In case the US didn’t know it was hitting a wall in wind development, some of its European friends are making that point more obvious of late. First, Orsted purchased PSEG’s Ocean Wind 1 off the New Jersey coast. The company said the project could only continue with an optimized tax structure. But Allen notes the complicated patent dispute between GE and Vestas didn’t help, as Ocean Wind will use GE’s Haliade-X turbines. IntelStor’s Philip Totaro says there’s more to it – a lot more. Helpfully, Siemens outlined a plan for the US to get wind development back on track, onshore and off. Will the US take Siemens’ advice? And can changes be made in time to meet those 2030 renewable goals? Joel says “nope.”Â
It will take years to overcome a shortage of experienced workers stateside, with the Jones Act’s requirements on using American workers, a lack of training programs, and little clarity from the Federal government. As China prepares to “move beyond the 18MW threshold,” when, and how, will the US get wind development back on track?
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Uptime 149
Allen Hall: For those of you on the inside, on the, on the podcast we actually have a producer. Now. You don’t see or hear her, which is probably good , but, but she, she is doing some really excellent work. So we, she, she did so well. On this episode, we’re gonna actually gonna split this into two. So you’re gonna get a bonus episode this week and look out for.
Allen Hall: This week’s topics include Orsted and New Jersey’s PSEG for ocean wind, one in the US Atlantic and Siemens Gamesa Renewable Energy puts together a plan of how to get American offshore wind and on shore wind rolling.
Joel Saxum: On the heels of that, something we’ve been talking about kind of regularly over the last few months of the Jones Act and some of the other things that the, the US needs to get in shape.
Joel Saxum: Making these offshore goals happen. As we talk about this American Offshore Worker Fairness Act, that’s a bipartisan act. Try to close up some loopholes to ensure that the people going offshore do have American passports.
Allen Hall: And Phil Totaro from IntelStor joins us for this episode. So it’s nice to have Phil back on the podcast.
Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech, and I’m here with my good friend from Wind Power Lab, Joel Saxum, and this is the Uptime Wind Energy Podcast.
Allen Hall: All right. So big news out of New Jersey. Danish developer Orsted who we know well, has signed a deal with US Energy Company, PSEG public Service Enterprise Groups which was my power provider when I lived in New Jersey. So they’re, they’re buying the 25% state PSEG has had in the 1.1 gigawatt ocean wind, one project off the coast of New Jersey.
Allen Hall: Orsted will now own 100% of that project once this transaction is complete. Pbs egs, chief Commercial Officer, Lathrop Craig said that it become clear that it was better for his group to step aside and allow, quote, better position investor to join the product so that it can proceed with an optimized tax structure that’s.
Allen Hall: Very weird language but Ocean One is, was, is still planning to use GE Hallide X 12 megawatt wind turbines that have run into patent issues with Siemens Ga Mesa. So we have. Phil Totaro from Tel Store back on the program because he has some interesting insights into this. And I, I, and it really gets down into who’s a good investor, who’s not a good investor, and the effect some of these patent disputes are having on the industry.
Allen Hall: Phil, welcome back to the show.
Allen Hall: Thanks, Allen thanks for having me .
Philip Totaro: So, what’s, what’s some of the background between Orsted PSEG and, and the GE Wind turbines? What’s driving some of this now after this project is, was essentially underway?
Philip Totaro: It’s an interesting question, Allen because the PSEG about three or four months ago, at the beginning of November last year, publicly stated that they were, they had not yet made a final investment decision on the project and that they were going to reevaluate their and their c e o publicly came out and said that, you know, there, there are legitimate concerns on their part to participation in such a, a large scale project, not only phase one, but there’s an additional phase two, which is I believe is another like 1.2 to 1.4 gigawatts as well.
Philip Totaro: That that has been planned for. So is there something in particular related to pseg keeping in mind that this company has been involved in renewable energy for a while? They are owners of four solar parks. They’re also power off takers from some of the renewable energy that’s already generated in the state of New Jersey, and I think a little bit from, from Maryland as well.
Philip Totaro: So there’s, you know, is it really a capital allocation issue that they’re, they’re running into, or, or was it something else? So publicly, what they’ve obviously come out and said is, you know, we, we feel that there’s other companies that would be better positioned from a tax equity standpoint. I don’t know that that’s necessarily true or not, but obviously this is a decision that they’ve taken.
Philip Totaro: You know, at least again, what they’re saying publicly, Privately. What I can convey to you is that there have been a lot of internal discussions amongst not just pseg, but a number of developers who were contemplating utilizing the GE Hallot wind turbine for their offshore wind projects in some of these places in the New York bite you know, north and South Carolina Virginia, et cetera.
Philip Totaro: You know different places up and down the, the eastern seaboard where there were big plans for that, that ge turbine to be utilized. They had something like an additional 10.8 gigawatts worth of non-farm orders. But basically, you know, preferred supplier agreements had been signed, even if it hadn’t been publicly announced.
Philip Totaro: According to our data at, at Intel. . And so this is a, this is an interesting kind of turn of events for PSEG to, to pull out after having also kind of publicly acknowledged a bit of the embarrassment of being involved in a project that, that ran into these kind of patent issues as well. So you know, the turns out there are indeed consequences sometimes.
Philip Totaro: You know, a patent infringement litigation. So do you
Joel Saxum: think that okay. As, as part of the due diligence activities, right? If they’re gonna be a part of the, whoever investment and whoever brings it on in their due diligence activities, are they digging that far? Like is that what the, when you say public embarrassment, my thought is, is that, did their engineering group not do their, their homework on, on what’s actually going on there,
Philip Totaro: or, you know what?
Philip Totaro: It’s not just them as a prospective. . The, the wider issue that I’ve been banging on about Joel for, for the last 13 years in the industry is that nobody makes it a point to do, you know, when you think about the scope of, of what’s involved in like a financial due diligence for a renewable energy project, especially like a 1.1 gigawatt offshore project like ocean wind one, you think about all the technical requirements that need to be met, et cetera, et cetera, and then there’s intellectual property.
