition by allowing somebody who bids, let's
say, an unrealistically low price, which I don't necessarily
believe any of the winners of the previous New York auctions did.
I think they bid prices that worked at the time. But part of that
is maintaining that competitive process. I know that NYSERDA has
been batting around the idea of doing a very quick fourth
solicitation; they're calling it like a "fire" solicitation, that
would allow those projects to essentially rebid as soon as that
solicitation is opened.


David Roberts


Let's just review the facts real quick. If people have not been
keeping up, there's two big projects, both by Ørsted that just
got canceled.


Samantha Woodworth


Right. Are you talking about the ones that the PUC denied their
renegotiation, or are you talking about the ocean wind projects
that Ørsted just came out a couple weeks ago and said, "we're not
doing these anymore."


David Roberts


Oh, are those different?


Samantha Woodworth


Yes. Yeah. So the two projects, the Ocean Wind projects that
Ørsted just recently canceled, are located in New Jersey.


David Roberts


Oh, New Jersey. That's what I meant. Right, right. Those are the
two big canceled projects that everybody's very angsty about. And
they got canceled because New Jersey wouldn't renegotiate the
PPA, right? So is the idea to have another auction, is the idea
that these same canceled projects might bid into this new auction
and win it and then be able to go forward after all?


Samantha Woodworth


So I don't believe that the Ocean Wind projects got canceled
because of the PUC. So the ones that got canceled because the New
York PUC denied renegotiation, that was Empire Wind, Sunrise
Wind, and Beacon Wind 1 were the projects that had petitioned the
Public Service Commission in New York to renegotiate the
contracts. The Public Service Commission said, "nope, we're not
letting you do that." Then they announced the winners of the
third solicitation, and there had been some mention of a very
quick follow up solicitation to, in theory, let those projects
that wanted to renegotiate, cancel, eat the contract termination
fees and rebid in such a quick succession that it, in theory,
wouldn't affect their project timelines.


David Roberts


Right, assuming they win.


Samantha Woodworth


Yes, exactly. Assuming they win.


David Roberts


So those projects are not 100% for sure canceled.


Samantha Woodworth


Correct.


David Roberts


They're just in limbo-ish?


Samantha Woodworth


Essentially, yes. Developers haven't come out and said we're
canceling. They haven't come out and said we're breaking our
contracts and hoping to rebid. There's just been kind of radio
silence from those projects.


David Roberts


I'm sure there's a lot of angsty meetings happening in a —


Samantha Woodworth


I'm certain, I'm certain.


David Roberts


When we talk about these contract cancellation fees, is that a
substantial hit to them? Like, is that something they would
really rather avoid?


Samantha Woodworth


Oh, definitely. I believe Commonwealth Wind is likely to pay
something along the lines of $50 million, close to it, for
terminating those contracts. South Coast, I believe, is paying a
little bit more than that. So, yeah, it really highlights just
how much project costs have become an issue with a lot of these
projects and how bad the inflation problem has affected these
projects, because if you're willing to eat $50 million —


David Roberts


I was going to say you have to be pretty desperate. So those
three New York projects are right now trying to figure out, "do
we just cancel and eat everything, or do we just eat the contract
cancellation cost and rebid and try to keep moving forward?"


Samantha Woodworth


Exactly. Yeah. And I think that all hinges upon, obviously,
whether or not NYSERDA does this flash solicitation that they'd
been hinting at.


David Roberts


I have no idea how long that process takes. Could they do it
quickly?


Samantha Woodworth


They're going to have to get their ducks in a row really fast if
they want to do it in the kind of near future. Generally, the RFP
process can take anywhere from, I don't know, like eight-ish
months to over a year just because you're in theory, supposed to
release a draft and then allow for public comments. So it is a
long process by design. So it'll be interesting to see, you know,
kind of what they can do in a very quick timeframe or what
they're expecting to be a quick timeframe.


David Roberts


So those three New York projects are in limbo. The two New Jersey
Ørsted projects are just flat canceled?


Samantha Woodworth


Yes, those are flat out canceled. Ørsted cited project delays,
permitting timelines, and inflation as the primary reasons.


David Roberts


Permitting timelines. I thought that had, like, I thought by the
time they were at this stage, they would have had the land, or I
guess it's not land, ocean land. What do they call it out there?
They would have had what they need in terms of permitting, like
they're still waiting for?


