In the realm of offshore wind installations along the East Coast, the US has set its sights on nothing short of monumental goals. Yet, as the winds of progress push forward, they encounter formidable obstacles that impede their journey. Enter Phil Totaro, a seasoned expert from Intelstor, who generously provides Allen and Joel with a captivating insider’s perspective on the intricate web of infrastructure challenges and formidable financial headwinds hindering this ambitious mission. Don’t even think about missing out on this enlightening podcast!
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Phil Totaro
Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech, and I’m here with the Vice President of North American Sales of Wind Power LAB, Joel Saxum and the CEO and founder of Intelstor, Phil Totaro. And we are here to discuss offshore wind development in the United States because we get a lot of questions about that via LinkedIn, via chat, via text messages that there’s, there’s a lot of concern about where the US is going because there appears to be delays and.
You know, as the offshore wind is rapidly a growing industry and the US has a potential to be a major player in it, but there are several supply constraints that are going to be holding back development that includes a shortage of vessels and ports, the lack of a domestic manufacturing chain for the turbines, foundations, and ships.
A shortage of skilled workers and also, you know, there’s just regulatory issues, transmission lines, all of that. These constraints are, are our major challenge to the US schools of developing 30 gigawatts of offshore wind by 2030. So to meet this goal, the US will need to invest and. All kinds of efforts to even get close to the 30 gigawatt number.
So this discussion today is to try to highlight some of the issues and, and, and make our listeners aware of what’s happening out there because large players on the US East Coast are starting to try to delay projects or asking for different PPA prices or trying to roughly trying to raise prices about 20%.
Why are they trying to do that? So Phil, hey, welcome back to the
Phil Totaro: program. Thanks, Allen. Thanks for having
Allen Hall: me. So there is a, a supply constraint and, and we’re, Joel and I have gone back and forth about how big that constraint is. Are we 29 gigawatts out of 30 or are we more like 15 gigawatts out of 30 by 2030?
Phil Totaro: We’re leaning more towards the 15. If, if that, and unfortunately The one answer to your question about why, you know and, and why are people trying to slow down? Why are people trying to raise prices by 20%? The short answer is inflation. The bigger question though, is it, it looks like we’re not actually quite ready to pull the trigger on some of the investment commitments that have been made.
You know, there are nael factories that need to be built. There are blade factories that need to be built foundations, et cetera. And while there have been many public statements about it which have excited and delighted, you know, local politicians who are interested in jobs and tax revenue, It.
We haven’t actually seen money, a whole lot of money get spent yet. I think of the 10 to 15 factory commitments or expansions let’s throwing in, you know, some, some other domestic facilities. There’s about 15 or so facilities today that are going to be built or expanded to support offshore wind.
Of those, I think there’s only been firm commitment and spending on about three or four of ’em, I wanna say. And so we’re talking about, you know, 20 to 30 million, or sorry, 20 to 30 billion in the supply chain that’s gonna need to be spent on spooling up all of these capabilities, many, many more factories than just those 10 to 15 that I’ve talked about.
But we’re not seeing the investment yet. We are seeing out of this, you know, 30 billion worth of investment, you’re seeing maybe 1 billion of it get spent at this point. So that’s, that’s a big challenge as well. And you’re, and you’re just talking hardware, right? Joel? Yeah. Right. Phil.
Joel Saxum: I mean, that’s just hardware, that’s just, that’s just manufacturing, that’s just building parts.
That doesn’t count any of the. Building parts, ships, ports, all these things that are their infrastructure need. But the, that doesn’t count. Training the staff to go and work at those factories, work at those ports, handle this equipment, maintain these turbines, you know, that doesn’t even, that’s, we’re not even
Phil Totaro: scratching that part of the surface.
You know, that part of what the IRA bill is doing for the United States is it’s providing investors an incentive by saying, okay, we’re, we’re giving you certainty about this production tax credit for a period of time. There are also manufacturing tax credits and, and other things that are tied into that package that make it attractive for domestic content.
But if people are, you know, getting nervous about inflation and, and thankfully that’s damping down a little bit. I mean, we’re still, you know, overinflated from where we were, let’s say two years ago, or even three years ago. But we’re, we’re at a point where they’re still. You know, project developers that are losing partners or developers that are just trying to wholesale, pull out of projects or try to renegotiate them.
