Blown It?

Offshore wind's troubles reveal a much larger problem

I’ve always been reassured that size doesn’t matter.

So you’ll imagine my surprise when I heard about the latest in offshore wind turbines.

The newest models are gargantuan. Clustered like a forest of spinning totem poles to the elements, each climbs over 280 meters tall, reaching nearly as high into the clouds as the Eiffel Tower, and boasting a wingspan of ~240 meters, 3.5x greater than a Boeing 747. Their foundations wrestle the waves and stretch deep into the salty depths.

Offshore wind is a remarkable feat of engineering.

These advances brought efficiencies and cost savings that fueled hype around the world that this technology could harness the power of the air and the tame the tempers of the sea to deliver abundant-zero carbon energy.

Hundreds of billions was spent building tens of thousands of turbines at breakneck speed along coasts from East Anglia to East China.

Many lofty promises were made. We are the “Saudi Arabia of offshore wind”, former UK PM and clown-in-chief Boris Johnson declared. “Wind is 9x cheaper than gas” chirped every eco-hack and midwit journalist in the northern hemisphere.

But pride comes before the fall.

And now the sector is now plummeting as if it fell from the top of one its mighty towers.

In just the past 6 months, here are some of the wincing lowlights:

  • Siemens Energy’s share price collapsed by ~45% since announcing “severe” quality problems with many of its turbines

  • Orsted’s share price dropped by 30% in August after revealing cost overruns will likely result in a $2.3bn write-down

  • Vattenfall cancelled the development of the UK’s largest offshore wind farm

  • 0 companies participated in government backed schemes in the USA and UK to build new offshore wind plants

  • Developers in the USA ask for a 54% increase in the government-guaranteed power price to continue with projects

An industry that has for years been boasting of its low costs is begging hat-in-hand for government life-support.

It’s sicker than a tray of dodgy oysters in the summer sun.

Growing pains

So wtf happened and can it recover?

Let’s start with the industry specific challenges: the internal mistakes and the inherent problems.

Much to my relief, the bigger is better mantra that drove so much of the progress in the sector is paradoxically now contributing to its demise. Bigger turbines mean greater capacity, higher power output, and more $$$, so manufacturers have been pushing the limits of their engineers.

Growing up | Source: BNEF

At first glance, this ambition seems admirable. We’re in a race against carbon emissions after all. But more haste, less speed.

The innovation was so fast that developers didn’t give themselves time to master each model before turning their attention to the next. Like a Lothario chasing his next conquest, they sacrificed the benefits of a prolonged relationship and used their confidence to go and level up again. They reset the learning curve before they could capitalize from it and kept running into new problems.

The blades started corroding in the inhospitable sea air quicker than expected. Specialized vessels weren’t prepared to handle these bigger models. This fed through into unexpected costs.

And as anyone who owns a boat will tell you, when problems arise with anything maritime-related, especially miles out in the unforgiving North Sea, things can get very expensive, very fast.

We sold turbines too quickly [that] had not been sufficiently tested… [we are] a victim of our own ambitions

Jochen Eickholt, CEO of Siemens Gamesa

The second thorny challenge is also a growing pain. When first movers into the space started building wind farms, they went for the low hanging fruit: shallow waters, high wind speeds, close to land and end consumers.

But wind farms take up a lot of space, and these prime positions were quickly snapped up, pushing new developments further offshore and into harsher conditions, driving up costs.

That’s not all. In the search for fresh new waters, wind farms are running into plenty of NIMBYism. Funnily enough, people like the idea of renewable energy until it ruins the view from their favorite beach.

The opposition may win in the end, and even when it doesn’t, it hits the projects with long delays and lawyers fees. Fisherman are not best pleased with wind farms either, for obvious reasons.

This is environmentalism, apparently.

It’s not just people that these projects are coming up against. Plenty of credible evidence, albeit unconfirmed, is emerging that wind farms are killing whales. The loud noises made during the installation deafen these creatures that rely on their hearing to feed and navigate.

They starve to death or wash up on the beaches. Dozens of lifeless whales have been found along the US East Coast near wind farms in the past year.

That little conundrum will create a tricky dilemma for the environmental religion.

A new world

To cut the sector some slack, today’s troubles also stem from factors outside of its control. These huge turbines are made from hundreds of tons of steel, copper, and rare earths. They are transported and installed using similarly large gas guzzling ships and hundreds of hands.

This is all rather expensive and requires a fat wad of financing. Like many sectors, the wind industry gorged on years of cheap money and cheap energy to turbocharge growth.

But those good times couldn’t last forever. Covid, Putin, energy shortages, and central banks saw to that.