Philip Totaro: which is just as big of a commercial risk. Mm-hmm. to a lot of companies. Mm-hmm. more so than they, they are willing to acknowledge, realize, but it’s one or two little line items in, in a, you know, turbine supply contract that says there will be partial indemnity provided for, you know, the, the project developer and subsequent asset owner.
Philip Totaro: You know, from the OEM for, for patent infringement, liabilities, you know, and, and basically these big multinational corporations don’t have anything like patent insurance. You know, such things technically exist, but they, they aren’t widely utilized. Certainly not in renewable energy. And the, the bigger question is why, when we’re going to all this trouble doing all this financial due diligence, do we.
Philip Totaro: Take more time to look through intellectual property risk as a legitimate technical and commercial risk in the same way that you do with designs, with, you know, financeability, with, you know, all these other considerations that, that go into an F I D.
Joel Saxum: Yeah,
Allen Hall: makes sense. Is the driver then if I have made a contract with GE for these turbines, right.
Allen Hall: And I’m P S E G. , and I’m looking at this and I’m going, oh boy. I’m not sure when I’m, I’m sure I’m gonna have to pay GE to start making the turbines. I’m not sure when I’m going to receive them. They may have to do a rework redesign. There’s castings involved. It’s a complicated patent and dispute, so it’s sort of deep down in the turbine.
Allen Hall: Does that then just say, Hey, Ike got a better use of those? Is that what it ultimately comes down to is that the financial people step in and say, I have say a hundred million tied up in this. I could put that towards a solar farm tomorrow and, and we’re out. Is that where it
Philip Totaro: goes? Yes and no. I, and so I want to get back to this specific issue with ocean wind one, which is right.
Philip Totaro: They already had been granted a carve out by the judge in this patent to use these for
Allen Hall: the GE. and I thought it was just vineyard. I thought there was only two projects that had that. Was this one of ’em? This was one of ‘
Philip Totaro: em. There were, there were these two. This was the other one. Okay. Okay. So just again, that’s a good question though, because to to clarify, originally the judge was only gonna grant the, the concession and the exemption to the injunction for.
Philip Totaro: And then, you know, the GE got involved, they got the State Attorney General in New Jersey to to actually write a letters of support to the judge. And, and you know, they basically asking for a carve out for ocean wind one since the, the turbine supply contract had already been signed. The bigger point though is, and, and it goes back to the question, well, why would PSEG reconsider.
Philip Totaro: they had plans obviously to invest in phase two and also to be able to utilize, you know, specific technologies and capabilities. Here. They were trying to do things to attract investment to the state of New Jersey for, you know, different factories that were gonna be built for, right. You know, sub-component, supply chain.
Philip Totaro: They could even theoretically have gotten GE. to have made a commitment to, to build some n cells in New Jersey. Sure. And do some of the, the assembly there. And so the point is that now with Ocean Wind one and Vineyard being the only two projects out of, again, more than 11 gigawatts worth of, you know, firm order book, and preferred supplier agreements that that were signed, you’re talking about.
Philip Totaro: you know, it’s a small percentage of the overall pipeline that GE was anticipating, and now they can’t sell the turbines that they have. It’s funny because, you know, Siemens made the argument, oh, they can sell the six megawatt. you know, version of, of the Hallot turbine, but you know, everybody already knows that that’s an uncompetitive product.
Philip Totaro: That’s why GE stopped manufacturing it after they bought it from, from Alstom and Right. They were only deploying it, you know, obviously it went into Block Island, but they were only deploying it in France because that was the commitment that they had already made to the French government for the jobs and the manufacturing, et cetera, et cetera.
Philip Totaro: That was happening over. . So when you also consider that GEs 16 megawatt plus designs you know, anything bigger than the 12 megawatt basically was all based on derivative designs and technology from the heliot X 12 megawatt turbine design. They’re, they’re kind of stuck right now with being able to sell anything for off for these offshore projects.
Philip Totaro: So my point going back to, you know, what I was suggesting earlier, , there are a lot of developers in the background since the injunction happened about six or seven months ago. Yeah. There are a lot of developers in the background that are scrambling around right now trying to figure out alternative turbine supply if they had been intending to work with ge.
Philip Totaro: And beyond that, they’re also considering what I just mentioned with, with PSEG and, and New Jersey. They want, you know, domestic production, they want local jobs, they want a tax base to be created there. There’s a lot of ancillary things that are tied into, you know, a project going forward. And so for. for any one company not to be able to sell their products and services is, is a bit of a disaster for just the whole industry, not just, not just ge.
Allen Hall: New Jersey has been very proactive though in terms of the state itself. The governor has been aggressively trying to set up the seaports and getting all the land cleared. doing the things that New York State has been un unable to do in Massachusetts on some levels also. But New Jersey seems to be going full steam ahead.
Allen Hall: Was that trying to help PSEG stabilize us a little bit? There had to be rumors going around about it for the last couple of months, and, and I know New Jersey in the last six weeks has put out, I’ve seen news articles about it, how, how aggressive they are in working with local townships and trying to push through some of these wind infrastructure pieces.
Allen Hall: So what does, what does New Jersey do
Philip Totaro: now? No, it’s a, it is a fantastic question. And also keep in mind that they were, and I believe still are planning to use a a thermal plant that p e seg was running or is still running. I, I’m not sure if it’s still operational or not, but they’re intending to use thermal plant grid interconnection to tie into the offshore wing park, ocean, wind blowing.
Philip Totaro: That’s right. And then, and any, projects. So the point is PSEG was supposed to be intrinsically tied into this whole project. There are still going to be, you know in an ancillary way tied into the project, just not as a co-investor. Mm-hmm. which again, I mean, I, I’ll, I’ll, I’m willing to take it.
Philip Totaro: I had face value that there were. Probably certain financial considerations that went into this. And I’m not trying to suggest that the patent dispute was the only reason they decided to pull out this. Oh, sure. No, no. But it’s a contributor and it, it’s, it doesn’t get talked about a lot because the industry for more than a decade has just wanted to try to gloss over a lot of these issues.