Samantha Woodworth


I think generally when they say permitting in that regard,
they're looking for those state municipal, local level permits
for that interconnection infrastructure where it makes landfall,
especially if it has to go through any sort of sensitive habitats
like marshlands and that sort of thing. Ocean Winds, neither of
those projects had gotten altogether that far in the BOEM
permitting process. They were still doing environmental reviews.
Their construction operations plan hadn't been approved yet, so
they were still kind of in the middle of that whole permitting
process.


David Roberts


Just for listeners. BOEM is the Bureau of Ocean Energy
Management. That's in charge of federal waters. And all of these
post Cape Wind, all these projects are far enough out that
they're in federal waters, right?


Samantha Woodworth


Correct.


David Roberts


So here's a thought I had, or a question I had. If you're in a
wholesale energy market and you're in a competitive market and
all your costs go up and you have to renegotiate your contracts,
you're just like, it's a mess for you. But if you're in a
vertically integrated regulated monopoly utility area, isn't this
a little easier for you because you can just offload the
increased costs onto your captive ratepayers? Is that — are they
having an easier time?


Samantha Woodworth


So in theory you can. It's the Public Utility Commission's job to
make sure that you're not unduly burdening ratepayers with your
cost recovery. But as we kind of saw with the Coastal Virginia
project, there are a number of cost overruns, and unfortunately,
they are going to end up ultimately passed to the customer. And
that is kind of the big difference there, is that the utility
still has to go through the process of proving need and necessity
and public good of the project and getting the cost recovery
approved by the Public Service Commission. So the burden of proof
is on the developer, on the utility at that point.


But ultimately, if that gets approved, the effect is going to be
felt by ratepayers, whether, you know, up or down.


David Roberts


Yeah, it's like the Vogtle nuclear plant in Georgia. Right?


Samantha Woodworth


Exactly.


David Roberts


They weren't competing with anyone. There was no auction. It was
just them and the regulators. And they're, "ah, costs are going
up again." And the regulators are very chummy with them. They're
like, "yeah, take it out of the ratepayers," but at least then
the projects go forward, right? At least those projects would go
and get built.


Samantha Woodworth


Yeah. So that at least at the very end there, you have a pretty
much guarantee that the project is going to get built in some
form or fashion because generally the utilities, too, will also
tie in other, a bit more contingency planning into it in that
regard. They're going to kind of tend to — I would say err on the
high side of costs — when they present their numbers, as opposed
to when you're in a competitive bidding scenario. You want to bid
low cost.


David Roberts


Right, right, right. You say now that they're talking about doing
a process where bids are tied in some way to inflation rates. You
say that's standard in Europe?


Samantha Woodworth


Well, there isn't much, actually that's standard in Europe as far
as remuneration mechanisms go. It really varies market to market
and country to country. But at least in the Massachusetts, the
most recent tender that they released, as well as the draft
materials for the upcoming Rhode Island and Connecticut tenders
that are being put out as part of that tri-state consortium or
tri-state regional procurement, those all allow for developers to
submit — you can either submit a fixed bid like you normally
would, or you can submit an indexed bid. There's different
stipulations around each that are very, very in the weeds, so I
won't bother going into them.


There are certain criteria you have to meet and to do if you want
to do an indexed bid versus a fixed bid. But allowing for that
indexation to inflation is obviously a good option, especially
considering no one wants to think about it. But God forbid, like
I said, inflation keeps going up.


David Roberts


Yeah. If we've demonstrated anything in the past few years is
that no one, including the alleged experts, has any friggin idea
what's going to happen to it. So it does seem like indexing is
good, although I have to say from a state's perspective, you want
to be careful saying "we'll pay no matter what happens with
inflation."


Samantha Woodworth


Well, that's why I'm saying there's other stipulations around it
that, like I said, it goes really into the weeds. But that's just
one way that some states are trying to address the issue of "if
inflation skyrockets again, none of these projects are getting
built." They want to obviously avoid that. The states have
already said — they have targets, they want offshore wind energy.
They've put a lot of money and investments into the industry
already. So having projects get scrapped is really not good on
them or for them either.


David Roberts


Yeah, I mean, the backdrop to all this, I mean, maybe you and I
probably know this, but it's just worth saying. It's just like
the northeast in particular really needs some new power. It's
very congested and very — this is not some luxury for them. They
badly need these things. Tell us, what is the deal with ships and
the Jones Act? What's going on there?


Samantha Woodworth


Sure. Yeah. So, the reason the Jones Act was such a big talking
point for the offshore industry is that it essentially precludes
foreign vessels from being able to go into U.S. waters, U.S.
ports, pick up components, and bring them to the project site for
the offshore wind projects.