As the cost of raw materials, energy, and financing shot up, so too did the cost of building a wind farm. Vattenfall, a wind developer, said the cost of a project has increased by 40% in the past few years. We’re in a new economic reality – which shows no sign of abating anytime soon - and the numbers simply don’t add up anymore for offshore wind.

And then there’s China. There’s always China.

Ask a German solar veteran about the decimation of the European PV sector by the Chinese industrial complex in the 2010s. Following its usual playbook of pinching technology and flooding the global market with cheaper alternatives, China swallowed Europe’s fledgling solar industry whole like a wolf snacking on a duckling.

The European wind industry is next in the crosshairs. It’s maybe a net positive for the global industry if it drives down costs but it doesn’t look great if you’re sitting in a board meeting at Siemens or Vesta or setting policy in Brussels or Westminster. `

Fall Britannia

Speaking of Westminster, nowhere has the rise and fall of wind been so starkly on display than off the UK’s shores.

For over a decade the UK has been the darling of the global offshore wind sector. Enjoying high wind speeds, shallow waters, and incontinent political support, the UK had, for a while, more offshore wind capacity than any other country on earth.

In what are known as capacity auctions, where the government guarantees a fixed price to power suppliers, wind developers promised, and boasted incessantly about, the low prices that they could provide power at with new projects.

Politicians and the media lapped it up as proof that costs of wind were now lower than hydrocarbons.

But here’s the snag. The developers were promising these prices for future, yet-to-be-built projects, and were under no obligation to actually follow through with them.

And guess what? None of them have, because when push came to shove they realized their projects were out of the money at those low prices they wouldn’t stop banging on about. It was all hot air, inevitably swallowed up and regurgitated endlessly by the media, and we’ve had to listen to it for years.

Propaganda, meet reality | Tell me, if wind is so much cheaper than the alternatives, why does it require more government support?

For the latest auction a couple of weeks ago, the government closed that loophole that would enable developers to pull out in the future. Interest rates are higher. All costs are higher. The result? Not a single bid. Zero.

The sector cried bloody murder saying the government wasn’t offering enough support. But those watching closely shouldn’t have any sympathy.

The sector has finally been asked to put its money where its mouth is and they’ve been found desperately wanting. If you can’t compete, you can’t compete. Sorry. Why should the taxpayer now cough up to save you when there are far better alternatives for power generation?

And to top it all off, on the same day that everyone was either going bonkers or laughing about this shambolic auction, the UK’s world-leading army of wind turbines was operating at just 0.3% of capacity on a still summer’s day.

For all intents and purposes, the ~2,500 offshore turbines that you and I have been forced to pay for were providing zero power to our grid.

Power generation from UK wind in the last 90 days | You wouldn’t try and run your house on such volatile power supply so why try and run a national economy on it? | Source: Energy Dashboard

What next?

Most Western governments are too indoctrinated with net-zero ideology to change tack. They will buckle under their own ignorance and the firehose of blame from the wind lobby and offer the additional subsidies that the wind industry demands.

These subsidies are paid for by you and I, of course, in the form of higher electricity bills, and pocketed by industry execs. The consumer always pays eventually. And as I’ve written about before, net-zero Europe-style is going to get very expensive for us all.

There are some rays of hope. Public attitudes towards this blind drive to net zero are beginning to shift as costs start hitting home. Germany’s powerful Green party is taking a battering the polls. In London, a new fee on high emitting cars is widely loathed. Nuclear, the only credible path to energy abundance and zero carbon, is on the cusp of a renaissance.

These shifting attitudes should eventually feed through into policy and put new, hopefully more intelligent suits in power. It’s just a question of how much pain we need to endure before we can course correct to a more sensible path.

Reality’s a bitch

The offshore wind industry is a $40bn market. It isn’t going anywhere just yet. But its challenges speak to a much broader and critical point about the false promises of “renewable” energy.

We’re fed a constant diet of heady ideals and sugary forecasts. This narrative is spun by a highly lucrative “green” industry and spread by gullible, sanctimonious reporters. But eventually, as offshore wind is finding out, these promises smash painfully against the ceiling of reality and science.

It’s now clear to anyone with their eyes open that the “renewables are the cheapest form of power” mantra has been exposed as a lie. So, what else should we be skeptical about? The cleanliness of EVs? The effectiveness of solar? Heat pumps? All of the above?

The energy transition is the greatest, and most costly, industrial transformation in history. Getting it wrong will not only be ruinously expensive but will delay implementation of the correct solutions for human flourishing and environmental protection.

But getting it wrong, we are. Buckle up, we’re in a slow motion car crash with blind fools behind the wheel.