The renewable-power fantasy is being blown apart by furious financial headwinds.
Already this year projects have tumbled in Rhode Island, Connecticut and Massachusetts, and now Danish wind-power giant Ørsted has canceled two wind farms in New Jersey.
Over and over, the litany of causes is the same: inflation, higher interest rates that drive up capital costs and severe kinks in the supply chain.
These same problems are slamming proposed offshore-wind projects in New York as developers make final decisions on whether to start building turbines or cut their losses before they get worse.
Seeing that the wild cost increases threaten to make their projects unprofitable, these companies went hat-in-hand to the state’s Public Service Commission asking for increases of 35% to 65% on the price of electricity they hope to generate.
But the commission declined to dig deeper into ratepayers’ wallets, sending them away empty-handed.
The four companies behind these prospective wind farms have all taken big hits to their balance sheets. Equinor has written its value down by $300 million.
Its partner, BP, wrote off more than $500 million. Eversource sliced $300 million off its portfolio’s value.
And Ørsted took a sledgehammer to its accounts, wiping out a whopping $5.6 billion. Its stock plunged more than 20%.
All this chaos caused a top BP executive to lament that the offshore-wind industry is “fundamentally broken.”
Indeed — and yet this broken industry is what New York’s climate activists have pinned their clean-energy hopes on.
If offshore wind had to compete on the free market, we wouldn’t even be talking about it.
The levelized cost of energy from natural gas is around $37 per megawatt hour.
The contracts the wind-energy companies struck with the state sets offshore wind’s price at $118 per megawatt-hour, three times as expensive as gas but still not enough to make turbines turn a profit.
To get out of the red, the firms had begged the PSC to jack up the price to between $140 and $190 per megawatt-hour.
These wind farms will almost certainly be built someday, even if the current contract-holders back out and the state has to rebid them.
And if it does, every bidding company will demand higher prices, socking ratepayers across the state with higher bills to subsidize them.
This is the danger of letting the government pick winners and losers. Watch the show “Shark Tank,” and you’ll see real investors having to decide whether to risk their own bankroll.
When experienced people are playing with their own money, they don’t care whether an idea sounds exciting or ticks the proper ideological boxes. They only care whether they’re likely to make money off it.
But when government provides subsidies to businesses, the investment decisions are made by folks who get to play with other people’s money.
Not having anything of their own at stake dulls their judgment, making them care more about the ideological appeal of a proposal than whether the money picked from the public’s pocket will provide a real return on their (unwilling) investment.
And while an investor will walk away from a project that’s going down the tubes, government agencies will keep throwing good money after bad — there’s no cost to them, and it hurts to publicly admit you’re wrong.
New Yorkers are capable of choosing the future they want. They don’t have to have it forced on them. Many do want clean energy and are willing to pay a premium for it, but only if it doesn’t come at an outrageous price.
It’s time to shove the cost-immune policymakers to the side and let the market work. Let firms innovate to find affordable sources of clean energy, and climate conscious New Yorkers will beat a path to their door.
James Hanley is a fellow with the Empire Center for Public Policy.
This story originally appeared on NYPost