David Roberts


What exactly does it say? It's illegal for a foreign ship to
carry from a U.S. manufacturer to a U.S. consumer, like a U.S. to
U.S. trip. Is that specifically?


Samantha Woodworth


Essentially, yes. So, the whole point of it was to kind of prop
up the U.S. shipping and shipbuilding industry years and years
ago by making it so that any shipping activity that happens
within U.S. waters between U.S. ports has to be done by
U.S.-built and U.S.-flagged vessels.


David Roberts


Yes. And so now what's happening is you need special ships for
these things, yes?


Samantha Woodworth


Correct.


David Roberts


And we don't have them?


Samantha Woodworth


Correct.


David Roberts


Which is like a real problem.


Samantha Woodworth


So, you know, we have the one vessel that Dominion's building,
Charybdis, that was supposed to be done this year; unfortunately,
due to supply chain troubles —


David Roberts


Doh!


Samantha Woodworth


Yep. I don't know, did you see that one coming? You know, the
timeline for that has been delayed somewhat, I think, to next
year, maybe even 2025. I'm not entirely sure on that one.


David Roberts


One ship is not going to do the job, presumably.


Samantha Woodworth


That's the thing. And so there was a proposition at one point
that was going to say all the foreign installation vessels that
we bring over have to have either a full U.S. crew or a crew
flagged from the vessel's hailing port. Obviously, that's like
another bunch of hurdles to jump through when we're trying to
attract European vessels to come across the pond and do these
projects for us. That provision never passed, thank goodness,
because honestly, it probably would have choked the offshore
industry a lot.


David Roberts


Well, how is this not just going to bring everything to a halt?
Is there any way around this? You can't build one without a ship?
We don't have the ships. It's illegal to bring a ship over from
where they're building ships. What's the solution to this puzzle?


Samantha Woodworth


So there's two hypothetical workarounds. The first is what was
used to do Block Island Wind Farm, the Coastal Virginia
Demonstration Project, which was to basically ferry things back
and forth from a foreign port. So they set up in Halifax. And —


David Roberts


Ah!


Samantha Woodworth


Yeah, obviously not really a very good solution.


David Roberts


Not economically ideal, let's say.


Samantha Woodworth


Especially if you're trying to build an 800-megawatt wind farm,
as opposed to a 20-megawatt wind farm.


David Roberts


Right.


Samantha Woodworth


So that was the first of the suggested workarounds. Scalability,
obviously, huge concern with that one. The current workaround
that's being used for the Vineyard Wind Project is to have
U.S.-flagged feeder barges and a foreign installation vessel. So
instead of having the installation vessel come to port and pick
up components, the installation vessel just stays stationed at
that project site, while the U.S.-flagged feeder barges are the
ones going from project site to port to pick up these components.
Then you transfer them to the installation vessel and then it
gets installed that way. Obviously not ideal either, but —


David Roberts


Every economist in the audience right now is getting hives.


Samantha Woodworth


I know, I know, I'm sure. Obviously not ideal, but when we look
at Vineyard Wind specifically, actually, another piece of good
news for today is that the first five turbines of that project
already installed, and they're planning to flow power very soon.
That project wasn't really adversely affected, timeline-wise, by
using this feeder barge workaround.


David Roberts


They did the barge thing and it worked.


Samantha Woodworth


Yes. It didn't seem to really impact the actual construction
timeline at all. Obviously, it's going to be a bit more expensive
because not only are we paying a premium on getting the foreign
installation vessels.


David Roberts


Yeah, you have to get the vessels anyway. Like, you still have to
get them.


Samantha Woodworth


Yeah. And so obviously we have to pay a premium to incentivize
European vessels coming over here because they have a ton of
demand in Europe anyway. So it's going to be a bit more expensive
using that workaround because you're paying a higher day rate for
the installation vessel as well as the day rates for the barges.
But at least it's not impacting timelines detrimentally. Or at
least it hasn't in the one example we have. So it is a viable
workaround is what we've learned.


David Roberts


Seems so crazy, though. Is there no prospect or chance of
Congress just like for once doing a think, you know, they could
just sit down and in five minutes pass an amendment to the Jones
Act. You know, saying, "except for offshore wind." Is that not
even on the table?


