You have 4 summaries left

Odd Lots

Orsted's Americas CEO on Fixing What Went Wrong in Wind Power

Thu Jun 06 2024
Offshore WindEnergy TransitionSupply Chain ChallengesRenewable Energy Financing

Description

This episode explores the challenges faced by the offshore wind industry in the US, focusing on Orsted's experiences. It covers topics such as the all-electric BMW i7, complexities of electricity markets, supply chain challenges, financing considerations, policy impacts, collaboration efforts, and wind energy economics. The episode concludes with insights on offshore wind as a bipartisan solution and tax incentives for renewable energy projects.

Insights

Culture is often shaped by the number seven

The all-electric BMW i7 offers innovative features like automatic opening doors and a 31-inch theater screen.

Understanding electricity markets in the context of energy transition

Electricity markets can be complex with factors like auctions, subsidies, and renewable energy sources like wind.

Challenges faced by the wind energy industry

The wind energy industry has faced challenges such as project cancellations, impairments, and industry headwinds.

Complexities of offshore wind industry growth

David Hardy from Orsted discusses the complexities of offshore wind industry growth and challenges faced in 2023 due to factors like ambition, expectations, and timing.

Challenges in the US offshore wind market

Orsted faced challenges in the US offshore wind market due to bad timing with rising interest rates and inflation.

Project evaluation and supply chain challenges

Management team and board decided to cancel certain projects due to high risks and challenges in the supply chain.

Global imbalance in offshore wind supply chain

There is a global imbalance in key offshore wind supply chain categories, leading to challenges in supply chain ramp up.

Financing challenges and policy considerations

Uncertainty around future pricing and demand poses challenges in financing renewable energy projects.

Collaboration, subsidy-free projects, and permitting delays

States need to collaborate to kickstart offshore wind projects and reduce energy costs.

Offshore wind as a bipartisan solution and tax incentives

Offshore wind is a bipartisan way to bring near-base load electrons onto the grid and create jobs across many states in America.

Chapters

  1. Understanding the All-Electric BMW i7 and Electricity Markets
  2. Challenges Faced by Orsted in the US Offshore Wind Market
  3. Project Evaluation and Supply Chain Challenges
  4. Global Imbalance in Offshore Wind Supply Chain
  5. Financing Challenges and Policy Considerations
  6. Collaboration, Subsidy-Free Projects, and Permitting Delays
  7. Offshore Wind as a Bipartisan Solution and Tax Incentives
  8. Challenges in the US Energy Market Structure and Wind Energy Economics
Summary
Transcript

Understanding the All-Electric BMW i7 and Electricity Markets

00:00 - 07:43

  • The all-electric BMW i7 offers innovative features like automatic opening doors and a 31-inch theater screen.
  • Understanding electricity markets, especially in the context of energy transition, can be complex with various factors like auctions, subsidies, and renewable energy sources like wind.
  • The wind energy industry has faced challenges such as project cancellations, impairments, and industry headwinds, raising questions about long-term viability and growing pains.
  • Factors like supply chain disruptions and rising costs of capital add complexity to the challenges faced by the energy markets in transitioning to cleaner sources.
  • David Hardy from Orsted discusses the complexities of offshore wind industry growth and challenges faced in 2023 due to factors like ambition, expectations, and timing.

Challenges Faced by Orsted in the US Offshore Wind Market

07:20 - 14:37

  • Orsted faced challenges in the US offshore wind market due to bad timing with rising interest rates and inflation
  • Orsted had to cancel some projects in 2023 due to financial implications but is still progressing with three other projects
  • Decisions on project continuation or cancellation are based on financial factors like weighted average cost of capital spread and strategic considerations, as well as supply chain risks

Project Evaluation and Supply Chain Challenges

14:08 - 21:30

  • Management team and board decided to cancel certain projects due to high risks and challenges in the supply chain
  • Different projects were evaluated based on factors like negative MPV, supply chain challenges, and potential delays
  • New global supply chain challenges emerged for Ocean Wind 1 project leading to concerns about delays and cost impacts
  • Offshore wind industry facing supply and demand imbalances for key components like HVDC systems and vessels
  • Industry struggles with committing to supply chain ramp-up without business case certainty

Global Imbalance in Offshore Wind Supply Chain

21:04 - 28:38

  • There is a global imbalance in key offshore wind supply chain categories, leading to challenges in supply chain ramp up.
  • Projects in the US are facing a reset period due to economic factors affecting both demand and supply chain economics.
  • The Jones Act requires US-owned, operated, and built vessels for transporting equipment, posing challenges for building out US offshore wind.
  • Orsted supports the Jones Act but highlights difficulties in complying due to limited availability of Jones Act vessels.
  • Building own transport vessels is discussed as a potential solution for offshore wind projects but poses significant capital investment challenges.
  • Orsted aims to provide strong demand signals to support the development of necessary components and infrastructure by the supply chain.

Financing Challenges and Policy Considerations

28:10 - 35:54

  • Support for the Jones Act stems from the goal of building an American supply chain for offshore wind projects
  • Uncertainty around future pricing and demand poses challenges in financing renewable energy projects
  • State demand and off-take, along with tax incentives, play crucial roles in financing offshore wind projects
  • Advocacy for direct pay to cut costs related to third-party monetization of tax credits in renewable energy projects

Collaboration, Subsidy-Free Projects, and Permitting Delays

35:26 - 43:15

  • States need to collaborate to kickstart offshore wind projects and reduce energy costs
  • Subsidy-free offshore wind projects in the US could become a reality in the near future
  • High upfront investments are required for offshore wind infrastructure, impacting project costs
  • Permitting delays have been a challenge for offshore wind projects in the US
  • Political landscape, including potential policy changes, is a factor in business planning for renewable energy companies

Offshore Wind as a Bipartisan Solution and Tax Incentives

42:48 - 50:28

  • Offshore wind is a bipartisan way to bring near-base load electrons onto the grid and create jobs across many states in America.
  • Renewables like offshore wind contribute to energy security and help maintain America's position as a net exporter of energy.
  • The Inflation Reduction Act (IRA) has brought changes to tax credits for renewable energy projects, providing more stability and incentives for investors.
  • Post-IRA, there are additional tax incentives for projects built in energy communities and with domestic content, aiming to boost the domestic industry.

Challenges in the US Energy Market Structure and Wind Energy Economics

50:02 - 56:34

  • The podcast discussed the challenges in the US energy market structure from a practitioner's perspective.
  • There was a focus on the supply chain aspect and how it can be fragile due to limited resources and sequencing issues.
  • Traditional economics may not adequately address industries with long timelines, leading to delays in meeting demand.
  • The conversation highlighted factors like bad timing, luck, and growing pains affecting the wind energy sector in the US compared to Europe.
  • The episode concluded with insights on wind energy economics, subsidies, and cost differences between Europe and the US.
1