Philip Totaro: But there, there have been, you know, huge patent disputes that have cost companies billions of dollars. Companies have left the industry as a result of patent dispute. in the past, and it’s, it’s something that really, you know, we all need to be able to work together to attract investment to renewable energy in general, and wind energy in particular.
Philip Totaro: You’re now seeing a situation where a US based company is pulling out of yet another US offshore wind project leaving, I don’t even know what’s left for o other than invent energy, which is technically, you know, majority owned by a, a Canadian. I, I, I don’t know that you have very much US Dominion investment and US involvement.
Philip Totaro: Dominion is yeah, dominion, you’re right. I mean, and, and it’s, it’s a bit confounding. Obviously, we, in the United States, we need to be able to rely on European expertise because they’ve built, you know, 40 gigawatts and, and have, you know, well built 25 gigawatts and have a total of 40 in their pipeline right now, plus China, which has a lot more.
Philip Totaro: But the point is they have the experience. We need to be able to leverage that. , but where are all the enthusiastic, you know, US corporations, utility companies, investors that are, you know, lining up to get behind offshore wind energy?
Joel Saxum: Yeah, it’s, it’s, it’s too, it’s too risky. Like even, even look at this as like I can’t remember what the exact number was for some reason there’s a value of $23 million six out into my head.
Joel Saxum: But I think that’s what it was costing for vineyard wind, but it was X amount per megawatt that the judge was, it wasn’t just you, you’re allowed to use these. It was, there was also a cost to it. That cost is minimal. To be honest. In the grand scheme of this project, this project’s gonna be hundreds of millions of dollars, right?
Joel Saxum: But there’s still 25% of that fee that they’ve got a pay rate they’d have to pay rate like that. Anyways. , you know, and in, and in the other side of it, I look at this in, again, I get, I say the grand scheme of things. Horsted knows what they’re doing, operations, maintenance, construction, t FFA wise, like to get this thing going.
Joel Saxum: Yes. And, and p seg has no clue besides being the guys on shore, holding a flag going, here’s where the interconnect is. They don’t have any business doing this. . Yeah. So
Allen Hall: there’s a risk there too. Well, and this also Roy ties into a bunch of other things. Well, yeah, Joel, you you nailed it on the head, which is the IRA bill.
Allen Hall: There’s a lot of incentives about American, this, American that setting up job programs, setting up all the onshore piece to the offshore, and, which I’m sure p seg was tied into doing. And that’s why I think it’s why the discussion about the tax structure comes in because they’re the American company, they can, they can do those things that probably Osted probably doesn’t want to do or would have more difficult time doing because they’re just not established like p seg is.
Allen Hall: So that, that kind of goes away though. I mean, if longer these projects kind of hang around and get d. why is PSEG involved in it? And we’re seeing that sort of play out throughout, up and down the east coast at the moment, weirdly enough, which is
Joel Saxum: frustrating. Yeah. To, to say the way I still, I still, you know, of this, this, this article, the thing that we still haven’t completely sorted out here is that statement of, so that it can proceed with an optimized tax structure.
Joel Saxum: It doesn’t make sense to me that, that, that, that, that they would leave and the optimized tax structure would. You would think that you would want more
Allen Hall: involvement from an American company. Guys, I’m, I’m gonna roll over to Siemens essa. So see if you, if we’re all watching LinkedIn this week, Siemens ESSA put out that big plan about American Wind energy.
Allen Hall: It’s called a sea, sorry, it’s called the Siemens Gama. It’s a scaling up the American Wind Industry Plan, and it lays out what Siemens ESA sees as the Road four for us. now, I think this sort of plays into some of the difficulty that everybody is having and as an o e m they, I’m sure Siemens Kamasa sees it every day.
Allen Hall: But I’ll give you the, the, the bullet points I’ll try to summarize a little bit cause they’re kind of long. But first one, provide expedient clarification on US tax incentive programs to get developers and manufacturers the flexibility to become eligible and promote wind energy. Consistent with statutory requirements and objectives.
Allen Hall: This has to do directly with the IRA bill and the tax rules that are not defined by the I R S yet and the Treasury Department not defined. So if you’re pse and g or PS e g and you don’t have those tax rules out laid out in front of you, all this is just ephemeral. It’s not real yet. And Siemens just pointed.
Allen Hall: So the, the other piece of what Siemens’s plan was acknowledge the impacts of long duration between the auction results and when the project’s gonna kick off and that inflation’s gonna happen in between there and having some compensation mechanisms maybe refunding some of the auction fee. It seems like to where that was going, connecting communities across the country to employment opportunities, provide public support for workforce development programs, maximize clean energy development deployment over the next 10 years by streamlining the permitting process, which again is a federal government issue.
Allen Hall: And then incentivize the construction of transmission infrastructure to bring new impending wind energy capacity online, which is y. EG was involved in this project to begin with, like Phil pointed out. So I think some of the things that everybody’s seeing are what also Siemens Sch Mesa is bringing to the table in this roadmap.
Allen Hall: It’s odd that American clean power didn’t raise this, but Siemens had to do it. What is happening at the moment? It just, are we just not clicking all in all cylinders yet, or firing on all cylinders? Are we, are we just disconnected? Are we in a pause period waiting for. tax rules to come out. What, what is, what’s happening?
Allen Hall: So
Joel Saxum: the, the three things here, right? Tax rules of the workforce in development, engagement and getting the trans and getting things on trans transmission line projects. Moving to get it, to get it all connected, right? That’s the, that’s what it boils down to, right? Yeah. And, and all those things are, are issues.
Joel Saxum: They’re, they’re not issues that are only specific to the IRA bill and clean energy. Those are issues that we have as a problem from a government standpoint in the us
Allen Hall: across the board. Does that get to Phil’s point of there’s not a lot of American investment in American offshore wind,
Philip Totaro: and is that why there isn’t in American American offshore wind, but there’s investors like certainty and investors like low risk and high.
Philip Totaro: Right. And those are things that you’re not quite, again, to Joel’s point, there’s still a lot of risk associated with certain aspects, particularly of offshore wind. But even addressing the onshore issue, you know, there’s been a disconnect in the past decade between what’s going on in your local municipalities and even at the state level versus federal policy.