Samantha Woodworth


Yeah, it's not really on the table. It is funny, and a little
sad, because obviously the whole point of it was to prop up the
shipping and shipbuilding industries in the U.S. The U.S.
shipbuilding industry has just continued to decline. But that was
always the question when this issue first got brought up was
whether or not they would ever pass an amendment. And it was a
pretty emphatic no, because it is a policy that is rooted in
nationalism and a lot of people in government still believe that
it is a good policy.


David Roberts


So then are we going to get a shipbuilding industry? Like, is
there anything on the horizon other than the one, the one ship?


Samantha Woodworth


That's the interesting piece. Right. So we have the one ship that
is going to be done within the next year or so. There haven't
been any contracts signed about or like to build additional Jones
Act installation vessels. There have been a lot of proposals and
potential contracts, expected contracts around other hybrid
vessels related to maintenance and that sort of thing, which, you
know, obviously equally as important, once the industry gets off
the ground, you don't need the installation vessel really
anymore. You need those Jones Act compliant operations and
maintenance vessels. So having those is going to be really
important because we know that feeder barge workaround works.


We can get these projects built even if we don't have more Jones
Act installation vessels. A lot of the problem, though, has to do
with just shipyards being able to build these. So there is a
continuous kind of arms race going on in the offshore industry
right now about bigger and better turbines.


David Roberts


Yeah, I was going to ask this. What are you even building the
ships for? Right. It seems like a moving target.


Samantha Woodworth


Yeah. So most of the fleets that would be available to the U.S.
right now can install turbines anywhere between 12 and 14
gigawatts in size. But we're already hearing talk of 16, 18, 20
gigawatt platforms coming in the future. So obviously, the bigger
the turbine platform, the bigger the ship is going to need to be.
In theory, Charybdis is supposed to be able to install those
16-megawatt turbines. But Keppel AmFELS, the shipyard where it's
being built, is one of only a handful that can handle ships that
big. And the other ones are contracted for military contracts and
are unlikely to want to pick up a commercial vessel contract.


David Roberts


Interesting.


Samantha Woodworth


They've already got cushy navy contracts, so why would they
bother building a commercial vessel of that size.


David Roberts


Especially in an industry that is in spectacular turmoil.


Samantha Woodworth


Exactly, it is kind of another chicken and egg problem, in a way.


David Roberts


That is just — what a dumb, what a dumb problem to have. It's
just so dumb. So, long story short, you anticipate us hacking our
way around this for the foreseeable future with barges.


Samantha Woodworth


Yeah, exactly.


David Roberts


Well, that's ridiculous. But such is life. One question that
comes up a ton, especially as I live out here in Seattle, is
about west coast wind. You know, all the action and all the news
stories are coming out of the east coast, they're way ahead. But
there's a lot of thinking, dreaming out here on the west coast
about offshore wind. Where is that? Is it just a gleam in our
eye? Is somebody doing something? Are there laws being passed?
Are there companies bidding on anything? What's happening on the
west coast?


Samantha Woodworth


So we had the California auction — I think that was towards the
end of last year, and that was a pretty well received, well
subscribed auction. California has its super ambitious offshore
wind targets. Oregon has their more realistic, I'd say, offshore
wind target. So obviously, the whole industry out there is
expected to be floating, just given the water depth.


David Roberts


Yeah. Just for listeners' benefit, on the east coast, they have a
nice little shelf off the coast that's relatively shallow, so you
can just put concrete foundations on the floor of the ocean. West
coast of the U.S., it drops off like a mile or two offshore to be
very deep. So you can't put anything on the floor.


Samantha Woodworth


Exactly. So, you know, the option for technology would be
floating wind turbines that are just anchored to that deep, deep,
deep seabed. Floating technology is still kind of in the
commercialization phase in Europe.


David Roberts


Is there an operating commercial floating wind turbine anywhere?


Samantha Woodworth


There's a few, I believe, in Denmark and maybe Germany. But
overall, the technology itself is still in the commercialization
phase, still trying to figure out, "okay, is this economical? How
can we do this economically?" Especially just because floating,
it takes so much more of everything than fixed bottom does. More
labor, more steel, more concrete, literally everything, more
space.


David Roberts


Why is that exactly?


Samantha Woodworth


The technology is a bit more complicated because you need to make
sure that you're ballasting everything right, so it's not going
to capsize in the first heavy gale. And as far as needing more
space, you are constructing these turbines port side and towing
them to where they're going to be anchored. You're not
constructing them at the project site.


David Roberts


But then you don't have the ship problem, right?


