CERAWEEK: Renewable power undergoing ‘deep industry reset’: NYSERDA official
Narrowing profit margins ‘unsustainable’
IRA a ‘game changer,’ but more work needed
Renewable power is “going through a deep industry reset” in which “nobody’s making any money,” a New York State Energy Research and Development Authority official said during the CERAWeek by S&P Global conference in Houston March 21.
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Asked how inflation in material and operations and maintenance costs have affected renewable project returns, Georges Sassine, NYSERDA vice president for large scale renewables, said, “Terribly.”
“What happened in New York in December, I had around 80 projects and 7.3 GW canceled contracts in the same day,” Sassine said during the energy conference.
NYSERDA issued an expedited request for proposals, resulting in about 5 GW of capacity participating, “and we’re in the process of evaluating and deciding what we’re going to award, but we are definitely seeing higher prices to try to adjust the market.”
‘Nobody’s making any money’
Only “a handful” of original equipment manufacturers are able to supply equipment such as offshore large-scale wind turbines, for example, “and all these OEMs are struggling financially.”
“There’s a race between the OEMs on who’s going to innovate faster, who’s going to drive the price lower, and it’s unsustainable for everybody,” Sassine said. “We are going through a deep industry reset, including the OEM. And I think there’s a lot of introspection that needs to happen along these lines, as we try to figure out how we build a sustainable industry where people actually make money. At this point, nobody’s making any money.”
A series of “black swan” events — the novel coronavirus pandemic, rampant inflation and the war in Ukraine — resulted in the dire project development circumstances, Sassine said.
In a baseline forecast, the New York Independent System Operator indicated it expects load to peak in 2024 at 32.3 GW in 2024, up more than 2 GW from 2023, but loads are forecast to remain in a range of 32.2 GW to 32.5 GW through 2030.
Current New York Zone G Hudson Valley on-peak forwards as of March 20 indicate prices are likely to average about $45.60/MWh in 2024, up more than $9, or about 25%, from 2023’s day-ahead on-peak locational marginal prices. Forwards indicate expected increased risks of higher prices peaking around $64/MWh on 2026 but stagnating thereafter to around $61/MWh.
National government actions
Ethan Zindler, climate counselor to Secretary of the Treasury Janet Yellen, said his office has “Issued over 50 pieces of guidance” on regulations to implement the Inflation Reduction Act, which provides tax incentives driving development of clean energy projects.
“We feel like the IRA is fundamentally a game changer in terms of the type of long-term certainty it has provided to the market,” Zindler said. “We’re certainly aware there are many details left to be filled in, and we’re working on sort of crossing our T’s and dotting the I’s, but if you look at the sheer volume of capital that has moved since the passage, by one estimate, a quarter-trillion dollars in the first 12 months after IRA passage, and well over $100 billion in new manufacturing investments. There is a lot of confidence in the market. People are building a lot of stuff that is already working. But that is said with great humility. We have a lot more work in Treasury to do in terms of continuing to roll out the regs and trying to provide market certainty going forward.”
Ben Wilson, National Grid chief strategy and regulation officer, said his London-based company has operations roughly evenly split between the UK and the US. In the US, the company is developing about 1 GW of solar, battery and wind storage a year, he said.
The renewables sector is going “through what I would call a kind of growing pains period,” Wilson said.
“We certainly commend the US government on the Inflation Reduction Act, particularly for our onshore renewables business,” Wilson said. “There are direct benefits from the ability to monetize tax credits directly, and we’re looking forward to the local content and energy communities schemes under IRA which will also help.”
The British government recently announced plans to allow the development of new natural gas-fired generation to ensure reliability beyond 2030, but the resulting carbon dioxide emissions must be abated.
National Grid has forecast the need for 25-27 GW of unabated gas generation in 2035 to ensure reliability.
