Today's installment in the endless epic about the exciting surprises involved in industrial policy concerns wind. Not the vagaries of its occurrences, but the predictable problems that are startling governments and their corporate accomplices as they attempt to harness wind to wean humanity away from less pristine means of generating electricity.
Your federal government is using taxpayers' money to bribe, with various subsidies, automakers to make more electric vehicles than taxpayers want. So, the government is bribing taxpayers with their own money to buy EVs; the bribes are substantial because EVs typically cost more than other vehicles. Simultaneously, the government is using taxpayers' money to drive a conversion to, among other renewable energy sources, wind-generated electricity, which potentially will increase taxpayers' electricity bills.
What (else) could go wrong? New Jersey, which is controlled by Democrats and hence is enthusiastic about wind, is disappointed. The Danish company Orsted, the world's biggest developer of offshore "wind farms," was planning to build two of them off portions of the state's 130 miles of Atlantic coastline. Orsted has changed its mind. It prefers a write-off of as much as $5.6 billion rather than proceed with the projects, which have become too expensive.
Democrat-dominated New York has a plan for 70 percent of the state's electric power generation to come from renewable sources — wind, solar, hydropower — by 2030. But since the plan was announced, BP has absorbed a $540 million write-down on two canceled wind projects off New York's coast because the state refused to renegotiate contracts. The New York Times reports: "High inflation and soaring interest rates are making planned projects that looked like winners several years ago no longer profitable."
So, both the public-sector and private-sector planners have been surprised by the inflation that was an unsurprising consequence of the government's gusher of spending. (The estimated "green" subsidies from the 2022 Inflation Reduction Act might top $1 trillion over a decade.) Inflation has had the predictable consequence of higher interest rates. It is wonderful how often society's planners, busily implementing their blueprint for the distant future, are astonished by unplanned things in the here and now.
But shed no tears for Orsted, which is majority-owned by the Danish government. This makes the company an exemplar of, and deserving casualty of, industrial policy carried to its logical conclusion — the erasure of the distinction between the public and private sectors. "They have sown the wind, and they shall reap the whirlwind."
Russia, Iran and Venezuela — among other unsavory actors — might reap a windfall from green energy policies. Benjamin Zycher of the American Enterprise Institute notes that the Biden administration has proposed for the five years after 2024 just three sales in its offshore oil and gas leasing program, the smallest number in the program's history. The plan would block additional leasing off Alaska and in the Atlantic and Pacific oceans.
"In apparent belief that the U.S. oil market is independent of the global market," Zycher tartly writes for the Hill, "the administration has forgotten that less domestic oil production only means more production overseas. After all, the administration's net-zero climate obsession does not affect global demand for petroleum products." Indeed, eager to avoid adverse domestic price effects, the administration has eased sanctions against Venezuela's oil industry, whose "sour crude oil emits more than four times as much greenhouse gas as Gulf of Mexico crude oil from U.S. producers." And Zycher says:
"Fossil energy resources are a form of national wealth. Policies designed to constrain domestic output artificially while expanding overseas production create an explicit transfer of wealth from Americans to such overseas producers as Venezuela, Iran" — Hamas's benefactor — "and Russia."
An interconnected world resembles a Calder mobile — jiggle something here, other things jiggle over there. So, forcing something minor such as wind power into the world's energy system has unintended distant effects.
In 2022, wind power produced about 0.8 percent of global electricity output. The International Energy Agency expects that by 2050, offshore wind capacity will be 35 times today's capacity. "But," the Financial Times says in an understatement, "analysts increasingly doubt whether governments' demanding targets for the technology will be met on time."
Orsted, which was an oil and gas company before it embraced wind, is undecided about a new North Sea project. An Orsted spokesman, expressing the obvious as ponderously as possible, says, "It continues to hinge on acceptable value creation." This is political language, which George Orwell said is designed "to give an appearance of solidity to pure wind."