Philip Totaro: And we’ve long. Tried as a country to get with, you know, ACP and as predecessors to get some type of federal policy put in place that would provide, you know, long-term PTC guarantees and you know, renewable energy portfolio standards, et cetera, et cetera. All these, all these lovely things that, you know, in, in a bit of a piecemeal way.
Philip Totaro: The, the IRA has, has attempted to do true however, , the disconnect between federal government and federal policy and state and local municipalities is there are, you know, in Illinois, Ohio, Indiana, Michigan, Pennsylvania. Iowa, you have local townships and, and counties that are banning wind energy development in, in those townships.
Philip Totaro: Yeah. And counties. And, and from that perspective, and this goes back to my comment. . You know, a decade ago, the predecessor to ACP was doing a lot of grassroots work. W you know, working with people at the state level, right? In the past decade, there’s been a shift towards let’s focus on federal policy and, and they’ve had several federal policy wins, you could say.
Philip Totaro: But what’s the point of a federal policy if we can’t execute it by going and getting steel in the ground? Because these local municipalities have banned wind energy. , right? So I think there’s a, a need to get back to some of the grassroots and that’s one part of it. Although Siemens, going back to this, the whole point about the, the Siemens ka Mesa roadmap, they don’t explicitly talk about that.
Philip Totaro: But one of the things that is an enabler to, you know, more you know, like, or addressing the question of why did Siemens write this roadmap and not acp or not in conjunction with acp. Is they Siemens? Go Mesa has had a specific issue where they’ve been losing market share to Nordex in the past few years because, you know, you’ve got companies that routinely just buy you know, GE investors turbines.
Philip Totaro: And then there’s all the other deals that are maybe less favorable project sites where Siemens, GA, Mesa, and Nordex have had to kind of scrap it out against each other. And Nordex has been winning lately, and Nordex has been doing that because they’ve been undercutting Siemens on price. So Siemens is kind of looking at this where, hey, we’ve got this whole factory that we put in place in in Kansas Nael factory.
Philip Totaro: You know, we’ve got blade factories throughout the Midwest and Iowa, et cetera, as. We’re, we’re having to, you know, stall and shutter these factories, although now they’re, they’re talking about reopening them because they’ve gotten some orders. But, you know, they’re, they’re trying to motivate everybody that’s a stakeholder in, in with this roadmap.
Philip Totaro: They’re trying to motivate everybody to, you know, get the industry reinvigorated so that they can, you know, do what they’re trying to do, reopen their factories. The jobs, create the tax base, et cetera, et cetera. All these things that everybody claims they want. So I, I, going back to my point as well, about all these townships that are banning wind energy, the reason that frankly, a lot of that’s happening is it’s not just NIMBYs and, and disinformation.
Philip Totaro: That that’s, you know, which has certainly been prevalent. You’re also talking about like if, if it’s getting cheaper and cheaper to build projects and, you know, project CapEx has gone down, it’s bounced back up a little bit off the bottom you know, corresponding with p p a prices and, you know, commodity costs and, and input costs for turbines and whatnot.
Philip Totaro: But you know, if, if it’s getting cheaper and cheaper, they’re not offering as much in the way of easements and lease payments. Yeah. Landowners, they’re not offering as much commercial incentive to the local communities. You know, these are all things that the project developers need to be able to do to smooth things over.
Philip Totaro: Because you know, if your neighbor is getting five grand a month and your, their wind turbine that’s on their land has got shadow flicker onto your property, you’re gonna be upset about it. Mm-hmm. , if you’re not getting five grand a month, but if you are, then guess what? You know that, that. Five grand a month goes a long way to easing your, you know, discomfort over your seizures and, and, you know, noise and, and acoustic ions,
Philip Totaro: Yeah. Supposedly. So, you know, it’s, it’s amazing. I guess it’s amazing what money does, but you know, that, so there’s that, that’s a very long-winded explanation of, of some of the things that are, that are. Transpiring at this point. But there, there are definitely, I mean, for Siemens Game Mesa, to feel like they have to come out with their own roadmap, it’s gonna sustain that the ACP wasn’t a part of.
Philip Totaro: There’s, there’s gotta be some kind of a disconnect there between these, these, you know, one of the top three OEMs in this country and the supposedly the leading, you know, champion of the industry in, in terms of the lobby group in, in the United States as well. So it, it just kind of feels like they’re, everybody’s not quite aligned on the same, on the same
path.
Joel Saxum: You can expect to see a large, a large presence of the two of them in Orlando at the A C P O and M conference here coming up in March, because that’s where the majority of the Siemens team is. So, so maybe we’ll see some, some communication there. Of course. That’s right. You know what I was thinking about this.
Joel Saxum: Yeah, yeah. Maybe some fireworks. John. It’s exciting. You know, Alan, a, a few months back we talked. It was a federal effort to install basically 80,000 new IRS agents. . Yes. 87. So I think it at that, maybe that’s why I’m saying 80. Cause I think I remember the comment where I was like, maybe they should just take 7,000 of them and help them move that, that effort into permitting, like permitting for transmission lines, permitting for other energy projects.
Joel Saxum: Like just speak every, everybody talks about it, whether you’re onshore or you’re offshore or wherever. And this is one of the things from the Siemens plan is, is just getting these projects, like there’s so many things in the queue to hook up to the grid, that there’s not enough time and, and in, in the day to get ’em all moving.
Joel Saxum: So, I mean, that’s a big problem that Siemens is pointing out. ACP has pointed that as out in, maybe not in the same capacity, but has as well something that we need to address as a, as a industry or, that’s not an industry problem, that’s a government problem, I
Allen Hall: guess. Well, it’s, it’s a government problem, which has become an industry problem.
Allen Hall: Yeah. That’s, that’s the real issue. And. Until some of these items get closed and I don’t see closure coming in the next six months to a. It’s gonna be a big pain point. And I, I, I expect GE investors and others to, to chime in on this with probably similar looking plans. And that’s good. At least we understand where they’re coming from.
Allen Hall: I’d like to see
Joel Saxum: more, more effort from some of these larger groups in the workforce development as well, because from, you know, being in the industry as, as, as as we all are, you hear it from every corner. . We can’t find enough people. We can’t find enough people now, so you’re say, say you’re working blades, right?