That’s happened in what at least three states. Now, let, let’s talk
Allen Hall: about the way this should work and when a, a GE or a Siemens game, Mesa is going to turn on a factory and start spending the money, when do they get triggered? Where does this all begin? Does it begin with a developer? That’s a locked in PPA price because that doesn’t seem to be a good trigger right now because they’re all renegotiating.
Then how does it, how does this flow start?
Joel Saxum: When we looked at the New York bite auction and all these different auctions, you see these wild amounts of money being thrown around. That money doesn’t mean that they have a permit to put things in the water, that they have a PPA that they’re ready to go. All that money means is whoever wins that auction has the right to possibly develop that in the future.
That doesn’t mean that they’re lock stock barrel. We want it now. We can go ahead. That just means that they’ve got the rights. That’s why it was so crazy to watch that those, like the New York Bites, specifically auction, go to such high prices because there’s nothing concrete about that, about those auctions.
The winning that auction just means you have the capability of some time in the future, maybe putting some wind turbines in. So that’s the first part, right? Then it goes to all the planning and securing PPAs and financing and turbines and all this, all this good jazz. E
Phil Totaro: exactly. Joel. And so to also address Allen’s questions, the, the OEMs aren’t gonna spend money on factories until they have firm order book.
They don’t get firm order book until after PPAs are, are well established and. More likely than not there’s an informal you know, acknowledgement that they can reach what’s called F I d or the final investment decision on the project. So in addition to the lease payments that they have to pay the government for those rights, the developers gotta be able to go raise the capital necessary to actually build the project and operate it.
So if they are finding it hard to, because of cost of money is going up again because of inflation, et cetera. If they’re finding it hard to be able to do that that’s going to de necessarily delay building these projects.
Allen Hall: Is it a financing play at the min minute with the f i d the, the f i d is obviously that, that sort of linchpin to the whole project, but what are the variables going into the f i D at the moment?
Phil Totaro: Well, right. That’s a great question because it’s, you know, if you’re asking what’s at the beginning of that chain, you know, you, you have to start with you know, your site identification and, you know, geotechnical surveys you know, bathometric studies, et cetera, et cetera. There’s all kinds of development process that goes into that.
And you know, thankfully, at least for the majority of the the near term or what should have been near term east coast sites, much of that was done. You’re having the problem right now in New Jersey with the whale thing. And that’s slowing down the ability to complete some of the geotechnical and math metric studies.
Sadly. So that’s, that’s one aspect of it, but that’s not what’s ultimately derailing things. It, it goes back to the inflation question and whether or not you know, individual developers are financially solvent enough to be able to, you know, build and operate these, these projects. One reason why, you know, STED, for instance, wanted to partner with PS EEG on the Ocean Wind Project was, or at least originally, was because PS EEG brought certain capabilities, including capital to to bear, you know, they were gonna own, you know, 25% or more of that project.
And to have somebody that was contributing that capital pull out. It provides less certainty for the power offtake and it provides less, you know, which is reflective of the fact that they’re now being sued and trying to counter Sue in, in New Jersey to, to straighten all that power offtake out.
But you also lost, you know, your, your capital provider or a partner in, in the capital.
Allen Hall: Does, does it come down to financial instruments? Is that what it is that. If, if I’m a, a large developer and I’m, I’m losing partners that would help supply the cash for these projects, and they seem to be losing pretty quickly here to now you’re getting down to four or five real key players.
Is the financial stability of those companies enough on their own to raise the capital or, or are they gonna go out and have to sell assets? Are they going to have to try to knock on doors of. Big lenders, BlackRocks of the world. To do with these
Joel Saxum: projects. It’s gotta be more granular than that, right?
It’s not necessarily, yeah. Like you could look at Sted and say, does Sted have the capital to do this? Osted can find the capital to probably to do it, but it’s the individual project. Right. Does that, is that project efficient? Does it have the, the big thing from, from my seat right now is, do we have a ppa?
And are these PPA prices enough to support the, the, the, you know, the, the CapEx at the beginning, you know, amortized over time, and then the o and m costs over the life of the project. Will that PPA stand? And if it doesn’t, then I’m out as a banker.
Allen Hall: Well, I don’t, Joel, I don’t know if it’s just orid by themselves, right?
