Transcript: Offshore Wind: Costly Projects, Tax Incentives, and Stakeholder Backlash
CLARICE: Hello, everybody. And welcome to this week’s episode of Environmentally Speaking.
MARISA: Hi, everybody. I’m Marisa Desautel, an attorney in Rhode Island and Massachusetts.
CLARICE: And I’m Clarice coming in — usually coming in with this week’s topic, but this week is a Marisa pick.
MARISA: It is. And let me also just say in Seinfeld third-person or first-person fashion, Marisa is casual and also recording this from a borrowed office because Desautel Browning Law has moved locations, not far, just down the hallway in the same building at 38 Bellevue Avenue here in Newport. But as moved go things are in disarray and there’s a lot of dirty stuff happening, so you’re getting casual Marisa. And with that as the caveat and the backdrop, the topic I wanted to talk about today is timely because there have been several recent high profile news articles about my favorite subject, offshore wind.
CLARICE: Yes. I felt the listener collective kind of like sigh. Like everybody knew.
MARISA: Oh, because of the lead in, yeah.
CLARICE: Yeah.
MARISA: I’ve been pretty vocal about how I think these projects are being shoved down the states’ and stakeholders’ throats without an appropriate amount of scientific investigation behind them, so that’s no mystery or secret. But the news that’s coming out about a lot of offshore wind companies recently has to do with the trouble relating to their financing. And I’m no financier. I’m not good at math. If I was good at math, I probably would have gone to medical school. So I don’t know the intricacies of the deal, but I know that —
CLARICE: Have to call back our last guest for that.
MARISA: Oh, yeah. Yeah. Mark Garren. Good episode, by the way. The companies are experiencing a decline in stock value and shareholders are just livid with the fact that these projects are taking longer than anticipated. And as a result some of the government programs and government subsidies that are associated with the lease areas are expiring.
CLARICE: So this might be — I’m not sure if you have the answer to this, but if these government programs with government funding expire does that mean that the funds are never released to them? Do they get rolled back into another program, or have the funds been spent and are not — the project is not yet in fruition?
[0:03:11] MARISA: When I say government funding, it’s not like the government is writing a check to these foreign companies, but they are providing certain tax credits, tax rebates, and tax incentives, so there’s a savings. It’s not in the form of direct revenue from the government, but it comes in the form of a break on their taxes.
CLARICE: Ah, okay. So the savings that they would get they’re just not going to get anymore. So it’s not necessarily that the government money has been spent. It’s that it’s just they’re not going to get to take advantage of this deal.
MARISA: That’s right.
CLARICE: Well, I’m not mad. I’m not mad. If you had told me that the government gave them money and it’s not going anywhere, that would annoy me.
MARISA: And they had to return it or something like that, the company had to return the money.
CLARICE: Okay. But knowing the cynicism of all the episodes, I was really expecting you to say, the government gave them money and they don’t have to return it. I was really braced for that.
MARISA: Yeah. No. Thank God that’s not the case. But what is the case is as a result of the forecasting that gets done for these offshore wind projects once you start messing with government tax incentives and that savings goes away it drives up the cost of the project and the stakeholders or shareholders are not happy with that because obviously they would prefer to have more money. And what is being proposed by offshore wind companies at this point in terms of who bears the cost, ultimately it comes down to the rate payers.
One of the recent news articles that I read came out of the state of New York where Orsted — who is a foreign company — went to the state regulator and said, look, we are experiencing a shortfall in our financial forecast because of things like supply chain issues, cost associated with products that are available, issues with local and state and federal objectors because the jobs that were promised as part of these projects are actually going to non-Americans, so that has created some issues, as you might think, and it’s caused delay. For these offshore wind projects, delay is their kryptonite.
[0:06:18] CLARICE: It’s detrimental. Okay. So they’ve gone to — they’ve gone to these groups and said, we’re facing all of these issues. What’s the end goal, help us get out of it? How can you —
MARISA: No. So, I mean, it’s a good question, but, no. The companies like Orsted are going to the regulator and saying, we need you to approve a rate increase that will be passed on to the rate payer who is anyone living in New York using power from the grid, or here in Rhode Island and Massachusetts it’s you and me. And the state regulator said, absolutely not. I mean, this is an incredible increase. People are not going to be able to afford electricity. We cannot approve this.
CLARICE: Wow. It’s that big of a jump.
MARISA: And so then Orsted — yeah. It’s a huge jump and people are — they’re just not going to pay the bill. I mean, they’re talking about a fourfold increase. So let’s say you’re paying 100 bucks a month right now for electricity. You’re going to be paying 400 bucks a month for electricity. That’s what they were asking for.
CLARICE: Fourfold.
MARISA: That’s what they were asking for. The audacity to go in and say, we need a fourfold increase because our phantom shareholders somewhere in Denmark, you know, are sitting back smoking their pipes and not getting enough return on their investment. So thank God New York said absolutely not and those projects are not in jeopardy. And the second part of your question that you asked there about, you know, what does this mean. Is there a penalty to be paid, or are they looking for money back. If Orsted cannot get the rate increase approved like it could not do in New York, then they have to unilaterally break their power purchase agreement and there are penalties associated with that in the millions [inaudible].
CLARICE: [inaudible] more expensive.