Joel Saxum: You gotta find someone that is competent and trained and understands composites and all this stuff. And then you also have to have that exact same person and the ability to work on ropes or at heights and away from their families. And so like, it’s hard to find those specific people. But if you can.
Joel Saxum: If we can start training them, if we can start injecting some, you know, into some STEM programs at, at young ages or into some, some of the, you know, it’s gonna have to be from the high, high schools and on up to get these things moving because just trying to repurpose and switch people into different industries, it’s, it’s a tough industry to get into because of the travel and you know, away, time away from home and, and not everybody has a wind farm out their backyard where they can just drive to work every day and, and work at it, you know.
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Allen Hall: All right. So the American Offshore Workers Fairness Act has been banging around Congress since last year. All right. And the, so the legislation is sponsored by Louisiana, Republican Garrett Graves, and California Democrat, John Gari that would quote, unquote close a loophole.
Allen Hall: And I, I don’t like that language, but I’m, I’m gonna just use it for now. to close a loophole in offshore wind and oil and gas to use non-US workers. All right? So as you can well imagine, because the offshore wind is happening and it’s gonna be a big thing there, there would be a push to have US workers involved with that, that that sees to be where the administration is going.
Allen Hall: The Biden administration is going. They, they are constantly putting out press releases about clean, renewable. , union jobs, middle class workers, training, all that all wrapped into a, a nice package. Right. So, and that’s where they’re going. However lemme describe what this, what this bill does. So what it does is it on offshore work that you need to have American workers essentially on the, on the boats.
Allen Hall: You can’t Bring in, like you can right now, people from all over the world to work on these projects at, at lower costs. But we’re, we’re trying to, they’re trying to force those construction crews to be American based and obviously use American ships. That’s the push. The, the company, the, the people that are pushing back from this are American clean power and, and, and remarkably.
Allen Hall: My Senator , ed Markey is pushing back against this and others Jake Olos, who was also a in Congress from Massachusetts is pushing back on this bill to, to drive more American content into some of these offshore projects, mostly due to wages. It’s what it seems like Americans are gonna get paid more, they don’t wanna pay more, puts the projects at risk.
Allen Hall: There’s a real dichotomy going on here. Now, guys, where if we’re gonna train workers, we are gonna train workers, but we’re not gonna use them. Or the the, and one of the arguments being made against this act is well it’s gonna take too long. We need to bring in people from the outside who have done this before, obviously, and they’re gonna be the ones in charge, and Americans are not gonna be up to speed fast enough.
Allen Hall: That’s the argument. That’s,
Joel Saxum: so you sit on both sides of the bill, right? So the fir, the first side of the bill is say you are, which is such an odd mix. A republican from Louisiana and a Democrat from California working together. Fantastic that it’s bipartisan in that way, but really weird in a political realm in the us So sitting on their side of the table, right?
Joel Saxum: You, it’s, this is the last kind of, and why do they say close a loophole is because it’s a. loophole in the Jones Act. The Jones Act actually does say you need to use US people, but you can swap around and kind of fudge it a little bit. Right? So, so what they’re trying to do is they’re saying like, okay, we’re gonna close that loophole in the Jones Act and we are gonna make all of these people be, cuz we want to create American jobs.
Joel Saxum: You know, Louisiana. tough to come by Some jobs there, California is, they had, there’s a lot of high paying jobs there, but there’s also quite a high rate of unemployment in, in California as well. So it’s, it’s, it’s making sure these people go to work and that you’re, what all of these things, the IRA, bill, all the stuff that you’ve, you’ve put in place actually does what it says and creates American jobs, and we can all get on board with that.
Joel Saxum: We sit in, we sit in, in, on that side table. Now we switch to the other side of the table, the people fighting against it, which includes the American Glean Power Association. So, and, and Phil, you’ll like this, this is the connection I’m drawing. So the connection I’m drawing is, is. bet, the American Clean Power Association and the, the, the detractors from the bill or the people fighting against it don’t believe that if this bill goes into place, we can hit any of our renewable energy targets.
Joel Saxum: They don’t believe we can have 30 gigawatts of offshore wind if we say this is what we have to do, because the simply the workforce won’t be there. You can’t train them in time. And they, they’re just not that many people. Like, and the the example I use is like, , the The Danish Society. So the Danish Society is a maritime.
Joel Saxum: in the US we don’t have that on any coast. We have a small portions of it, but we don’t have it. Like in, in Denmark, there’s a lot of, there’s a lot of young women and men that grow up knowing they’re going to be on a vessel, whether it’s a fishing vessel, oil and gas shipping, wherever. You know, like MAs one of the biggest shipping companies in the world, boom, go headquarters in Copenhagen.
Joel Saxum: Like that’s, that’s that culture there. So we don’t have that maritime culture. So the proponents of the bill are saying, if you put this in place, , we won’t get the build out. And so why I think that American clean power and American clean power, don’t get mad at me, but why I Why? It sounds like to me that they’re pushing back on it.
Joel Saxum: Is the fact that the people paying the bills for American clean power are the developers and they want to get that 30 in the ground by 2030. So it’s at the top end of the thing. The people fighting against this bill that is set to. , I, I, in a perfect world, is set to help working families and the people out there making, you know, to, to make really high paying wages and have good jobs.
Joel Saxum: The people that are actually paying the bills for the lobby are the developers and they wanna make the money themselves. So I think that’s where we have the, the split, and that’s why it’s a difficult one to kind of stomach. . I mean, I grew up in the Midwest. Everybody’s fighting for good paying jobs. And if there was all these 50, $60 an hour jobs in my home town, people would be licking their chops for ’em.
Joel Saxum: They’re not here, they’re not gonna, we’re not, we’re, we’re not building 30 gigawatts of offshore wind in Lake Superior. So I, I can see why the people on the, so, you know, some of the people on the coast would be, A little bit salty, but you know, one of the numbers we’ve seen is needing a hundred thousand workers.