So ORID as a company, true. But how many project projects have to go bad or sideways where Ted becomes financially in trouble? It isn’t because they have so many projects going on simultaneously. They’re really leveraged that way. It doesn’t take, but a couple, well, that’s
Joel Saxum: why Vineyard, wind and all these other, they’re Vineyard, wind, llc, and Sunrise Wind, llc, it’s, you know, it’s not 100%.
There’s, there’s instruments there too.
Allen Hall: So if the developers are having questions on making the financial decision to turn a project on or off, Then back down the supply chain. Here we go. Where we in America are having an issue of getting into these blade factories, the cell factories, towers built.
What happens and, and what, what, what does this look like because we don’t build them today or next in 2024. Does that just cascade into a bigger problem as we go along? I
Joel Saxum: mean, unless, unless, I mean if we’re shooting for local content, that’s one thing, right. But if, unless other factories wanna pick up, like a lot of these blades for, I believe it’s Vineyard Wind one, are being built in Gas Bay.
They’re being built in Quebec right now. And, and that’s actually a pretty good setup because there’s not a long steam to come down here. In general for the project, right? Of course, we would rather see local content building these, these blades. But the demand, it’s not like they’re saying, Hey, we need to put 5,000 these out right now.
So we need three blades making, or three factories making blades right now. I think they’ve got enough to push the blades out for the, the minimal amount of projects we’re running to date. But if we have another auction go on in the Gulf and another auction going on in different places on the east coast, another auction going on a little bit deeper water or, or California or all these other things to get to that 30 gigawatts, that one factory in gas bay isn’t gonna make it happen.
So Phil,
Allen Hall: how far off are we are are we? 20% behind, 30% behind, 50% behind on some of these factories. Quantity wise?
Phil Totaro: Yes. It’s a, it’s a great question, but a complicated one cuz again, it depends on what the target is. If you’re saying 30 gigawatts by 2030, there’s, I don’t think there’s any way we make it with or without factories and, and domestic content, et cetera.
We’re just too, we’re too late to the game now to be able to build that fast because the, the operative thing there is can you stand up a factory in. You know, 18 to 24 months from, you know, your, your decision to invest in, in that factory, yes you can. But are we going to be sufficiently supplied with vessels capable of doing the large turbine installations?
And the reality is that those vessels are not gonna get built. In enough time to get us to that 2030 target. We are, if again, if 20 30 gigawatts by 2030 is the target, we’re probably about between 40 to 50% behind where we need to be. There are obviously some domestic vessels being fabricated right now, but not enough to, to hit that.
Measure. So again, going back to your comment, if it we’re talking about 15 gigawatts by 2030, which is maybe more likely if we even get to that level, to be honest we’re probably about 80 to 85% of where we need to be. But we, well, assuming that the nael and, and blade factories and, and tower and foundation factories that people have committed to actually go forward relatively quickly, that being before the end of the year.
So we, we can, again, that’s, that’s what makes this kind of a complicated scenario is, you know, it’s how much investment do you wanna unlock and how quickly there’s a saturation point at which, you know, no matter how much investment you throw at it, you’re only gonna be able to move so fast. We’re already, I’m fairly convinced, not gonna meet that 30 gigawatt by 2030.
But we could, you know, if we threw all the investment we could behind things you know, you could probably get up to, you know, 20 to 25 ish. You know, but we’re still in, even in that scenario, you’re still 60% below you know, the, the vessels, the foundation fabrication and the other component fabrication capabilities where we need to be so, It’s just how fast do you want to go?
That, that’s always the question investors have and, and policy coupled with, you know, well, or inclusive of monetary policy kind of goes hand in hand with
Allen Hall: that. Bill has raised a good point here. He’s really talking about domestic manufacturing to sort of fill the void. I don’t, sure. Not sure that offshore content makes it much difference here because the offshore.
Demand, the European demand and other parts of the world are gonna be so high that LM Blade Factory in Gu Bay has nothing to worry about. They’re gonna be booked out forever and that they’re gonna have to build factories. Yeah. And it’s just a
Joel Saxum: matter of where do you build them? Make a choice. Cuz they’re gonna have to go somewhere if, if, with all these plans.
