|November 20, 2023 - As The Wall Street Journal recently put it, “the energy transition is getting a dose of reality.”
In the U.S., offshore wind projects are evaporating, transmission lines remain extraordinarily difficult to build, the nation’s first planned small modular reactor project was just cancelled and dozens of renewable-power developers are trying to rewrite contracts to recoup rising costs.
The suspicion that the renewable energy and enabling infrastructure buildout couldn’t keep pace with the Biden administration’s goals has been replaced by sobering certainty.
While renewable additions are happening, they simply aren’t coming close to the pace boosters envisioned. Across the board, nothing is going as planned. Higher interest rates, supply chain bottlenecks, labor challenges and ongoing permitting snafus have left their marks.
Consider the transmission buildout – or the lack thereof – and the immense setbacks facing the offshore wind industry. Despite the urgent need for more high-voltage interstate transmission, additions have in fact slowed instead of sped up. And the few success stories have also only underscored the challenges. The SunZia project, for example, a massive interstate transmission project approved this year, took 17 years to permit. When the project was first announced, Taylor Swift was a 16-year-old country singer and had just released her debut album.
The offshore wind industry is faring little better. Just a few weeks ago, Ørsted, the world’s largest offshore wind developer, announced it was canceling two projects in New Jersey and taking a $4 billion write-down. And as Politico pointed out, those cancellations were indicative of an industry in crisis. “Ørsted is not alone. Avangrid canceled power contracts in Massachusetts and Connecticut. SouthCoast Wind terminated its power deal in Massachusetts. And in New York, utility regulators rejected requests to let four offshore wind projects charge more for their power, leaving the projects in limbo.”
ClearView Energy Partners estimates that 30% of planned offshore wind capacity contracted through state procurements has been canceled with more cancellations likely.
These challenges seem to be forcing a national – even international – energy policy rethink everywhere. Everywhere, that is, except for at the U.S. Environmental Protection Agency (EPA), the agency that continues to ignore this reality and regulate away the existing generating capacity we have in favor of renewable generation that doesn’t exist.
At the Federal Energy Regulatory Commission’s (FERC) recent reliability technical conference, commissioner James Danly expressed his deep concern to EPA about the pace existing, essential generation is being forced off the grid and the stark challenges facing developers to replace those megawatts.
His warning was echoed by a number of witnesses but notably by a representative of PJM, the operator of the nation’s largest grid, who not only expressed deep concern about the accelerating pace of retirements but the lack of new capacity coming online to replace it. He specifically pointed to Ørsted’s two cancelled New Jersey offshore projects as case in point.
The Biden administration’s idealized energy future simply isn’t going to materialize at the speed and scale hoped. But the EPA refuses to recognize that reality, continuing to operate in a fantasy where it can disassemble the generating capacity that meets 60% of the nation’s power all but overnight and not expect calamitous results. Despite continuous and ever-louder warnings over the collapsing state of the nation’s grid reliability and resource adequacy, and the growing mismatch between the speed the agency is forcing capacity offline and the speed at which reliable capacity and infrastructure can replace it, EPA simply isn’t blinking. It’s an incredible display of policy malpractice.
Whether or not the Biden administration can accept reality is a deeply important question. As the gulf continues to widen between what the nation’s grid reliability needs and the policies the administration pursues, the stakes are growing alarmingly higher.