Joel Saxum: Well, we’re not, there’s not, it’s gonna be difficult to get a hundred thousand maritime workers
Philip Totaro: out out at sea. One of the reasons this also came up was not just to quote unquote close a loophole with the Jones Act. It’s also in the uk. , there has been a significant amount of pushback on foreign workers being utilized to build a lot of these UK officers.
Philip Totaro: Yes. And you know, some of these Congress people and senators have done junkets over, over there to the UK and Germany, et cetera, and they’ve seen, you know, how these things are getting built and what’s involved in the investment. And they’re looking their chops because they see, you know, tax based jobs, revenue, you know, et cetera, that that’s gonna come into their state, their.
Philip Totaro: Now the other, the flip side to this as well is who do you think ends up paying for the higher wages and the higher cost of developing a project? It’s yeah. Us, the consumers. Yeah, sure. And so at the end of the day, you know, we have to be able to take on the, the, the cost burden of you. Domesticating that much production capacity, that much, you know, industry expertise, construction expertise, et cetera.
Philip Totaro: I mean, to be perfectly blunt, I’m on the, the side of the, the, the whole like, let’s ban or overturn the Jones Act, to be perfectly blunt, just to, and to be transparent about it. , I understand that we want to be able to build a domestic industry. I don’t think we have to have a Jones Act to be able to mandate the fact that we should do it.
Philip Totaro: Yeah. More
Joel Saxum: the libertarian stance of let, let, let the markets figure it out.
Allen Hall: Yeah. That’s good take. I mean, the other side of the equation is if you don’t start, you’re never gonna get there anyway. If you, if you don’t have American involvement in this, who’s gonna maintain these things? We got 30 years of maintaining.
Allen Hall: Offshore turbines, those crews that install ’em are gonna go to the next project. They’re gonna be in South Korea, they’re gonna be in Australia. They’re not gonna be sitting off the coast of New Jersey all the time. EOR saw that when we talked to Harriet Green probably a year ago, and she was working with the local, state and communities to, to build up a workforce and how she described how difficult it was, you should go back and listen to that episode.
Allen Hall: It’s really, it’s really good. She’s informative. And ma the state of Massachusetts where I can use, because I live here, there’s there, it’s an educational state. We have m i t, Harvard, right? We have all these Northeastern, we have all these engineering schools running around the state. We, it’s just the high, it’s gotta be the highest density of schools to population in the country.
Allen Hall: We can train people in Massachusetts, but we don’t, we don’t seem to want to turn that. what we, what we appear to do is like, well, we can’t do it today, so we should never do it. I don’t think that makes a lot of sense here. I, I’m, I’m game. If they would ramp it, if they would decide, put on some sort of graduated scale, say, Hey, you know, the Jones Act ain’t gonna work right now, but in 2026 we’re gonna enforce the Jones Act.
Allen Hall: And you did this. Yeah. Yeah.
Joel Saxum: And, Yeah. Oh. Something of that sort where Exactly. It’s like, you know, at right now, we want you to have X percent, and if you can prove to us that you’ve tried to get as high as you can, but you’re only able to find this many workers, then you can move on. Now there’s of course people that will fudge that and that, so that’s a, a different game to play.
Joel Saxum: Right. And there’s then, then we have to hire more auditors to chase, chase this stuff down and whatnot. Sure. But it, it’s, it’s just like we say right now, we talk about all the time, it’s an energy. Transition, not an energy step change. Right. So we all well know on this call and our, and, and, and I don’t, I don’t wanna speak for everybody.
Joel Saxum: We know that hydrocarbons are not going away tomorrow. They’re gonna be it’s gonna be a gradual changeover and we’re gonna have to merge into it. It’s the same thing with trying to build this offshore workforce, offshore and onshore, right? Because if we’re trying to build 120,000 more turbines in the next seven years, we’re gonna need a lot of people trained up in every corner of the wind producing nation.
Philip Totaro: which it brings up another good point, Joel, because if you look at the countries that have instituted local content provisions, either to qualify for favorable mm-hmm. feed and tariff incentives, or some other similar type of like local content regime. . The reason that that usually fails if it fails, the reason it does is because they never back that up with a commitment to the industry to say is, you know, everybody puts out lofty targets and says they wanna build 120,000 turbines or what have you, but do they put the right resources in place for that to actually happen?
Philip Totaro: And so there’s a difference between having a goal of, you know, 30 gigawatts by 2030 or et cetera. You know, there, there are a lot of lofty things that that. Governments and industry trade groups and the industry itself wants to be able to achieve. But you know, you, you’re, you’re right, it’s not gonna go from zero to 30 in, in a step.
Philip Totaro: It’s gotta, it’s gotta be ramped. And, and that’s why, again, I will agree and acknowledge that there needs to be a, an investment in the training. They’re true. You know, there are some universities that have been getting some state grants. New Jersey is one of them that, that gave some grants. Massachusetts is another one, Rhode Island.
Philip Totaro: Also recently just announced that some local community colleges and technical colleges are getting some grants, so that’s a good step. But are they being trained by people that have experience? Yeah. From. because at the end of the day, , we’re still gonna have to rely on right on knowledge gain who are ahead of us at this point, unless we’re gonna rely on the the Chinese which I doubt, but you know, who else are you gonna talk to?
Philip Totaro: That’s got significant experience in doing this. You know, we’re gonna have to rely on these people for now until we can figure out how we can domestically. , these kind of, you know, annual goals of, I mean, we could, we could easily do like 10 to 12 gigawatts a year in offshore. You know, for, for, you know, a timeframe if we were sufficiently ramped up.
Philip Totaro: So there’s, there’s other places in
Joel Saxum: the world we can, I mean, not the exact same example, but experience that we can draw from on the US now, we’re not used to being in this position. Right. That’s part of the issue I think here is the US is not used to being the people that are trying to figure out how do we do this and how do we ramp up?
Joel Saxum: We’re used to just kind of going and getting it done. But if you look at like switch, switch your vision to. Some, some of the hydrocarbon industry, like in say in Africa, they were taken advantage of for a long time, so they instituted some pretty heavy laws around local content. But what that, some of those laws have done in some of those countries have, it’s like the pendulum swings, right?