Right? So, I mean, when we talk 30 gigawatts, now remember it’s, it’s 20. I mean, when we, when the conversation started on 30 gigawatts. The, in my head, it’s one of these things like, oh, it’s not too far off from the year 2000. Right. That’s my head, like, well, when the conversation started, about 30 gigawatts, this was 20, this was like 2, 20, 20.
Right. We’re only, we’re already halfway through 2023, so there’s only six and a half years left. Before 2030, and we are at right now, what, like 42 megawatts in the water. That’s not a good sign. I think today we got another tur, we got another tower installed. Right? So that’s, I mean, that’s, that’s positive.
But it, it, I mean maybe Phil, you know this number off the top of your head. I know I don’t. But how many gigawatts of possible space have we actually leased to date? I know the California leases were spaced for about four and a half gigawatts. What are we at on the east
Phil Totaro: coast combined with the, the East coast tenders and California?
Everything all in that Boham has actually done, we’re at sized up to I think something like 28 and a half gigawatts which is good of
Joel Saxum: possibility. That’s been basically the lease
Phil Totaro: rights are, are out there for the lease rights are in place, but as you just mentioned before, it, whether it gets built or not is still up for, for conversation I suppose.
And as we’ve talked about in the past, even California is probably gonna take until 2032 at the earliest to be able to build anything because they don’t have transmission that they are even contemplating putting in place yet. So that’s a problem
Joel Saxum: and we know how things work in California at a snails pace.
So
Allen Hall: then, then, what are the options here? Cause it, it feels like we, there needs to be a financial instrument provided by either state. Or federal government to kick these projects into gear. That’s, that seems like the only option right now because of the inflationary pressures. Banks are not willing to lend, there’s a lot of oversight at the moment on banks.
Getting outside investment from other countries is not gonna go that well, I don’t think at the moment. Where else are you gonna go to, to find a financial instrument to begin these projects?
Joel Saxum: I mean, we do, we do see regularly, like doe backed loans go out, but they’re smaller. Right. Some of the, yeah, I mean some of them for transmission lines and things like that.
Let’s talk
Allen Hall: to DOE just for a brief second here. It does seem like the DO OE is spending money in a lot of different places. They have to focus that there’s only so much money in the world, or at least you would think that there would be that sometimes a DOE doesn’t act like it, but they’re just spreading cash everywhere for all kinds of projects.
I’m not saying that’s wrong, but if you’re gonna have one big goal, you gotta spend a significant portion of that funding on that goal. And it doesn’t seem like they are, it seems like they’re more distributing money in a political sense than it is a accomplishing a. A. Task sense.
Joel Saxum: Yeah. And, and to be honest with you, I’m wondering how much this will play or how much this is going to play into the next election cycle.
I don’t think
Allen Hall: it’ll make a
Joel Saxum: difference. You might see some, some changes in policies and spending as it bo as it comes close to that as well. It might be something that’s talked about in where this money being spent and, and the IRA bill and, and those kind of things. I think we’ll
Allen Hall: already see a decrease in the number of times we’re seeing 30 by 30.
I, I, I watch do oe and kinda see what they’re putting out. There has been a quiet shift away from that and I, I think they’re getting some real numbers to look at, probably from Phil and others that, that says, Ooh, we’re not gonna make it. So let’s not hold this out as a accomplishment. Cause it’s not gonna be an accomplishment.
It’s gonna be. Something where they just do poorly at from the outside. It’s their goal. It’s not anybody else’s goal. But I’m, I, my thought was that they would try to realign, right? That there, there’d be a realignment sometime this summer or this fall on getting these projects out of this merc, this murky area that they’re
Joel Saxum: in at the moment.
Maybe, maybe instead of 30 billion going to Ukraine, we should save two of that and finish these
Allen Hall: wind farms. I’m not sure Congress would do it. See, then this, this is where I get back to Phil on the financial side. On on the commercial side. I think if it’s gonna happen, it has to be done commercially.
What do the, what do the developers do to get these PPAs locked in place to to move on? Do they just have to go to the Governors of the States and just say, open the books, kind of like what they’re doing in New York and. Asking for another 20, 25, 30% in PPA prices so they
Phil Totaro: can move on. Yeah. It’s, it’s altogether fair for the independent power producers to ask for an accommodation when inflation hits.
