The offshore-wind boondoggle 

Like the proverbial skunk at a garden party, reality has disrupted the offshore-wind fantasy. After announcing a potential $2.3 billion write-down on its U.S. offshore-wind projects, Ørsted CEO Mads Nipper said that it was “inevitable” that consumers would need to pay more for renewable energy, since offshore wind “faces cost increases in orders of magnitude.”

Nipper’s confession makes a jarring contrast with claims made about offshore wind’s costs only a few years ago. In 2017, Michael Liebrich told BloombergNEF that green-energy costs were at a “tipping point” and had fallen below those of fossil fuels as technology “slash[ed] the costs” of offshore wind and solar. “One of the reasons those offshore wind costs have come down to be competitive without subsidies,” Liebrich said, “is because these turbines are absolute monsters.”

Even before supply-chain woes, crippling inflation, and inevitably higher interest rates intervened, the promise of rapidly declining costs driven by ever-larger turbines was always a delusion. In Europe, as University of Edinburgh economist Gordon Hughes documents, wind energy’s capital costs have risen over time, and newer and larger offshore wind turbines have regularly broken down.

President Biden’s Inflation Reduction Act allows offshore-wind developers, unlike their on-land cousins, to claim a minimum 30 percent investment tax credit, an extra 10 percent if they use U.S.-manufactured equipment, and a further 10 percent if they build their projects in “energy communities.” All this federal help has not stopped developers like Ørsted from demanding even more concessions from U.S. taxpayers and beleaguered ratepayers in the Northeast, who already pay some of the highest electricity rates in the country.

According to its recent announcement of potential financial impairment, Ørsted, which the Danish government owns, is now “negotiating” with the United States to relax the domestic-manufacturing requirement, so that the company can obtain an additional 10 percent credit. Ørsted and other offshore-wind developers have requested that the New York Public Service Commission unilaterally alter its long-term contracts to raise purchase prices—already three to four times higher than New York’s average wholesale-market prices. In total, the four offshore-wind-projects—Beacon Wind, Empire Wind 1 and Empire Wind 2 (being developed by Equinor and BP), and Sunrise Wind, being developed by Ørsted—have requested that the NYPSC let them collect an additional $38 billion from ratepayers. Meantime, the Alliance for Clean Energy New York, an advocacy group whose board members include renewable-energy developers and environmental organizations like the Sierra Club, has requested an extra $10.7 billion.

Those higher costs do not reflect the additional costs that would be incurred by the New York Independent System Operator to ensure that the state has sufficient back-up power supplies for when the wind doesn’t blow, which, according to the U.S. Energy Information Administration, is more than half the time, even for offshore projects.

The soaring costs of wind power and demands for ever more taxpayer and ratepayer subsidies raise a simple but key question: Who will benefit from these projects? Not U.S. taxpayers, who will be forced to send billions of dollars to European firms and the governments that own them. Not consumers and businesses, who will be required to pay even higher prices for electricity, reducing economic growth and costing thousands of jobs. Not commercial fishermen and seafood processors, whose livelihoods will be devastated by offshore-wind construction and operation in some of the world’s most productive fisheries. Not whales, which the Bureau of Ocean Energy Management recently admitted can be harmed by offshore-wind development, contrary to offshore-wind-proponents’ dismissal of links between development and whale deaths as “disinformation.” And not the climate, which won’t be measurably affected by any greenhouse-gas reductions associated with offshore wind development.

Using an eighteenth-century technology to meet the needs of a twenty-first-century economy is a costly and futile gesture that will benefit the politically connected few at the expense of everyone else. Eventually, the offshore-wind industry will collapse. The only question is how much economic and environmental damage it will be allowed to cause before it does.

Jonathan Lesser is the president of Continental Economics and an adjunct fellow with the Manhattan Institute.