So Much For Biden And His “inflation reduction” Act

WIND TO SURVIVE IF LEFT TO ECONOMICS?

Haven’t we been led to believe that offshore wind is the way of the future? Perhaps, but only if projects continue to receive massive subsidies:

An excerpt from the article:

While offshore farms are seen as critical to ridding the US power grid of fossil fuels and avoiding the worst effects of climate change, they’re also extremely capital- and labor-intensive. In order for the industry to bring future projects to fruition, it’s “inevitable” that consumer prices for energy will increase, Nipper said.

“And if they don’t, neither we nor any of our colleagues are going to build more offshore,” Nipper said. “It’s very simple.”

It’s a tough time for offshore wind globally, with costs for steel and other materials spiralling higher just as countries push to add more turbines. Large projects by the likes of Vattenfall AB and Iberdrola SA have already been scrapped this year.

So more offshore wind means higher cost of electricity. So much for Biden and his “inflation reduction” act. The delusions of this renewable crusade are remarkable to say the least.

That is one nasty bear market…

However, bear markets are the authors of bull markets, albeit eventually. The actual returns (return on assets) and forecasted returns are far from being remarkably cheap. It would seem that Orsted’s stock price is still on an ideological valuation.

The problems Orsted is encountering aren’t unique to it. Rather, it is across the “wind electricity generation” sector (if you can call it a sector).

No new offshore wind projects have been bought by developers at a key government auction, dealing a blow to the UK’s renewable power strategy.

Results showed no bids for new offshore wind farms, but there were new solar, tidal and onshore wind projects.

Firms had said the price set for electricity generated was too low to make offshore wind projects viable.

Simon Virley, vice chair and head of energy and natural resources at consultancy firm KPMG, said the lack of new offshore wind projects in the latest auction was a “major setback at a critical time when we should be looking to accelerate renewables”.

He said it was the first time since such schemes were launched in 2015 that there had been no new offshore projects announced.

“This outcome reflects the growing inflationary and supply chain pressures affecting the offshore wind sector in recent years, which is making it harder to deliver these projects at the strike prices and other auction parameters set by the government,” he added.

On a contrarian note, remember when Siemens in their wisdom decided to “unlock shareholder value” by spinning off its wind power plant business to a new company, Siemens Energies?

Some three years later, Siemens Energy is down 41% whereas Siemens is up 24% — a 65% differential.

Beware when businesses spin off assets to unlock value. Usually value is unlocked, but in ways diametrically opposed to what management believed.