But the, the real question is, it’s kind of twofold. One is, is does this really necessitate a wider conversation around monetary policy to say, why is the Federal Reserve still going so slowly with. You know, hikes you know, is there something they could do that would damp down inflation faster that, that would necessarily get people back to the table?
What would also bring people back to the table was not only would, Joel mentioned a willingness on the government’s part to potentially issue you know, green bonds, quote unquote but also on, on behalf of some of these corporations. Now, companies like Ebola. In Spain or, or Ted in Denmark have necessarily gone the route of, you know, issuing green bonds to a reasonable degree of success in those countries.
For projects that are, you know, theoretically European or maybe elsewhere. They, they’ve, I know, or Ted’s transferred some of that money to Taiwan, for instance, for, for some of their offshore projects. But they haven’t levered themselves the way that they could here. And I wonder if that’s a commitment that government, state governments would necessarily mandate is to say, look, you know, you guys are gonna have to demonstrate that you’re gonna be able to come up with more cash either through, you know, that type of a capital raise or by finding another, you know, investment partner.
And those. The kind of large scale investment partners that they want are tying their money up in oil and gas right now because they’re seeing higher returns at this point. So as long as that’s the case and they don’t see the the value for money, you know, if you can’t raise the P P A prices, And, you know, the developers complain that the, that the projects are unviable, which, I mean, I, I only believe that up to a little bit of a point.
I think this is, yes, obviously inflation’s biting and you need to be able to accommodate it, but there’s plenty of margin these days for, especially offshore independent power producers. They, they could, they could do with a little, a little bit less, you know, 1%, 2% less. So there, there are things that could be done.
The projects that
Allen Hall: in the United States are, are part of a larger portfolio of projects that they can compete in, right? And if the US projects are not that profitable, let’s get down to what it is profitable. They have other choices where they spend their money, and I think that’s what’s happening at the moment.
The or DIDs of the world are saying, well, I can make more money in Europe. Why am I messing around in the states and getting locked into something that I know is not a real winner, where I can make another point, two points, three points over in Europe, I’m, I’m out. And does is, is that what’s happening right now or is that the U essentially the US has competing against Europe and it definitely is competing against China.
Does that then go back to the point of. You need some sort of state instrument, federal instrument to get these projects
Phil Totaro: going. That’s one mechanism, yes, is the short answer. That’s one mechanism that could be utilized
Joel Saxum: at some point in time. You gotta do something to tip the scales, right? Because if you’re the one sitting there with the capital allocation in your hand and you just looking around like, where do I go?
Well, if I can, if I can take a loan note at 6% or a loan note at 3%, then, or then I’m gonna go elsewhere. When you’re talking billions of dollars.
Allen Hall: So the, the supply chain on the East coast right now that’s gonna be creating these offshore wind turbines in theory at some point, where’s that all focused at right now?
Cause from the outside observations, I see it’s happening in New York state almost exclusively because of their ability to probably help finance some of these. The P P A pricing. The leverage they have in Congress. New York’s a huge state, right? They have a lot of political power. Is that where most of these factories end up?
Or in Virginia, same reason. It,
Phil Totaro: it’s likely to be New York and New Jersey. There will be a few factories in Massachusetts. You could actually see South Carolina spool up quite a bit because there’s there’s no unions. And that’s still, I mean, why do you think GEs there with some of their manufacturing, even in gas turbines and, and such?
So, you know, Boeing’s also in, in, you know, obviously unrelated to offshore wind, but Boeing is, is there for the same reason. You know, California has been, again, a little slow on the uptake with some of this, but you are, I mean, even the Port of Long Beach now that they saw the outcome of the. The auctions, you know, six, seven months ago, they got their act together pretty quick cuz there were a lot of voices coming out and saying, well, what are we gonna do for ports?
And, and this one, you know port in Humboldt can’t serve, you know, the, you know, all these projects throughout, not only Northern and Southern California, but also Oregon. So the, you know, port Long Beach has come out, said, okay, we’ll expand, we’ll expand you know, everybody. We’ll get their act together if they feel like they’re gonna miss out on an opportunity.
But I don’t think everybody quite feels that way at this point. We’ve even calculated that there’s, you know, talk about port infrastructure improvements. There’s something on the order of like 800 million in port infrastructure improvements that needs to be made that hasn’t been committed to yet.
