Category: Energy

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Energy Resource Stocks

Big Oil in the Green Revolution: Can Exxon Mobil Be a Sustainable Investment?

Imagine a world where the biggest names in fossil fuels are also leading the charge towards renewable energy. It might seem like an oxymoron, but that’s the tightrope walk Exxon Mobil (XOM) is attempting. This article explores how this energy giant is navigating the transition to a greener future, and whether it can be a viable investment for sustainability-focused portfolios like the Hennessy Energy Transition Fund.

For decades, Big Oil has been synonymous with environmental resistance. However, the tide is turning. Public pressure and the economic realities of climate change are forcing these companies to adapt. While complete divestment from fossil fuels remains a possibility, some investors believe collaboration with these established players might be a more pragmatic approach.

The Hennessy Energy Transition Fund exemplifies this strategy. Exxon Mobil surprisingly holds the top spot in their portfolio, alongside other oil majors like ConocoPhillips (COP) and Chevron (CVX). Portfolio manager Ben Cook explains this seemingly contradictory choice by highlighting Exxon’s pursuit of “practical pathways to transition.” This includes investments in carbon capture and storage technology, as well as lithium extraction for electric vehicle batteries.

Cook argues that Exxon’s commitment to renewables is more measured than some of its peers. Unlike companies scrambling to jump on the bandwagon, Exxon maintains a “shareholder-focused” approach. This translates to projects with a higher likelihood of delivering consistent returns for investors during the energy transition.

Exxon’s size also offers unique advantages. Their “deep pockets” ensure renewable initiatives aren’t waylaid by political winds like tariffs or tax credits, which can cripple smaller players. The company’s long-term commitment to lithium, even in the face of price fluctuations, further demonstrates this stability.

For Cook, Exxon’s “integrated business model” is another key selling point. When oil prices dip, profits from other sectors can help offset the losses, leading to more consistent financial performance. Additionally, Exxon’s vast resources allow them to pursue diverse renewable ventures. Their total capital expenditure in 2023 was a staggering $23 billion, making investments in green energy projects mere “rounding errors” in comparison.

Environmental, Social, and Governance (ESG) investing has become a powerful force in the financial world. However, the lack of standardized criteria makes defining a truly “sustainable” company a challenge. For instance, some ESG funds might include Philip Morris International (PM) due to their reduced-risk tobacco products, while others may exclude them entirely. This ambiguity allows companies like Exxon to potentially fall under the ESG umbrella.

Cook believes the growing emphasis on ESG could incentivize Exxon to further invest in green initiatives. Attracting investors who prioritize clean energy is crucial for Exxon’s long-term success, and their pursuit of low-carbon solutions positions them well to do so.

Critics may scoff at this notion, particularly with the urgency of climate change. But as the saying goes, a journey of a thousand miles begins with a single step. While baby steps might not be enough to appease everyone, Exxon’s efforts could represent a turning point for the entire industry.

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Energy Latest Market News

Is NuScale Power a Future Leader in Nuclear Energy?

  • Global clean energy shift boosts nuclear power demand
  • NuScale Power sees significant stock surge despite volatility
  • Analysts optimistic but caution high-risk investment

 

As the global quest for sustainable energy solutions intensifies, nuclear energy stocks are increasingly in the spotlight, with NuScale Power (SMR) leading the charge. This company, pivotal in the transition towards greener energy, has demonstrated significant market movements in 2024, captivating investors and analysts alike. With the ongoing shift to cleaner energy sources, nuclear power is poised for substantial growth over the next several years.

NuScale Power, a pioneer in modular nuclear technology, operates at the forefront of this sector. The company’s innovative approach with the NuScale Power Module (NPM), which produces 77 megawatts of electricity, addresses diverse energy needs including electrical generation and hydrogen production. Founded in 2007 and making its public debut in 2022, NuScale has experienced its share of market fluctuations. Despite a notable decline in 2023, the stock rebounded with an impressive surge of nearly 150% in 2024, bringing its market cap to approximately $1.99 billion.

