Biden's Mixed Signals // Massachusetts Offshore Wind Project "Non-Viable" // The Northeastern Heating Crisis

Biden's Mixed Signals

President Joe Biden said at a rally this weekend that there will be no more oil drilling.

This sentiment contradicts his administration's pleas for the oil and gas industry to ramp up production. And as we covered yesterday, the shale patch's output is starting to slow down due, in part, to a lack of investment. While there is no near-term solution to the world's energy woes, Biden's flip flopping statements create an atmosphere of unpredictability that make it harder to invest, thus taking any medium-term production increases off the table. 

"Mixed messaging--impossible to trust," Matt Gallagher, the CEO of Greenlake Energy, tweeted. "All we want to do is drill more. How can I justify a second rig in the face of this uncertainty?"

The energy crisis has created a serious internal problem for Democrats, many of whom want to support Ukraine by upholding sanctions on Russian energy--their green wing's climate ambitions are now colliding into the realities of the party's geopolitical ambitions, which demand an increase in American oil production. This tension will also frustrate the President's ability to tackle inflation. 

But Biden's hasn't only turned his thumb down for oil. In California last week, he told the crowd that he wants to shut down coal plants across the country. America's already about to lose nearly a quarter of its coal plants to retirement by 2029, according to an EIA report covered in today's Conversation Starters.

This spells trouble for America's electrical grid, as coal will be replaced by intermittent renewables and just-in-time natural gas. Thus, more of America's electricity generation will be reliant on a fuel few feel capable of investing in--higher electricity bills for consumers, industrial and residential, may tighten inflation's continuing squeeze. To say nothing of the potential electricity reliability problems losing base load power plants like coal creates.

When asked about Biden's coal comments, the White House Press Secretary said, "It was loud and hard to hear, I think, or, maybe not exactly what was being said. I currently don't want to get into punditry from here and why we did it, or why we did it on TV."

Massachusetts Offshore Wind Project "Non-Viable"

The Commonwealth Wind project, sited off the coast of Massachusetts “is no longer viable and would not be able to move forward” under the terms of contract, according to a motion recently filed by the project's developer. The project is supposed supply 1200 MW of offshore wind power starting in 2028.

"Attorneys for Commonwealth Wind in the motion cited global commodity price increases, in part because of the war in Ukraine, the sudden spike in interest rates, prolonged supply chain constraints and persistent inflation as reasons for the increased expected cost of construction," reports CNBC.

Another offshore wind project has also run into trouble. Dominion Energy "expects state regulators to approve by the end of the year a settlement agreement addressing its concerns over a performance guarantee tied to its $9.8 billion, 2.6-GW offshore wind project," reports Utility Dive. 

The projects' costs are spiking right when the Biden administration wants to get ambitious on offshore wind. Biden has set a permitting target for 30 GW of offshore wind by 2030. 

The Northeastern Heating Crisis

America's most densely populated region is in deep trouble this winter. It's already rationing heat oil and warning of natural gas shortages. 

"Heating oil delivered to New York is the priciest ever. Retailers in Connecticut are rationing it to prevent panic buying. New England’s stockpiles of diesel and heating oil — the same product, taxed differently — are a third of normal levels," reports Bloomberg. "Natural gas inventories are also below average. A Massachusetts-based utility is imploring President Joe Biden to prepare emergency measures to prevent a gas shortage."

Families in the Northeast are expected to pay 23% more to keep warm with natural gas this year compared to last, bringing the average monthly bill to $1094. 

“It’s going to be pretty bad,” Marcus McGregor, head of commodities research at Conning Inc. told Bloomberg. “Diesel, heating oil and natural gas prices are through the roof. When you’re on a fixed salary, how does it impact your overall budget? It has to be bad.”

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Conversation Starters

1. Dominion Energy is staking a hard look in the mirror. "The lackluster performance of Dominion Energy’s stock in recent years has prompted the company to launch a 'top-to-bottom' review of its businesses, Robert Blue, Dominion Energy president and CEO, said Friday during a call on third-quarter earnings," Utility Dive reports. "Despite improved earnings in the most recent period compared with a year earlier, Blue said the stock price – down about 12% this year – 'has not met our expectations,' especially given strong performance on the operating side across its businesses."

2. Germany's about to drop some serious coin on capping its gas and electricity prices. "The German government plans to spend as much as $82.8 billion (83.3 billion euros) on funding a planned cap on electricity and gas prices next year as it looks to help businesses and consumers with coping with high energy costs," Oilprice.com reports. "The proposed financing for energy price caps would represent 42% of the planned $199 billion (200 billion euros) 'defensive shield' to protect companies and consumers against the impact of soaring energy prices. At the end of September, the German government said that it would ditch earlier plans for a gas levy on consumers and instead would introduce a gas price cap to curb soaring energy bills."

3. American coal plants are retiring at a breakneck pace. "Due to continued competition from natural gas and renewable resources, 23% of the 200,568 megawatts (MW) of coal-fired capacity currently operating in the United States has reported plans to retire by the end of 2029," reports the Energy Information Administration. "Between 2012 and 2021, an average of 9,450 MW of U.S. coal-fired capacity was retired each year. In 2022, U.S. coal retirements will total 11,778 MW if the remaining retirements reported to us proceed as scheduled. The pace of planned coal-fired retirements slows down after 2022; the largest amount of capacity retirement we expect over the next seven years is 9,842 MW in 2028."

Crom's Blessing