Samantha Woodworth


That's true. You don't have the ship problem because we have lots
of U.S. flag tugboats. But, yeah, you don't have the ship
problem. But then you run into the issue of you just need
exponentially more port space to be able to construct these
massive turbines and then tow them out of the harbor. So it has
its own specific set of constraints and problems and
idiosyncrasies, if you will.


David Roberts


How close is that? Is there a port that could do it? Obviously,
based on everything we've said to date, no one really knows, and
it's very up in the air. But when might this happen?


Samantha Woodworth


A lot of retrofitting would need to happen to any port to be able
to construct floating offshore wind. But we have some very good,
large ports on the west coast that are already hubs of wind
energy imports, like Long Beach, Los Angeles, even like
Vancouver, Washington, Portland, that sort of thing. You know,
it's definitely doable. It's going to take time, though, and I
think it's going to take a lot more time than anyone really wants
it to, naturally.


David Roberts


Well, you have to get the ports ready. You have to settle this
technology question, I guess. You got to get bids like all that
just based on how long it took on the east coast. It's hard to be
super optimistic.


Samantha Woodworth


And, I mean, I know California has tried very hard to implement
policies that would allow for fast tracking of these projects, at
least through the paperwork phase, as it were, so they can start
getting more focused on the physical infrastructure needed. But I
think they're also still trying to figure out how the contracting
mechanisms are going to work in CAISO. And frankly, they have
enough problems with their electricity grid as a whole with
integrating the exceptional amount of renewables that they're
targeting.


David Roberts


Well, like some steady baseload offshore wind would be super
helpful.


Samantha Woodworth


In theory, yeah, as long as the existing wires can handle that
much power. So California has its own grid struggles that it
needs to address first, I think before it can really think about
actually making these projects into a reality, I think they're
going to be able to do it. I think it's going to take —


David Roberts


When is the target in law? Like, what are we saying we're aiming
for?


Samantha Woodworth


5 megawattts operational by 2030, and I think it was —


David Roberts


This is California?


Samantha Woodworth


Yes. 5 gigawatts, rather, by 2030 and 25 gigawatts by 2045.


David Roberts


2030 is not very far away.


Samantha Woodworth


No, it is not.


David Roberts


Do you think there's going to be 5 gigawatts of operational
offshore wind off of California by 2030?


Samantha Woodworth


I do not think so. I think we will have one to two projects
operational by then, but I don't believe we will be hitting 5
gigawatts.


David Roberts


It just seems like on both coasts, there's just this hump you
need to get over. You need to get the supply chain going and then
build a few projects, and the costs come down each time you build
a project. And the costs come down each time you scale up your
manufacturing. And it just seems like there's this hump we need
to get over, and things will get smoother once we're on the other
side of it. But, man, it's a big hump.


Samantha Woodworth


Yeah. And I mean, obviously the hump got a lot bigger with all of
these unforeseen circumstances, post pandemic and whatnot. But we
all kind of have to remember that these are the same, or at least
similar growing pains that the U.S. onshore industry went through
in its infancy. Storage is seeing similar growing pains right
now. Solar had their fair share, too, in the infancy of that
technology. So the growing pains, I think, seem a little greater
in offshore just because the projects are so much bigger and so
much more expensive and require so much more —


David Roberts


And we have less time and we have ambitious targets and we have a
lot more media attention on the whole thing.


Samantha Woodworth


Exactly, exactly. But as we've seen before in all the other
technologies, you know, we can get these industries going in the
U.S. and we can get them going in a sustainable way. So I don't
really have any doubt that that's what's going to happen with
offshore. We're just really in the growing pains phase right now,
and it just happened to coincide with a really, really, really
bad bunch of macroeconomic issues.


David Roberts


What about the Great Lakes? Is that a real thing?


Samantha Woodworth


So the Great Lakes is kind of interesting. I know that Icebreaker
— Ohio regulators, I think, early last year approved the project,
which was totally not expected by anyone, including the
developers of the project, who said, "oh, no, we need to do this
now. We got to get the wheels spinning again."


David Roberts


If you were building on the Great Lakes, would that be a standard
platform hooked to the seabed, like just the kind they're
building off the east coast? It wouldn't be any special
technology or anything?


Samantha Woodworth


Yeah, it's a fixed bottom. It's also state jurisdiction,
obviously, instead of federal jurisdiction. So these are all —
would be significantly smaller projects. I think Icebreaker, at
most, it was going to be 20 something megawatts.


David Roberts


Interesting. But they're doing it. They're moving forward.


