Offshore Wind Is Really A Pirate Ship on the Sea of Subsidies

Tom Shepstone
Shepstone Management Company, Inc.

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Offshore wind only survives due to subsidies created by government and wind developers are more like pirates than entrepreneurs.

The Manhattan Institute does fantastic research and a little over two weeks ago it issued a report by Jonathan Lesser that addresses the fiasco that is wind energy; offshore that is. Titled “Out to Sea: The Dismal Economics of Offshore Wind,” it illustrates the piracy occurring on those seas as wind developers ride a wave of green political correctness and raid the ships of state to steal their booty of government subsidies.

New Jersey and New York and a handful of other Northeast nincompoop states are both currently chasing wind with abandon; the abandon of economic sanity with respect to the interests of ratepayers and taxpayers. It’s one gigantic scam; a new venue for hedge fund types who want maximize government rent as a source of profits, milking consumers for every bit of it, while distorting the economics of every other form of energy. Wind has been just this sort of scam for decades now, but the production tax credits that made the theft possible are slowly be ratcheted backward, so wind energy has blown out to sea. Offshore is the new hedge fund opportunity for the pirate managers who want to empty the pockets of energy consumers.

Here are the following key findings from the report (emphasis added):

  • Offshore wind is not cost-effective, and the forecasts of rapidly declining costs through increasing economies of scale are unrealistic. Absent continued subsidies—such as state mandates for offshore generation and renewable energy credits, which force electric utilities to sign long-term agreements with offshore wind developers at above-market prices—it is unlikely that any offshore wind facilities will be developed. These subsidies, along with the need for additional transmission infrastructure and backup sources of electricity, will increase the cost of electricity for consumers and reduce economic growth.
  • The actual costs of offshore wind projects borne by electric ratepayers and taxpayers are likely to be greater than advertised. Experience in Europe over the previous decade demonstrates that the performance of offshore wind turbines degrades rapidly—on average, 4.5% per year. As output declines and maintenance costs increase, project developers will have a growing economic incentive to abandon their projects before the end of their contracts to supply power. In contrast to the strict requirements for nuclear power plants, it is unclear whether offshore wind project owners will be required to set aside sufficient funds to decommission their facilities. This will likely mean that electricity ratepayers and state taxpayers will pay to decommission offshore wind turbines or pay higher prices to keep the projects operating.
  • The cumulative environmental impacts of multiple offshore wind projects along the Atlantic Coast—including on fisheries and endangered species—may be significant and irreversible. Also, mining the raw materials of offshore wind turbines, especially rare-earth minerals, has significant environmental impacts because those materials primarily are mined overseas, where environmental regulations are less stringent than in the United States. Dismissing environmental impacts that occur outside the U.S. while championing offshore wind’s alleged worldwide climate-change benefits is hypocritical.
  • The justification of subsidies for offshore wind based on increased economic growth, new industries, and state job creation is an appeal to “free-lunch” economics. The subsidies will benefit the well-connected few while imposing economic costs on consumers and businesses at large.

Here are the money paragraphs (in more ways than one):

As part of its Annual Energy Outlook, which provides a long-term forecast of U.S. energy demand, EIA publishes an accompanying report on the projected costs of different types of generating resources. In its most recent report, EIA estimated the real LCOE for offshore wind facilities beginning service in 2025 as between $102.68/MWh and $155.55/MWh, with an average price of $122.25/MWh (2019$).[62] EIA estimates that the costs for offshore wind installed in 2040 will be about one-third less, with levelized costs between $74.47/MWh and $105.39/MWh, with an average price of $85.53/MWh (2019$).[63]

By comparison, the levelized cost of gas-fired combined- cycle generating units entering service in 2025 is between $33.35/MWh and $45.31/MWh, with an average price of $38.07/MWh (2019$). For 2040, EIA projects levelized costs for combined-cycle units to range between $34.27/MWh and $72.32/ MWh, with an average levelized cost of $42.89/MWh (2019$). (The higher real levelized costs in 2040 are the result of higher projected prices for natural gas.)

So, even in 2040, EIA projects that the levelized costs of gas-fired combined-cycle units will still be half the levelized cost of offshore wind generation.

There’s much more, so read the whole thing. You’ll find wind energy of the offshore sort is piracy of the worst sort and the victims are the passengers on the good ship “Energy.”

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