Orsted's Americas CEO on Fixing What Went Wrong in Wind Power

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:25)

And I'm Tracy Alloway.

Joe Weisenthal (0:26)

Tracy. We've been talking a lot of electricity lately, actually.

Tracy Alloway (0:29)

Yeah, it's been, what, Energy Month here on Odd Lots?

Joe Weisenthal (0:33)

Not really intentionally, but yes, it's sort of becoming Energy Month here on Odd Lots.

I find, like, understanding any markets, understanding any commodity markets or whatever is sort of extraordinarily difficult, but I find power and electricity to be sort of like orders of magnitude. Like, it just sort of, like, my mental model, how it all works, is so still, like, inchoate and immature, and I'm just sort of understanding it. Like, it feels like so much more complicated. All these, like, auctions and micro-auctions and mini-markets and, you know, it feels a lot more complicated in my mind than, say, like, trading oil.

Tracy Alloway (1:09)

My mental model for how it all works is that meme from It's Sunny in Philadelphia with the post-it notes, right? It's, like, this weird pseudo-government private thing where, on the one hand, you have natural monopolies in the form of the grid, and then, on the other hand, you have all these private individual actors who are trying to do all these new things, and it just seems enormously complicated. And in some ways, it's becoming more complicated because you do have efforts to hasten the energy transition in the form of things like the Inflation Reduction Act, this network of tax credits and subsidies seems very difficult to understand to me as well.

Joe Weisenthal (1:53)

Right, and we had this grid that for years sort of operated with gas and coal and some nuclear.

And now, over the last several years, and the Inflation Reduction Act has tried to accelerate it, get more renewable clean energy on the grid. So we're sort of putting a new model of production onto an existing model of distribution, which creates all kinds of new things. One thing in particular, though, we're here in the Northeast, and we don't get a lot of sunlight, or we do, but we get...

Tracy Alloway (2:25)

It's erratic.

Joe Weisenthal (2:25)

It's erratic, and for much of the year, there's hardly any. And so if we're going to sort of decarbonize a lot of the Northeastern part of the grid, the bet is that a big chunk has to come from wind, and in particular, offshore wind.

Tracy Alloway (2:38)

Yes, absolutely. And this is something that we've touched on before in an episode with Chelsea Jean-Michel, the wind industry analyst for Bloomberg NEF, so one of our colleagues here at Bloomberg. And I think to me, the big question is, we have all these projects, and there have been some hiccups over the past year. So we've seen projects canceled. We've seen a bunch of big energy companies take impairments on wind projects. We've seen energy stocks fall quite a bit. There's the potential return of a known wind energy disliker, let's put it that way, in the form of Donald Trump. All these different headwinds for the industry. And to me, the question is still, are these growing pains for something which requires enormous upfront investment and the creation of a lot of really, really big structures in the form of turbines?

And complicated supply chains are needed to build those, and huge investment outlays, and all of that?

Or is this something more fundamental about the business? That's the big question in my mind. Is this just a question of transition and getting started, or is this maybe saying something more long-term about the industry?

Joe Weisenthal (3:55)

I think that's a great way to frame it. And the only thing I would add is a further complication to this question is that the IRA and this particularly aggressive imperative right now is coming at a time when like every industry saw supply chain disruption. And every industry saw rising cost of capital thanks to the rate hikes and inflation, et cetera. You know, if we had a do-over, we would have started this done an IRA like act in 2009 or 2010 when we had significant unemployment and commodities were dirt cheap, but we can't go into the past. And so answering these questions, how much is growing pains? How much is the bad timing with supply chains? How much?

Very complicated, but that fits the theme of how complicated the energy markets are, power markets are in general.

So we continue our process of discovery, of learning about how it all works.

Tracy Alloway (4:48)

I am excited. We do in fact have the perfect guest for this episode.