Samantha Woodworth


Yeah, in theory, that one's moving forward. It's been radio
silence since that approval. But Canada, Manitoba had looked into
doing Great Lakes offshore wind way, way, way back in the day and
then kind of tabled the whole thing because they said they needed
to do more environmental reviews, since obviously the Great Lakes
are a source of water for —


David Roberts


Yeah, I can only imagine the NIMBYism that's going to take hold
when this gets well.


Samantha Woodworth


And that's why Manitoba has a moratorium on offshore wind
development in the Great Lakes at this point, while they do more
research and that sort of thing. But that moratorium has been in
place for, I think, like ten years now. So that one's going to
come with its own set of hurdles, especially as it pertains to
the fact that those lakes are drinking water for millions of
people. So you're definitely going to have, permitting wise, a
significant number more hurdles. But for powering load centers
like Chicago and that sort of thing, I think it would be very,
very beneficial.


David Roberts


Very handy. But if I had to pick one that's going to take longer
than anybody thinks. That would be my bet.


Samantha Woodworth


Exactly.


David Roberts


One other thing. What about, and this is something I wrote about,
jeez, when I was back at Grist, I want to say in, like, the
mid-2000s, this idea of an east coast transmission backbone out
in the ocean, that you just sort of hang projects off, because
obviously, if every project has to build its own connection to
the shore, that's NIMBYism, that's money, that's time. And if you
could just connect to this backbone, and there could just be one
or a small number of big connections to the shore, then it seems
like you'd open up, you'd make things a lot easier for subsequent
projects. I've heard talk about that for ages.


Is that real? Is that going to happen?


Samantha Woodworth


So that's definitely something that we've heard from both, like,
New Jersey and New York. We're talking about doing a meshed grid
system for their projects. And there are a lot of positives,
let's say, about doing it that way because it's beneficial both
to grid reliability, but it's also beneficial to the project,
like asset owners as well, because essentially the way it works
is that you have that grid interconnecting at multiple points on
land and also connected to multiple projects. And so basically,
if one point on land has too much power flowing to it at one time
and it's congested, but another point needs more power, you can
shift what point that power is getting or where that power is
getting flowed.


David Roberts


The whole east coast becomes one big shared grid.


Samantha Woodworth


Yeah. And honestly, I frankly think that is a brilliant idea, and
I hope that it gets built, because I think —


David Roberts


I loved it back in the 2000s when I wrote about it.


Samantha Woodworth


I think it makes a lot of sense, because then the asset owners
aren't having their generation curtailed and losing money that
way. While we're not adversely affecting grid reliability by
injecting excess electrons into an overly congested location.


David Roberts


And plus, you just cut the whole NIMBY thing out completely. It's
all taking place out in the middle of the ocean where nobody's
going to see it.


Samantha Woodworth


Well, sort of —


David Roberts


Except for the big connection spots.


Samantha Woodworth


Yeah, exactly.


David Roberts


You're reducing your NIMBY battles to a couple of key central
battles.


Samantha Woodworth


Yeah. And I mean, you still have that NIMBYism about where the
lines interconnect underneath, or any sort of onshore grid
expansion that would be needed to flow the power, which is just
super difficult to get approval for any upgrades or new
transmission lines, even if they're underground these days. So
that's definitely a huge piece that needs to be addressed. And
honestly, that's kind of the big piece that I always harp on is
the fact that our existing onshore infrastructure needs to get
addressed and those projects getting fast tracked. But as far as
the mesh grid goes, overall, I think that idea makes a lot of
sense.


The reason that there hasn't been a ton of movement on it, I
don't think is just purely because of cost.


David Roberts


We'll talk about planning. I mean, that's like multiple states,
the federal government. That's a lot of planning.


Samantha Woodworth


Yeah. And God forbid that everybody talk to each other.


David Roberts


I know you'd have to have a lot of jurisdictions working together
to get that going.


Samantha Woodworth


Yes. So I think that's a big piece of it is like getting
everybody together and getting all of the permitting and stuff,
getting it done easily. I think also, again, it goes back to that
question of "who's going to foot the bill?" Generally, the asset
owner is the one that is paying for the lines to connect their
project to land or to whatever point of interconnection. So.
Okay, well, I only want to pay for the line that connects my
project to one point. Who's going to pay for the interconnected
interconnection?


David Roberts


Clearly that's something the States would have to get together
and somewhat pay for.


Samantha Woodworth


Exactly.


David Roberts


It would pay itself back so richly over time.


Samantha Woodworth


But it's the time value of the dollar. Right. The dollar later
doesn't mean as much as the dollar right now. So the states, they
should have a hand in funding pieces of that, probably most of
it. But as it stands now, the way that it's always worked for
onshore and for solar is just the developer pays for those
upgrades.


David Roberts


We know how well that's going.


Samantha Woodworth


Yes.


David Roberts


How well that system is working.


Samantha Woodworth


Yeah. So there definitely needs to be a paradigm shift, I think,
if we're going to get these mesh grids built. I think, again,
they are a fantastic idea, but it's just the complexities there
and then, yeah, where's the money going to come from?


David Roberts


Just on the technology side, I mean, you have sort of two buckets
here. You have the fixed and the floating. Floating, as you say,
is still somewhat in the technology development stage. Is fixed —
is there a set technology now or are we still in a place where we
might see big, fundamental, new, different kinds of technologies
come into play? Or do you think on the fixed side, is that like
they know what they're doing now and they're just replicating?


Samantha Woodworth


There's multiple different ways that fixed bottom is done and
construction methods, let's say. And obviously, which ones get
used it depends on the project location and all the
characteristics of the seafloor and that sort of thing. I think
that we'll continue to see technological developments on the
fixed bottom side, but generally, as far as overall design goes,
I think we're pretty well established as far as you have these
handful of designs to choose from based on your project site
characteristics.


David Roberts


So we'll get incremental improvements.


Samantha Woodworth


Exactly.


David Roberts


And some scale, some learning from scale, maybe. What about on
the floating side? Because I've seen some cool, sort of like,
animated demos of exciting, completely new, like the turbines
that are sort of laying kind of on their side and then get blown
erect by the wind when they need it, and all sorts of crazy stuff
on the floating side. Where is that in terms of figuring out what
we're doing?


Samantha Woodworth


It's definitely more in the technology development phase. I think
there's kind of the one overall design that is being kind of used
as the baseline for most of these projects, but there are
definitely lots of creative designs out there that are being
posited. And ultimately, though, I think the one that we are
currently seeing as most often used as the rendering is still
proving to be what would be the most economical option.


David Roberts


And that's just like some buoys to keep it steady and cables to
the seafloor?


Samantha Woodworth


Essentially, yes.


David Roberts


And this notion of offshore wind turbines sitting out in the
middle of the ocean, not connected to any grid, but instead just
making hydrogen or making ammonia and serving as kind of like an
ammonia gas station for ships, is that anything other than like,
a dreamy idea in someone's head? Is anyone seriously doing that?


Samantha Woodworth


So there are a couple of projects that are in development in
Europe that are going to be directly tied to hydrogen production.
So it is not entirely a pipe dream. I know that that's also
something they're talking about in Canada, because Canada wants
to be a net hydrogen exporter.


David Roberts


Oh, interesting.


Samantha Woodworth


So they're proposing a couple of gigawatt scale onshore projects
to power those. But then Nova Scotia is also talking about
interconnecting offshore projects as part of that, because Canada
itself, you know, especially in the east, in the maritimes,
doesn't really need any more renewable energy. They have so much
hydro power.


David Roberts


Yeah, they need to figure out how to sell it in various forms.


Samantha Woodworth


Right, exactly. But I could also see them putting in these big
offshore projects, using them to power their electrolyzers, but
also becoming a net energy exporter to New England. We already
buy hydro from them why wouldn't we buy offshore wind?


David Roberts


Or buy ammonia?


Samantha Woodworth


Or ammonia. Yeah, exactly. So in other countries, that's
definitely materializing. The hydrogen economy in the U.S. is
kind of a little bit on the slower side. But I think we could
definitely see, especially once state targets have started to be
met and there's no longer a push to have these solicitations and
have these projects directly tied to the grid, I could definitely
see some of these projects contracting for providing power to
electrolyzers.


David Roberts


That's probably a ways out.


Samantha Woodworth


Yeah, I mean, that's definitely, you figure right now these
projects are being proposed to sort of help with the
decarbonization goals of all these states. So really I think
we're going to just continue to see there be utility contracting
and offtake until those goals are either within reach or met, and
then we'll start seeing the offtake landscape changing for
offshore wind as it is.


David Roberts


We still need a lot of clean electricity —


Samantha Woodworth


Exactly.


David Roberts


— around here. Summing up, I mean, you sort of touched on this,
but I guess the big question on most people's mind, and the big
question on my mind, the big question on everybody's mind is just
sort of which of these troubles that have all converged on this
industry at once, which are temporary and which are structural?
In other words, how temporary is this versus are we, in some way,
to some degree, permanently downgrading our hopes for offshore
wind? Or do you think this is all in some sense temporary?


