GE predicts $2 billion losses in renewable energy; Germany plans to cap wind, solar profits
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GE predicts renewable energy losses of $2 billion in 2022
GE expects to make losses of about $2 billion in its renewable energy division this year due to inflation and supply chain challenges as well as policy uncertainty following the expiry of production tax credits (PTCs) that dented demand.
GE trimmed its full-year group profit forecast after reporting a decline in third-quarter earnings on October 25.
Chief Executive Larry Culp said onshore wind is "the battleground" for the company as it aims to make its renewable business profitable in 2024.
New tax credits from President Joe Biden's Inflation Reduction Act are set to boost demand for renewables in GE's home market in the medium to long term.
However, "near term, customers continue to defer investments into the future," Chief Financial Officer Carolina Dybeck Happe said on an earnings call.
GE plans to reduce global headcount at its onshore wind business by around 20% and the cuts will take place over the next 12 months, Culp said.
Leading wind turbine suppliers have cut profit forecasts as soaring materials costs and logistical challenges following the Covid pandemic have impacted margins. Margins were already squeezed by several years of intense market competition and the gradual removal of renewable energy subsidies.
Massachusetts offshore project economically unviable, developer warns
Iberdrola's U.S. subsidiary Avangrid has asked Massachusetts authorities to give it a month to re-evaluate the power purchase agreements (PPAs) for its 1.2 GW Commonwealth offshore wind project, warning rising component costs and interest rates have made it economically unviable.
Avangrid was awarded the PPAs in December 2021 in a deal that would involve "$4 billion investment and create 11,000 jobs," the developer said.
"A one-month suspension in the proceeding provides a needed opportunity for Avangird, the Massachusetts Electric Distribution Companies, state and regulatory officials, and stakeholders to evaluate the current economic challenges facing Commonwealth Wind," the company said in a statement on October 21.
Avangrid would "assess measures that would return the project to economic viability including, but not limited to, modest changes to the PPAs," it said.
Forecast U.S. offshore wind installations
(Click image to enlarge)
Source: Department of Energy report on U.S. offshore wind supply chain, June 2022
In February, Iberdrola said it plans to invest $10 billion to develop three offshore wind projects underway in Massachusetts. This includes the 800 MW Vineyard Wind project, the first large-scale U.S. offshore wind farm. Avangrid and co-owner Copenhagen Infrastructure Partners (CIP) aim to complete the project by 2024.
Despite the economic headwinds, the Commonwealth Wind project could reach commercial operations in 2028, Avangrid said.
New Jersey awards offshore grid project to EDF-Shell venture
The New Jersey Board of Public Utilities (NJBPU) has awarded its first offshore wind grid project to Mid-Atlantic Offshore Development (MAOD), a joint venture of EDF and Shell.
NJBPU also awarded onshore grid upgrade projects that will accommodate the offshore wind power injections in what is the first application of the State Agreement Approach between the NJBPU and network operator PJM, the board said October 26. This new approach is designed to optimise grid investments and reduce offshore wind costs through a holistic analysis of network requirements.
New Jersey currently has 3.7 GW of offshore wind under procurement and the combined grid work will allow New Jersey to install 7.5 GW of offshore wind capacity.
The 'Larrabee Tri-Collector Solution (LTCS)' power link proposed by MAOD is estimated to cost $504 million while the onshore upgrades are estimated to cost $568 million.
The LTCS "offers a single onshore interconnection point while leveraging existing right of ways," EDF and Shell said in a joint statement.
The grid plan will require a successful bidder in New Jersey's upcoming third offshore wind tender to pre-build a single corridor from the shore crossing to the LTCS, NJBPU said. The tender is scheduled for the first quarter of 2023.
Germany plans to skim excess profits from wind, solar
Germany's government is studying skimming excess profits from wind, solar and nuclear generation to finance a cap on power bills for households and industry, according to a ministry document seen by Reuters on October 19.
EU countries have agreed to limit revenues from non-fossil fuel power plants to 180 euros/MWh ($180/MWh) from December until the end of June. They have also allowed national governments to impose a lower revenue cap if it sufficiently covers generation costs.
Under the proposals set out by Germany's economy ministry, around 90% of wind and solar profits realised above 130 euros/MWh would be skimmed off and reallocated towards subsidising customer bills or investing in power transmission, the draft document said. The measures will be presented to Germany's Cabinet on November 18.
Renewable energy officials have warned over the disruption of national price limits and those that are technology specific.
Industry group WindEurope has warned they could create a "regulatory mess” and deter investment.
Last month, Germany's government said it would pay 13 billion euros ($12.6 billion) of subsidies towards grid transmission fees to further soften the impact of soaring energy prices on consumers.
The government also plans to provide urgent support for consumer gas bills in a 96 billion euro energy crisis package, following recommendations by a commission of experts.
Offshore wind majors to co-develop 5.2 GW in Denmark
Denmark's Orsted and Copenhagen Infrastructure Partners (CIP) have agreed to co-develop 5.2 GW new offshore wind capacity in Denmark separately from national offshore wind tenders.
Orsted is the world's largest offshore wind developer and CIP is also a major investor in offshore wind. Their plan includes the 1.1 GW Vikinge Banke and 1.1 GW Jyske Banke Nord projects in the North Sea and the 1.5 GW Bornholm Bassin Syd and 1.5 GW Bornholm Basin Ost projects in the Baltic Sea, Orsted said in a statement.
The partners would develop and build the offshore wind arrays as well as the transmission infrastructure, under a procedure where developers complete necessary permitting approvals and secure power offtake contracts without a government tender. The projects could be online by 2027-2028.
The proposed capacity is more than double Denmark's current offshore wind capacity and would help the country become a major producer of renewable hydrogen and other green fuels, the partners said.
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