At least not officially. So, you know, we’re, we’re a ways off from where we need to be. And the one thing that unlocks all of that is bringing people more certainty. Right now the, the one knob that the government has to turn as far as I can see, or the biggest knob that the government has to turn is federal Reserve policy.
They can try to damp down inflation faster. Which will, you know, trigger a lot of these other things that will ultimately lead to more investment commitment in the infrastructure and the, the manufacturing capacity. You know, I
Joel Saxum: think one of the things not to be missed here either is when it comes to moving things around in the maritime world, distance isn’t as big of a deal as it is on shore.
So the first substation that’s being built for, I believe, vineyard, wind, It was built in Texas and it just left not too long ago. Right. So the, the, the capabilities of ports and manufacturing and, and those kind of things being done along the Gulf Coast I think sh in my mind should be leveraged a little bit more to help the East Coast, cuz.
If you want to, if you want to use a port facility, there’s a lot of ’em existing down here. There’s a lot of manufacturing, there’s a lot of assembly areas. They’ve been doing it down here for big time, for a long time, and they got the expertise, the people. They know all the coatings. They, they’ve, they’ve been through the whole thing.
They know how they’ve got facilities built for launching these platforms, towing these platforms, all the above. So that’s one of the things I think that we could leverage a little bit more to as a boost to the East coast is using the Gulf and Dragon stuff out around Florida now.
Allen Hall: Joel, I think, and Phil, if you’ve watched some of this later discussion on particularly Massachusetts, where they’re talking about raising the prices of electricity to start paying for these offshore projects, right?
So they’re gonna have to raise the PPAs to get projects off the ground. The governors are getting involved in Massachusetts and New York and particular, and into those discussions. They have to do that. They really have no choice. So when they, when they flip that switch of higher PPAs, where they’re going 25, 30% higher, so instead of being at 75, they’re gonna be at a hundred dollars a megawatt hour, which is where they’re gonna end up most likely.
Then I think the local content’s gonna become a big deal. Because there’s gonna be pressure from the local citizens saying, oh, if I’m gonna pay a hundred dollars a megawatt hour, I need my brother-in-law to be working. Right. And so the Texas thing, Joel is just gonna go away. There’s just no chance they’re gonna be able to sell that and still be reelected.
Yeah, that’s true. It’s such a difficult market.
Phil Totaro: You also see even the governor of Louisiana’s now kind of on board with offshore wind, and not just because of the Gulf projects, but because of he sees the fabrication opportunities. There’s still a lot, I mean this goes back to Hurricane Katrina. There’s still a lot of places in new or in and around New Orleans that were kind of abandoned after the hurricane and never had an opportunity to, to be revived.
So there’s still plenty of space down there to be able to put. Support facilities in and, and accommodate not just the, the Gulf Mexico projects which will be huge if, if those move forward. But, you know, continuing to, to support anything on the East coast as well. So there, there’s a lot of people keenly interested, but there’re.
There are decisions that need to be made, like you said, from Massachusetts, New York, et cetera, where the projects are actually being built in the first place. Yeah.
Allen Hall: If you look at where they’re building ports of the minute, if you have Albany, New York, like they’re talking about two or three different ports, not very far from Albany, New York.
You have some around Long Island. You have one in Kinetic or two in Connecticut. You have a couple in Massachusetts eventually. Right. So you can see the writing on the wall here. They’re not gonna let it out of their. Domain if they can prevent it, right, because they have to show something happening on shore, that’s where the jobs are.
If something’s happening 50 miles away in the water, it’s pretty hard for the local constituents to drive by that and see it. Right? So you, they want to have that, the docks and the turbines sitting on the shoreline. They need that. The politicians need to be able to show that, and the states and the governors need to be able to show that.
I don’t see how they move away from it, which, which adds to the constraint of how the heck this all gonna get done. Right? So, You don’t have the F rids kicked off, you don’t have the financial instruments where the, the, the Ords of the world are gonna be able to maybe do this themselves or, or think this is a high priority project.
Meanwhile, the states are kind of stuck eating higher PPAs, and then at the same time, they’re probably gonna have to kickstart a bunch of factories in their own state to make it seem sellable. Is, is that where we’re at today?