Joel Saxum: So they got taken advantage of here. and then the pendulum swung so far through maybe a middle ground to the other extreme where it’s actually stifled their growth by having too much local content laws and too many things in place to stop, you know, cuz they had, there’s development that could have went gangbusters there had they allowed some help from the outside to come in.
Joel Saxum: But they’re still trying to catch up because they put too, too stringent of laws in place, or two string too stringent of rule in place. Joel Brazil is a good example on. I Exactly. And that,
Allen Hall: that’s what I mean. So if, if we’re last and we’re pretty close to last in terms of, and, and developed countries and putting in wind term is maybe be, we’re a little ahead of Australia, not hugely in front of Australia, but
Allen Hall: But if, if we’re having to go up that scale, you know, is, is it such that.
Allen Hall: the federal government is gonna be an impediment to this no matter what, what happens and that we should be looking at other should we be looking at the, the model that Denmark’s using and what France used, and what the UK has used and what Japan is using, and to, to look at those and go, okay, here’s the things that are working.
Allen Hall: Here’s are things are not working. Because we had the, the advantage of time. We’ve been sitting on the sidelines on offshore for, for a while. Do we, do, we now say, okay, we’re gonna, we’re gonna steal the best things from all these countries and implement them to speed up the progress. Because if, if we did that, I think that would make a lot of sense.
Allen Hall: But I haven’t heard, I have heard nothing like that.
Joel Saxum: If you do that, you end up with boats full of people from the APAC region at a hundred bucks a day. Cuz that’s what’s happening in the military. Well, it sounds. . Right. And maybe that’s, if you, if you’re, if your goal end goal is to get 30 gigawatts in the ground by 2030, then that’s what you’re gonna have to do as it sits today.
Joel Saxum: Okay. Right. That’s the, that’s, that’s what we’re staring at. If you, if to get to that goal, but also meet the other bullet points down the list of all the other items that we want, it’s. I don’t, I don’t know if it’s a, if you build it, they will come situation. Because if I’m, well, someone manning a vessel, I’m, I, I’m gonna grab, if I have the ability to, I’m just gonna grab the cheapest people I can
Allen Hall: find that can get the job done.
Allen Hall: Yeah. And, and I think back to Phil’s point about you don’t want to have increased costs in electricity prices. Massachusetts already has high electricity prices, and this is, this is not a state that shies away from taxes. It just doesn’t. But in this particular case, they are. It just seems like it, like the world.
Allen Hall: So is it a massive subsidy? I, yeah, maybe. Right?
Joel Saxum: Like say, Hey, if, if you’re, if you’re, if you’re going to, if you’re, if you guys will put a trained American worker on your vessel, we’ll refund you 50% of their wages from Biden’s
Allen Hall: pocket. Well, is that a better spin than what we’re doing right now? It may be.
Allen Hall: Maybe, maybe. Well, and going back to some of the discussions here with the IRA and how the tax law hasn’t been written. Is that what they do? Right? Yeah. This is, this, this happens in many levels of government where the, the legislation is very vague. And then you get down to the real rule making part, which is usually a committee locked away somewhere inside one of these government agencies.
Allen Hall: Outskirts out this policy. You know, like that wasn’t what the intent was, the law was, but that’s the way it goes. Right. So they’re allowed to manipulate it. Should they be manipulating a way, like you’re saying like there’s an incentive to put Americans on ships and to train Americans to do some of these jobs.
Allen Hall: Can the i r s just do that and almost whole cloth in this sense to get the industry kicked off? And what else is it gonna do? ,
Joel Saxum: but that’s what they’ve done with ITTC and ptc right? For since the nineties. Yeah. Well, so maybe they, maybe
Allen Hall: they did. Well, I’ll give you the good example. And I’ll, I’ll bring you some names because I think I like these guys.
Allen Hall: Josh Ranel, Ranel Renewables. Right? Those guys are busting their ass. Yeah. Out there fixing wind turbines, Pronto Wind, another one. There’s a, there’s Joel, you and I know a bunch of these companies are out there. These guys are busting their asses out there. Yeah, absolutely. And. They’re doing the thing the right way.
Allen Hall: And so they have this Amer, there’s this American component to it, right? And so when you get to the offshore side, it’s like, well, screw it. , you know those guys at, at Rango renewables that are working their asses off and doing the right thing and growing their company the way it should be grown and, and getting will have no, well, they’re gonna have any opportunity, any of this offshore work.
Allen Hall: I think the answer is no, cuz they’re gonna compete against wherever APEC workers. It doesn’t seem right,
Joel Saxum: so, so I’ll give you, I’ll give you an example. I’ll give you an example that’s happening, right? This isn’t, this is from this year, this knowledge that I have, right? The people working on the blades on Block Island.
Joel Saxum: Mm-hmm. , gv, Windpower. . Yeah. So GE v wind power based in o over in Hull in England, but with a big and massively growing operation in the US has taken some of the, the smart able contractors that have been working offshore in Europe for a long time. And what they did when they went to Block Island for GE is they intermix those guys.
Joel Saxum: Some of their American people that have been working onshore for a while, and they put ’em together on teams offshore so that the American side could get a little bit of knowledge of how to work offshore. Mm-hmm. And, and so that is, that’s, that’s fantastic. That’s, we go That’s great work. Well, that’s what we wanna see.
Joel Saxum: Yes. But that’s tough to do for the whole industry when we’re only talking about those five turbines in on Block Island. Right. If that’s the only training ground we have, that’s not gonna go very far. But that’s, that’s that, that’s a case example, right.
Philip Totaro: And don’t forget too, that they’ve now put new limits on H1B visas, meaning that we can’t burden a lot of the knowledgeable people from Europe or APAC over to the US anyway, unless it’s just provides a certain amount of training to Yeah.
Philip Totaro: The locals, right. Which I think long term. So, you know, going back to the earlier point, Alan, I. You know, companies like Rangal aren’t necessarily going to be able to have a, a place in the market. It’s just a question of how quick are they gonna be able to get ramped up. I mean, like we’ve been talking about, if, if you wanna have 30 by 2030, where are the training programs that are happening this year?
