Challenges and Potential of Offshore Wind Projects in the US

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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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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