Samantha Woodworth


I think in some sense this is kind of all temporary. When all of
these kind of macroeconomic problems kind of came together, I
know that we were talking, "oh, inflation will be back to normal
next year." And obviously that wasn't the case. Obviously, I
think that volatile piece of it that'll eventually return to
normal. But I also think that it kind of has provided us a good
lens with which to look at the future for offshore wind
development. And knowing that these are things that should be
considered as part of the due diligence process.


David Roberts


Like interest rates particularly — probably going to stay. It's
not going to go back down, I don't think, anytime soon.


Samantha Woodworth


Yeah. So in order to adapt to what is kind of our new normal, to
use a super cliché phrase, it is definitely requiring our
understanding of how our own power markets work kind of be
revisited and how getting these projects to fruition, how we
revisit that as well. I think in some ways the renewable industry
as a whole will be forever changed by all of these issues. But I
don't think that it's going to be changed in such a way that is
going to be irreversible or overly detrimental to the health of
the industries. I think it's just going to force us to adapt, and
I think ultimately we're going to be able to.


We've seen these growing pains before in all the other
technologies. It stinks that those normal growing pains are
converging with unexpected exterior stressors. But overall, I
think really what it's shown us over and above how susceptible
these projects can be to unexpected stressors like inflation or a
pandemic, I think it's really shown us to temper our expectations
as far as timelines go. I don't personally believe that we're
going to see a ton of these projects get canceled. I think we're
just going to see a lot of timelines get extended. As far as
getting those projects online.


David Roberts


Are there policy tools? One of the things — it comes up for me
again and again, and is it would just be crazy of us to let high
interest rates strangle the clean energy transition or
substantially slow it down. Are there ways to carve out cheaper
money for something like offshore wind? Or just more broadly, are
there obvious policy steps that could be taken here to make
things somewhat easier on this industry during its time of
trouble?


Samantha Woodworth


That's kind of a little out of my realm of expertise. I think,
though, given the fact that a lot of this is tied to tax credits
and essentially government subsidies, it's going to be really
hard to sort of disentangle funding from the health of the
economy.


David Roberts


Yeah. Okay. Literally, final question, which is just the reason
we're talking about all this, is that the potential for offshore
wind in the U.S. is big. Just give us, by way of wrapping up,
really wrapping up. Just give us some sense of like, what is the
prize out there that makes it worth fighting through this tangle
to get there?


Samantha Woodworth


Renewable energy. It really is kind of that light at the end of
the tunnel, right. We've seen in the other technologies, we've
watched it go from not technologically viable, to technologically
viable, to outright economic on its own without subsidies.
Offshore wind has the potential to do that as well. And it is on
just such a larger scale that it really does have the potential
to green our grid in an incredibly huge way.


David Roberts


Yeah. Do we have any numbers on that? I mean, I should have told
you beforehand so you could grab some, but when we talk about the
potential for offshore wind in the U.S., do we have gigawatt
estimations of what's out there?


Samantha Woodworth


At the end of the day, we're still expecting close to 15
gigawatts operational by 2030, which is not a small number.


David Roberts


Yeah, and that's all east coast. That's what we expect by 2030.
Is all east coast or is there —


Samantha Woodworth


Yep, it's all east coast.


David Roberts


And so is there another 15 waiting for us on the west coast?
Like, is the potential on the west coast as big as it is on the
east coast?


Samantha Woodworth


Again, because of the technology, I think the implementation is
going to take a lot longer. But floating farms are generally
larger just because the economy of scale is there. So, having
successful floating wind on the west coast, it has the potential
to be a huge impact on the overall energy transition in the U.S.


David Roberts


Despite all these troubles, just the hope is pretty amazing. It's
just like steady, around the clock, power generated way out where
you don't have to see it. That just shows up in your cables. That
seems worth fighting for.


Samantha Woodworth


Absolutely.


David Roberts


All right, well, thank you. I'm sorry I kept you so long. I've
been digging into this stuff and it's very interesting.


Samantha Woodworth


Don't apologize. I could talk about this for another 2 hours.


David Roberts


So many moving parts here, like social stuff, political,
economic. It's just all in chaos right now. Really fascinating
story to watch develop. So, thanks for coming on and walking us
through it.


Samantha Woodworth


Not a problem. Thank you again for having me, David.


David Roberts


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