Philip Totaro: That need to prepare the workforce for doing the construction, doing the offshore maintenance. You know? Yeah. I I mean, you need to start the knowledge transfer and the tech transfer now. Yeah. And
Joel Saxum: I don’t see that happening. And, and it’s 23, right? Yeah. Like there’s some, there’s some stuff that transfers, right?
Joel Saxum: You have like, so if you’re up there right now, so this is more not block island knowledge, right? If you’re there and say they want some spot on metal repair, that’s a union. . So now you have union people that have never actually been offshore painting anything that someone’s gotta you, you know what I mean?
Joel Saxum: Mm-hmm. . So they, they, they’ve gotta have a painting off of, off of ropes and in the splash zone and all this stuff, but it has to be whatever, x, y, z union it is, to, to be a painter over there. So now you’re, it. , you’ve, you’ve created a, an Americanized job, but you’ve made it very, very, very difficult to find that person.
Joel Saxum: And to get those qualifications and to get that stamp and to pay those union dues and to get all those guys on board is not, it’s not simple, it’s not basic to
Allen Hall: do. Well, I go back to Phil’s point, the unions that were being involved in some of these offshore products projects, the American unions are saying they need more time to spool up workers, to train them.
Allen Hall: What have we been.
Joel Saxum: You know, 2023. Yeah. We’ve only got seven years left. Right. This
Philip Totaro: is, which sounds preposterous, but we’re still gonna be, I mean, when you realize how many qualified workers are necessary for those specific jobs, we’re not moving fast enough. No, no. That’s the goal. We’re definitely not moving fast enough.
Philip Totaro: Right.
Joel Saxum: So have you guys seen an, have you guys seen an announcement that says for 9,200 bucks you can come to X, Y, Z college and get your one year certificate in this? I haven’t seen it. I know they exist
Allen Hall: for offshore. You’ve seen it for offshore onshore? Not yet. Yeah, not yet. But even, okay. So
Joel Saxum: say that. Say that.
Joel Saxum: That’s an announcement that we hear today. That person is still nine months to a year away from having their training certificate. Yeah. And being a green hand. Yeah. In and on January 19th, 2024. They’ll have a year of experience, might be able to work on their own by January 1st, 2025. That’s
Philip Totaro: crazy. Well, which also begs the question when, when you look at, you know, going back to our other conversation, What does this injunction on GE being able to sell their turbines mean for projects being constructed according to their original time schedules?
Philip Totaro: Oh yeah. You know, are we going to have a situation where we just can’t find enough personnel? And if there’s, you know, legislation that comes into play that closes the loophole, so to speak, on offshore workers to be in compliance with the Jones Act, then how do we. This stuff by, you know, start construction in 23, 24 or 25 and have it done by 26, 27, 28.
Philip Totaro: And there’s, there’s no way we keep this timeline.
Allen Hall: I, there has to be guys, there has to be a way, right? We, we’ve seen multiple projects of this scale done in America over the years. Have we just lost our, our bearings a little bit. The,
Joel Saxum: are you going back to the, the moon landing? Is that what we’re going back to?
Joel Saxum: It’s,
Allen Hall: well, I could pick a whole bunch of ’em. Right? The, and it’s not just that there’s a lot of ’em. Well, Musk is putting rockets, landing rockets, two at a time down in Florida at the moment. Where do you think that came from? Right. That, that came from America? Yeah. Right. That was, that wasn’t the, the timeframes got shortened because you got smarter.
Allen Hall: Not because it was, the project was difficult is we applied brain power and a lot of muscle to to, to get some of these in action. It just, it just seem, there’s a lot of thing kills me as, there’s a lot, I’m on a podcast, of course there’s a lot of talk, but when you, you start scratching the surface, around like what’s actually happening.
Allen Hall: You don’t see much, you don’t see it. I don’t see, I don’t see in my state, I know at the, at the lowest level there is. , but in that medial level, like, yeah, we got the port set up, we’re ready to take the cells in. We got the blades coming in, we’re all getting ganged up. We got these, these units involved, and they got guys trained and people ready to go.
Allen Hall: That’s not there. No,
Joel Saxum: and and so y it duplicates what Phil said on timeline problem. Rosemary, you’re a business person, Alan. You’re a business person. Fill your business person. I’m a business person. When was the last time you put a quote out that said this quote is good for the next two? Three years? No, never.
Joel Saxum: No, never. 30 days, 60 days, 90 days max before I’m gonna change these prices on you. Right? So you have these people that have done the bus, the complete business model in 2022. bid on an auction, paid hundreds of millions of dollars to do it, and now they’re not gonna be able to put steel in the water for two, three years and at inflation at 8% and all these different.
Joel Saxum: So like there’s so many market factors here at play that you can see why EP SG or P E S G or whatever it was, decided to kind of back off. Right? Just say like, man, you know, it’s just too many uncertainties here. All of a sudden, like our business model doesn’t make sense.
Allen Hall: If you, if you wanna kill an industry, and I’ll, I’ll, I’ll close it out this way.
Allen Hall: If you want to kill an industry, have high inflation, have high interest rates, there you go. Which is what’s happening right now. And, and it’s not just offshore wind. Offshore wind, it’s pretty much all across American society at the moment. And it, it’s gonna make, doing some of these training initiatives and getting engineers up to speed and, and learning the specifics of offshore wind implemented, it’s gonna make it even more difficult than it was already.
Allen Hall: It’s, it’s just a variety of factors, unfortunately. , it’s just not solved. And I know we’re all sort of griping one another. That’s what podcasts do a little bit, but they do need to be addressed and you feel like the, there should be some leadership on this issue and hopefully over the next couple of months, we’re gonna start to see it.
Allen Hall: That’s the goal. That’s gonna do it for this week’s Uptime Wind Energy podcast. Thanks for listening. Please take a moment and give us a five star rating on your podcast platform. Be sure to subscribe in the Sonos Below to Uptime Tech News, our weekly newsletter, as well as Rosemary’s YouTube Channel Engineering with Rosie.
Allen Hall: And we’ll see you here next week on the Uptime Wind Energy Podcast.
Allen Hall:
