Wind boom, wind bust (Two Windicators)

0:00This message comes from Capital One with the Venture X-Card. Earn unlimited double miles, a$300 annual Capital One travel credit, and access to airport lounges. Capital One. What's in your wallet? Terms apply. Details at CapitalOne.com. This is Planet Money from NPR. Late last summer, Mike Salado was in his New Orleans office early. A hurricane was brewing in the Gulf of Mexico. But Mike was fixed on his screen for another big event for the Gulf. See, Mike had helped set up the first ever auction for offshore wind farms in the region. He works for the Bureau of Ocean Energy Management. That's a government agency that manages how the sea, owned by the government, is used for things like drilling oil or gas.

0:48It was leasing out patches of water for companies to build giant wind turbines in the water and sell their electricity. It was a lot of anticipation. We were just waiting to see what those first bids would be. A lot of excitement. A lot of excitement. And you can hear it in his voice. I mean, look, Mike is a steady hand on this big government work. So, you know, he's appropriately measured. But this auction could mean pretty high bids. A similar patch of ocean near New York had gone for over a billion dollars. And when Mike had asked around with developers about interest in this Gulf site. We had a very good response.

1:24So we thought that there would be competitive interest. But the sea patches did not go for anywhere near a billion dollars. One of the three sites sold for$5.5 million. That's well under 1 % of New York's. And two didn't even get any offers. Hello and welcome to Planet Money. I'm Waylon Wong. I'm Darian Woods. Today on the show, wind. Wind is in this weird economic moment. Boom and bust all jumbled together. It's this perfect opportunity to watch how a brand new market gets created or doesn't. The tale of wind in two acts today adapted from our daily podcast, The Indicator. First, the lows. An auction flop points out one of the overlooked keys to the green energy transition.

2:09And then the highs. The industry has created one of the fastest growing jobs in the country. The number of wind turbine service technicians, or wind techs, is expected to grow by 45 % over 10 years. So if Darian goes to sea for himself, he tries his hand at being a wind tech way up in the clouds. Okay, this is the windigator on the top of an air turbine. It's windy. Who'd have thought?

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3:20Earn unlimited 1.5 % cash back on every purchase, every day. What's in your wallet? Terms apply. See CapitalOne.com for details. The Gulf of Mexico is a massive patch of sea framed by the U.S., Mexico, and Cuba. It's mainly known for its oil industry. and Mike Salata explained that it has a couple of advantages for offshore wind. First, it's not too deep. There's a shallow slope to the water as you enter. The water is much warmer than the Atlantic. Growing up in Boston, I'm not sure how I ever went in the water in the Atlantic, but generally it can be 80 degrees. It's very warm. Also, it's got all that seafaring expertise and equipment from the oil and gas industry.

4:07Those could be repurposed for wind. There's a lot of strengths here in the Gulf of Mexico that I think will make offshore wind success in the future. Now, Mike considered the auction a success, almost a proof of concept. But we wanted to hear from others in the industry about why this auction for offshore wind energy failed to get any interest at all for two sides. It was a little deflating. We asked Mark Repsha, a partner at PA Consulting, which is a clean energy advisory that worked with some of the energy companies that were considering bidding for the auction. First, Mark says there are some downsides to the area.

4:42If you think about what other kinds of electricity you could generate in the region, like in Texas, there are cheaper options than to drill giant windmills into the Gulf floor, like solar power. If you look at the western part of the state, there's a lot of empty land, there's a lot of space to do all of this development, and you can do it at a fraction of the cost on a much quicker development cycle than you could develop that offshore wind in the Gulf of Mexico. That being said, you generally can't rely on just one source of renewable energy. When the sun isn't shining, you need something else.

5:17So offshore wind likely has a place in a portfolio of energy sources. Another downside to the area was that hurricane at the time of the auction, Hurricane Adalia. And Hurricane Adalia was, of course, not a one-off in the Gulf. Hurricanes can damage wind turbines, but even when there's not a hurricane, it's actually calmer than outside New York or Massachusetts. Wind speed's not as fast in the Gulf of Mexico as you see in the Northeast, so there's a trade-off. All right, so the location had some disadvantages, but these surely can't have been so bad as to warrant a 99.5 % discount on their own.

5:56No, and so we were curious, was there an issue with the auction itself? Right. And being auction geeks, we learned that they use what's called a simultaneous ascending multiple round auction. And if you'll excuse us for nerding out for just a second. Because that term wasn't nerdy enough, Darian. Exactly. Right. So I've got to give the explanation. This is like a gold standard for government auctions. It's basically like an eBay auction when you've got a lot of things selling all at once. But instead of things going under the hammer and actually selling once the auction is over, that's actually kind of like the dress rehearsal.

6:29So bidding companies will go back to the drawing board after the first auction. They'll figure out what they've learned from that, you know, kind of almost like a practice round of an auction. And then they'll bid again. Auction experts say that this maximizes government revenue because those practice rounds make the companies less risk averse. We looked at all this and we thought, you know, there probably wasn't a problem with the auction design itself. In fact, this might have brought in more money than if it had been a single round auction. Let's look at some other possible culprits for why this auction drew so little interest.

7:03Mark Rupture says another issue is the cost of building the wind farms. Drilling into the seabed is never cheap. And lately... Some of these initial cost estimates have slowly started to increase, sometimes quickly started to increase. And you won't be surprised to hear the blame put on supply chain snarls, which raise costs. High interest rates at the moment also increase the cost of borrowing. And once you've built the offshore wind farm, you've got to connect those high-voltage cables to land. And when they hit land, that means you'll need to fence off the area. So finding and permitting that can be a challenge.

7:40So those are the difficulties building the wind farms. But that shouldn't fully stop developers from wanting to build them, because these can be partially offset by federal subsidies. The Inflation Reduction Act, it was a huge benefit to the industry. You're knocking 30 to 40 percent off of the construction and installation costs to develop these projects. And so the costs and the federal subsidies are more or less similar around the country. All right. So we've ticked through the auction design, the pros and cons of the location, the construction costs. And we have finally hit the main answer for why the Gulf auction had so little interest.

8:21Right. So Mark says it comes down to what the electricity can be sold for. Generally, states are in charge of how their electric grids operate. And so if you want to encourage offshore wind in your state, financial incentives matter. And the main financial incentive given around the country is a guaranteed price, a price of how much the electricity will be bought for. Mark says this is conspicuously minimal in Louisiana and Texas and Mississippi. They haven't done anything really on the offshore wind side to say we're going to provide an avenue for cash flow security. So when you kind of present that risk to a developer, when you're talking about projects that are in the billions of dollars, the calculus changes for them and they kind of have a pause, if you will, on, well, do I really want to take that risk?

9:12Every state basically has a different system for electricity. So even with the federal supports in place, if the whole country is to dramatically boost green energy, what this auction reveals is that the states are critical to creating the electricity markets where that can happen. The experts we spoke to were clear that state-level deals to attract offshore wind energy were key. But, you know, as we're exploring this clean energy future, we're still figuring out what sources are viable. Even in the Northeast, offshore wind companies are struggling to find routes to profitability. Despite these struggles, Mike is still optimistic about offshore wind in the Gulf.

9:51But overall, I think I am bullish on offshore wind in the Gulf of Mexico. I think there's a bright future there. But whether or not that bright future for offshore wind happens may depend on the politics closer to home. Up next, the boom. Wind tech jobs are on the rise. And so is Darian. He travels to Maine and climbs a wind turbine. That's after the break. We're opening the roof hatch.

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11:46Terms and conditions apply. At the Bingham Wind Farm, you start your day with stretches. Picture a circle of men in an industrial garage. Beards, beanies. They're pulling on their steel-capped boots to stretch their quadriceps. I mean, it's a vital muscle in this job, which I'll find out later. This is all before a conversation about what needs to happen for the day. And in the crew, you've got Connor Terrio. He's a lead technician for Vestas. He's had the job for several years. He's super measured, which is important because safety is a huge priority at this company. There's a lot of electrical hazards just inherent during the motor control cabinets, rotational mechanical forces.

12:36There's a lot of hazards with the job.

12:44Festus is among the top wind energy companies in the world. It's a Danish company servicing more than 57 ,000 wind turbines globally. It's got a brigade of wind techs maintaining and fixing wind turbines. And with US wind capacity forecast to double in the decade to 2030, that is growing. And look, I'll be honest, when I read about this, I did not know what the job actually was. Like, sure, maybe the blades need replacing once in a while, or the generators presumably simply break down sometimes.