Phil Totaro: Which begs the question, are they gonna end up doing some kind of horse trade of, you know, guarantee us a factory and we’ll guarantee you a 15% boost in the PPA price?
You know, I think it’s gonna come down to that kind of horse trading to, to get, you know, job commitments and factory commitments in exchange for something. I think
Joel Saxum: you’re there. Here’s a thought. Now this is a little bit conspiracy theory ish. However, I was thinking about this the other day after a conversation, Allen, you and I had, do you think that the temperature here or the the ability to negotiate would be different if the companies coming in and doing these developments were US-based companies versus non-US based companies?
Because there is not one that is a US-based entity. Every one of ’em has got a headquarters somewhere else, so I don’t think they have the, the, the us you know, the US population’s best interest in mind. If it was, you know, like a US company, like a Boeing or something, we said that earlier. It has nothing to do with offshore wind, but like, if it was that home company, like we’re gonna do this for the, for the states, there might be a little bit of an easier negotiation.
Phil Totaro: Yeah, the independent power producers at, at the moment are not again, we’ve talked before about Invenergy is is majority owned by a Canadian Canadian company. But all the other, you’re right, I mean, all the other independent power producers and developers are, you know, have a, a foreign owned majority.
Right? So I think the short answer is yes. We, we tend to. Like the, the patriotic thing. At least most of the time, although I actually, you know, again, not to get off topic, but I worked for Sikorsky Aircraft Corporation back in 2003 when they were re tendering the presidential helicopter contract. An American company, Sikorsky flew the president for as long as the president’s ever flown in a helicopter, and they ended up allocating the project to Euro copter.
So it, it was you know, that was right. Yeah. So you know, I, we could, we could say, you know, made in the USA all, all we want. But the only way we can really say that is by getting the, I mean, you’ve got ge, which is obviously gonna keep lobbying for it. They are. Technically even though they’re, you know different organizations are, you know, part of GEs in, in France as well.
But it’s a, it’s a US-based parent. I think the supply chain companies are gonna potentially push, even though again, you know, Vestus is Danish of course. And Siemens, GA Mesa is, is well, Spanish, German still sort of Spanish at this, at this point. So, you know, you’re, you’re at a point where they’re gonna have to make commitments for domestic production.
If they’re gonna get the politicians excited to do anything and like Allen’s been kind of driving at, if we’re gonna do some kind of a horse trade, there’s gonna have to be some kind of America wins. To be able to get the local politicians excited enough to get the, the PPAs renegotiated and. Keep in mind that all these, all this power needs to go somewhere.
And they have a, the local politicians also have a say in the electrical interconnection as well, which again is, has been a problem for the likes of Sted in New Jersey and other companies who are trying to negotiate cable landing points and, and power offtake. So yeah, this the, you, you’re gonna have to, everybody’s gonna have to give something.
And what the local politicians are gonna want is what they always want. You know, tax, revenue, jobs and, you know, something domestic. And the OEMs want and the, the independent power producers, the financiers, insurance companies, everybody else that’s involved wants certainty and profitability. Yeah.
Allen Hall: And with the elections being about 15 months away, just about. There’s gonna be two plays. Everything’s gonna happen just after the election, right? All the horse trading’s gonna happen before the election. And then when the government is established, then all, you’ll hear all the contracts and stuff laid out, or it’s gonna happen in the next eight to nine months.
Those are your two windows? I, I think so. I’m really watching in Massachusetts to see how this plays out. Cause it feels like it’s gonna be before. 2024 elections. It
Joel Saxum: has to be, to make any, to make any progress. It’s gotta be
Allen Hall: right. The I think in, in states like Massachusetts and New York, the offshore wind development matters in places like Florida, Texas, nobody cares, right?
So it’s not gonna be part of a national scene, but I think a locally, it’s gonna play big. Phil, hey, it’s great to have you back. We haven’t talked to you in a while and I, I always miss having you on the program and cuz you just provide some insight that Joel and I don’t have, cuz you get your fingers in the data.
So. If, if you’re not familiar with Phil Totaro and the work of Intelstor, check them out on LinkedIn and on the web. Good information. And Phil, I appreciate you coming
Phil Totaro: on the program. Thanks again, Allen. I appreciate you having me.
