AOC with Street Signs Overwhelm NY’s Governor and Mayor? That’s Not Volatility, It’s Tragicomedy…

Thanks for those of you who took an interest in my interest in the burgeoning offshore wind industry. Since my lasts post I’ve traveled internationally as well as in the USEC. I was recently at the landward sites of the offshore wind sector, and there I heard – ? – well: crickets (that’s slang for silence). I was underwhelmed.

Then, this week and last, we all watched – some of us in dismay – as ill-informed street protesters whose inciters don’t know the difference between a long-term tax rebate and hard cash for infra-structure. See https://www.cnn.com/2019/02/16/business/amazon-foxconn-deal-backlash/index.html. By inciters I refer specifically to Queens (NY) Congresswoman Alexandria Ocasio-Cortez, who triumphantly gaffed that having killed they deal her district would have billions of $ in cash, prompting NY Post to editorialize that “De Blasio Says [she] Didn’t Understand Amazon Deal,” https://nypost.com/2019/02/17/de-blasio-says-alexandria-ocasio-cortez-didnt-understand-amazon-deal/

If the governor and mayor of one of the richest and most populous (20 mm) states in the US caved to that kind of pressure, and the Amazon agreement was torn up because of it, then my confidence in similar promises being pushed through against small, vocal, vociferous opposition has been diminished by not extinguished.

The overweening question remains the same, will the customers (mostly European developers) stomach the a) political risk, b) extra cost burdens the Jones Act imposes, c) the paucity of land and its comparative poor structural quality and d) the extremely high cost of investment, coupled with e) the harsh seasonal weather which makes it good to harvest wind? Only they can answer that. And only those carefully listening to the customer’s actual needs and planning to meet them on a timely basis will provide assurances for the customers to move forward. But now Amazon….

To me at least, the tearing up of the Amazon contract in NY state bodes very poorly for offshore wind’s anticipated long-term foray into the same political morass. Amazon’s macro figure was $25 bb in direct investment, and offshore wind was touted at about $50 bb. NY sits squarely at the fulcrum of the political megalopolis, leaving beleaguered developers with at least six other state governments to contend with. Will those governors making staggering promises now still be there a few years down the road when bills come due and taxpayers are in revolt? Are other top-down economies perhaps more attractive? The US offers political wrangling for offshore wind in VA, MD, NJ, NY, CT, RI and MA, all just northeast of it’s capital..

China stretches across some 60 lines of longitude, 5,000 km west to east and between 4,100 and 5,600 km north to south. They have 858 cities, nearly 10 million km of land, and 14,500 km of coastline excluding lakes and river. The population of c.1.4 billion cover what would usually be 5 time zones. The green zone below covers almost all of the political and economic power and population:


https://www.travelchinaguide.com/essential/time_difference.htm

Yet how many time zones to you think China actually has? ONE. Beijing time. I’m not suggesting that any one government (or sets of state governments) would be easier to deal with (and having lived in Asia over three years makes me no better equipped). I’m just trying to see a problem through the developer’s eyes, and maybe to call on the wisdom of 孫子兵法 or the Art of War by Master Sun, Sun Tzu, China’s general, writer, military strategist, and philosopher in the Eastern Zhou epoch in the early 5th Century.

Foreign investors in US offshore wind have the advantage of mobility which, in practical terms, because they are shackled by the Jones Act, US market participants are less able to take advantage of. Everyone else can pick up their marbles and go to a different playground: the US cannot; case in point SEACOR, left with 3 Jones Act CTVs after the Cape Wind Debacle which was forfeited two years ago. If the government which gave the customer the right to harvest wind is then successively re-elected, shuffled around and (due to machinations by various interest groups not dissimilar to AOC), starts to take claw back or condition some of the initial rights, where does that leave a developer? When do they cut free, as Amazon did? When is the tipping point? Do the US vendors who cut steel in otherwise useless offshore wind craft take that chance along with the customer? Do we all need to hire political risk consultants out of the global re-insurance markets (hint: they’re not cheap!).

Its’ fantastic that there are 5 turbines off Block Island (2015-16). Harvesting wind in sites as large a 79,000 acres will be a vastly more formidable logistical and political challenge, particularly if a majority of the heavy lifting (pardon the pun) cannot (practically or politically) be done by a single European mother-ship.

As for this blogger, I’m not giving up, I’m just admitting that based on recent events, I’m disheartened. It’s like someone threw flour in the turbines I loved to watch and my eyes sting. Reality does bite. Anticipating, understanding and listening to the logic of parties in opposition to one’s position is imperative, but what of when there is not logic? When firms and people act of spite, as Amazon clearly did with the ambush timing of their announcement?

We all saw the excruciating drawn out death-rattle from 2005 to 2017 now known as Cape Wind where ” opponents have included the late Senator Ted Kennedy, former Secretary of State John Kerry, former Gov. Mitt Romney, and businessman Bill Koch,who has donated $1.5 million to the Alliance to Protect Nantucket Sound.” https://en.wikipedia.org/wiki/Cape_Wind#Controversy.

With the help of BOEM forcing everyone out of the sandbox and into offshore waters, have we grown out of those dark days when visitors to Nantucket or Martha’s Vineyard were physically confronted by opposing activists seeking signature on a continuing basis? Is the Amazon failure a tipping point backwards to the politics of the street when 25,000 prospective new employees lose out due to a vocal rabble a-la Ceaușescu of Romania, who unleashed miners to the streets? Or Maduro in Venezuela?

If I were in the Hartford, Albany, Providence, Beacon Hill/Boston, Dover, Annapolis, Richmond, or Trenton, or even Washington DC, I would be studying the termination clauses on offshore wind contracts more carefully. I suspect there are executives in Hamburg, Oslo, Copenhagen, Rotterdam, London, Aberdeen, Madrid, Lisbon, Tokyo, Beijing and beyond doing the same as I write and you read.

Not often do I hope I am wrong. This time, I hope I am, and will leave the company of bears to party with the bulls again soon! But for now I will listen and learn, and lay low, beyond the reinforced tips of those massive turbine blades, waiting to see of the assurances made in Essbjerg Denmark last autumn than an offshore wind tower can be installed and erected in a day or two can really, truly happen in the US?

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