13:22So that's how I found myself wearing a hard hat while riding an orange snowcat. You know, the snowmobiles of tracks like a tank. And today Connor's focusing on the annual maintenance of one of the wind turbines.

13:40So in between the snowy slopes of this woods in Maine, you've got 56 bone-white wind turbines and stretched into the sky. Each are about as high as a 28-story building. They're beautiful to some, they're ugly to others, but when all the wind farms are combined, they are generating about 10 % of America's electricity. But in any case, I couldn't see them that day because of the fog. I mean, I could barely even see the one that we were meant to service. If you want to head right up, meet Matt up there, I'll grab that stuff from you and put it in a bag. Today's job, make sure the parts are all in good order.

14:17Top up the lubricants and oil, check the engine's working well. We walked inside the ground floor of the wind turbine. Above us was a 34 ,500 volt cable and a very tall ladder. Knowing that I was going to soon be climbing up the inside of the equivalent of the Statue of Liberty, I was keen to learn more about these safety protocols I'd heard so much about. And in this case, safety meant a lot of gear.

14:48Hard out and harness, obviously, but there were so many carabiners. Small ones, big ones, carabiners for my carabiners. As we got ready for climbing, I felt like I was carrying half my weight in these spring-loaded aluminium hooks.

15:07Our ascent was aided by a clever piece of technology called Climb Assist, which is like a little electric tug up the rope. Kind of like pedal assist on an e-bike. It makes the scrambling easier.

15:22At the top was the engine room. Even with the mechanical help, I really understood why they were stretching their quads earlier. I was a little tired when I got to the top. I mean, if you guys checked, hydraulic oil. And there you had a big blue dome, which was the electricity generator. You also had a computer and a steel cabinet to one side, tubes and cables neatly tucked away. And this is where a small team of wind techs will be based for two or three shifts. The turbine is off at the time. You don't want to be tumbling around, of course. And on the way up, Connor noticed some oil drips underneath the engine room.

16:02We will drop down. It might have been a residual gear oil leak, but we can go investigate that. Let's investigate the leak. So we headed back down one floor. Looks like the gearbox is over full at one point. So there's a little bit on the deck below us. It'll be important to get that cleaned up. Cotta took a note to get his co-workers to figure out exactly how much oil the gearbox actually needs. So we'll have them do that. That way they're all prepared for tomorrow morning. The team was also replacing filters and refilling the turbines with lubricant that will slowly pump to the blades over the next year.

16:37They were sweeping out a year's worth of flies and ladybugs who had made the wind turbine their final resting place.

16:47We were like mice scurrying inside a sophisticated car engine. We were mice with hardhats on and a ton of carabiners. Looking up at one of those sleek, minimalist blades, you never would have known the complexity of what was behind the steel and fiberglass. I mean, I certainly didn't. We went slowly going down, one person at a time. Safety first, because one dropped cell phone or wrench could be deadly for somebody below. One fatality or serious injury could turn the tide of public opinion against these wind turbines. And that is already fragile enough as it is. You know, around the US, some people are worrying about the noise or what they'll do to the landscape.

17:35And back at the office, I asked Connor about what he'd heard from the people in the town. You know, certain guys will sort of gripe about, oh, you know, I used to hunt that land and you guys have ruined it. But honestly, we see moose and deer all the time. Like the animals are still here. But for the most part, people are very receptive. The wind farms open to the public. So people on snowmobiles, hikers, hunters, they'll actually chat with the wind decks. Our guys are really good about taking the time to explain certain things and answer questions that they may have. And everyone, for the most part, is honestly very positive.

18:10And Connor himself was really good about taking the time to show me through his day. His time is valuable. His base pay is around$73 ,000 plus overtime and benefits. And that's only likely to increase as the competition for hiring wind turbine service technicians heats up. Well, thank you so much for your time. I really appreciate it. Absolutely. Thank you for coming. These episodes were adapted from Planet Money's daily podcast, The Indicator. Every weekday, one insight on the news from an economic point of view in 10 minutes or less. The original episodes are produced by Cooper Katz McKim and Julia Ritchie with engineering by Valentina Rodriguez-Sanchez and James Willits.

18:53They're fact-checked by Sarah Juarez and edited by Dave Blanchard and Kate Kincannon. This is NPR. Thanks for listening.

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