MARISA: Yeah. I mean, that cost doesn’t get passed on to the rate payer, but it just goes to show you how much money these companies have where they’re like, you know what, we’ll just break the contract and pay the $4 million penalty.
CLARICE: Wow. I would love to know where that penalty money goes. Not to hearken back to our school bus admissions episode, but I just want to know where that penalty money goes. I want to hear that it ends in some altruistic fund. Does it offset costs in some other way? Can I at least get an answer on where the end of that rainbow is?
[0:09:08] MARISA: Good luck.
CLARICE: It doesn’t exist. I’m never going to know. But that’s an insane — and it’s just I feel like the articles — the more we read about this and the more we follow this story it’s this constant will they, won’t they back and forth about it’s too expensive. How could this happen to us. And I can’t get past the fact that Orsted is constantly being portrayed as shocked and in jeopardy and I just want to point out everything has gotten more expensive.
MARISA: Yeah.
CLARICE: Why do you feel that you’re the exception?
MARISA: Well, because they have the absolute backing of our federal government, so they feel bulletproof.
CLARICE: But, I mean, think about all of the local construction projects that were paused, extended, delayed just because of — you know, roadwork became more expensive. Those projects were longer. We did an episode about Route 79. That’s now been slated to take longer because of costs. Was anybody surprised? No. Everything’s gotten more expensive. We all remember that point in the pandemic when plywood became way more expensive. Why are they surprised? Aren’t there supposed to be experts there who are predicting this? I shouldn’t be some Joe Schmoe in my home office who’s like, I saw this coming. I feel like there’s supposed to be smarter people over there —
MARISA: Yeah. Yeah.
CLARICE: — who are supposed to tell them about this. I shouldn’t know this more than they.
MARISA: Yeah.
CLARICE: It just feels like a silly problem that they should have planned for or better prepared for.
MARISA: Well, they might have planned for it. Who knows if there’s another angle here. You know, we’re hearing what the papers are reporting.
CLARICE: That’s true.
MARISA: So I’ve got no idea what’s actually happening. I just know these projects are bad. I just know the projects are bad. That’s what I know.
CLARICE: And, you know, hearing this thing about how upset they are about this extreme need to bypass regulation is such a big red flag. You know, we all poke fun at red tape. We all poke fun at the idea of, this is bureaucracy, but, you know, on some base level there is an idea of we have to hold to this process. Otherwise, things do steamroll out of control.
MARISA: Yeah.
CLARICE: It’s what it’s there for.
MARISA: Yeah.
CLARICE: Ugh. That’s my answer, just ugh.
MARISA: Yeah. It’s a ridiculous construct that Americans don’t know about. It’s not part of the information that you hear about on a daily basis. The only reason I know is because what I do for work, you know, but the supply chain issue has been in place for a long time. And the other question that I have is these wind turbines are custom made, so it’s not like there’s a supply chain issue in terms of supply and demand. Oh, there’s a mad demand for giant propellers.
[0:12:36] CLARICE: Yeah. They’re all built —
MARISA: [inaudible]. Aren’t they custom?
CLARICE: They’re all built to fit. Well, I wonder if it’s the materials to make each propeller, like the actual metals. Maybe that’s what — I don’t know.
MARISA: Fiberglass.
CLARICE: I have no idea. Are people building a lot of boats? Is that a thing? That’s the only other thing I know that’s made out of fiberglass.
MARISA: Yeah, maybe. Maybe they are.
CLARICE: Somewhere some listener is screaming that they work with fiberglass and do not work on boats.
MARISA: Well, I can tell you fishermen are beginning to sell their boats left and right, so maybe Orsted could use some of that material.
CLARICE: Oh, what a slap. Actually, here’s an interesting thing. So, listener, when we were out — and I recently came back from a trip to Chile and on our drive we did a six-hour drive into the desert and then back out of the desert and there was a huge portion that were wind farms. And as we were driving through the wind farms, they had on the side of the road a propeller as like just sort of a demonstration of how big they were.
MARISA: Yeah.
CLARICE: It is so much bigger than you think. I mean, they look gigantic obviously as you’re driving by them and as you see them in the distance, but driving alongside the propeller they were massive.
MARISA: Yeah. It’s scary, right?
CLARICE: And just driving through the wind farm they were huge.
MARISA: Scary.
CLARICE: Yeah. It was such a weird experience. I’ll send the photo to see if we can put that up on the socials.
MARISA: Oh, yeah. Please do.
CLARICE: Yeah.
MARISA: That would be interesting to look at.
CLARICE: But, I mean, getting the size of them on land, it really changes your perspective of how intense and invasive they could be going underground. So it’s something to keep an eye out for.
MARISA: All right. [inaudible].
CLARICE: [inaudible] keep fighting.
MARISA: Yeah. I’m sure we’ll do another or many episodes on updates of these projects.
CLARICE: Yeah. Let us know what you think. You can catch us on the socials. I’ll see if we can post that picture of the wind farms. We’re going to be on Instagram, Facebook, the site formerly known as Twitter at Desautel Browning. You can watch our video on YouTube. You can get a sneak peek at parts of the new office there, as well, through this video.
[0:15:11] MARISA: Yeah.
CLARICE: And you can send in your questions, comments. Let us know what people use fiberglass for — I have no idea — at our e-mail and our e-mail is —
MARISA: It’s info@DesautelBrowning.com
CLARICE: Have a good one.
MARISA: Bye.