However, investing in NuScale remains a speculative venture. The company’s efforts are largely focused on commercializing its groundbreaking technology. Although it currently derives revenue from engineering and licensing services, NuScale anticipates a breakthrough in commercial deployment soon. Notably, the company boasts a robust financial foundation, free from debt, and has been successful in securing new orders and advancing revenue-generating projects.

The geopolitical landscape has also played a role in bolstering nuclear stocks. The recent U.S. legislation that prohibits uranium imports from Russia, coupled with a $2.7 billion government investment aimed at augmenting domestic nuclear fuel production, has created a favorable environment for firms like NuScale.

Investor sentiment remains buoyant regarding NuScale’s prospects. The company’s small modular reactor technology, the only such innovation certified by the U.S. Nuclear Regulatory Commission, stands to potentially accelerate its market penetration. Recently, NuScale inked a significant deal with Standard Power to develop facilities projected to generate two gigawatts of clean energy, sufficient to power 1.5 million homes.

Financial forecasts are optimistic, with revenue expected to increase from $22.8 million in 2023 to $63 million in 2024, and projections of reaching $132.3 million by 2025. Despite these positive trends, the company’s path to profitability is marked by expected reductions in losses per share from $0.80 in 2023 to $0.37 by 2025. With $132 million in cash reserves, NuScale appears well-equipped to manage its financial obligations in the near term.

The analyst community reflects a predominantly positive outlook. Out of six analysts covering the stock, four advocate a “strong buy,” one recommends holding, and one views it as a “strong sell.” The consensus 12-month target price for SMR is set at $8.90, mirroring its recent trading price, with the most optimistic scenario suggesting a target price of $14, indicating a potential 71% increase.

Key Takeaways:

  • Market Dynamics: NuScale’s market position has dramatically improved in 2024, supported by legislative changes and heightened investor interest in clean energy.
  • Technological Edge: NuScale’s certification and innovative modular technology may lead to significant expansion and competitive advantage in the nuclear energy sector.
  • Financial Outlook: Increasing revenues and a manageable cash burn signal potential for growth, though the journey toward profitability remains critical to watch.

Conclusion

NuScale Power represents a compelling, albeit high-risk, opportunity in the nuclear energy market. Its pioneering technology, strategic partnerships, and strengthening financials suggest a promising horizon. However, potential investors should consider the inherent risks associated with the commercialization of new technologies and market volatility. As the world gravitates more towards sustainable energy solutions, NuScale could be at the cusp of redefining the future energy landscape, making it a stock to watch closely in the coming years.

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Energy Environment Latest Market News

Deciphering the Complex Landscape of Energy Investments Amidst Grid Expansion

As global energy needs expand, the need for a robust and efficient power grid becomes more apparent. This necessity sets the stage for a strategic review of which industries and companies stand to benefit from such a transformation. This analysis delves into the potential gains for traditional energy suppliers alongside the burgeoning sectors of Bitcoin mining and nuclear energy.

Energy Sector Dynamics: The Challenge of Choosing Winners

Selecting the most promising stocks within the power grid landscape is a complex endeavor. Short-term capital movements often mirror prevailing narratives rather than underlying economic realities, leading to potentially skewed valuations. Over the long haul, profitability tends to drive performance, emphasizing the importance of a forward-looking investment approach.

The Impact of Bitcoin Mining on Energy Consumption

The role of Bitcoin mining in energy consumption is significant yet not as dominant when compared to other technologies like AI data centers and electric vehicles. According to a report by Paul Hoffman of Best Brokers, Bitcoin mining utilizes a massive 384,481,670 kWh daily. Even though this is substantial, it represents a smaller fraction (1.34%) of total U.S. power usage. This level of consumption, though noteworthy, does not alone justify massive grid expansions but underscores the increasing energy demands of modern technology.

Natural Gas: A Keystone in the Current Energy Framework

Natural Gas remains a linchpin in the U.S. energy landscape, accounting for 43.1% of domestic utility-scale electricity generation in 2023, as noted by the Energy Information Administration (EIA). The affordability and environmental efficiency of natural gas make it a preferred choice for utility companies. With an expected demand increase by 10 billion cubic feet daily by 2030, natural gas production, especially from shale via fracking, is poised to play a crucial role in meeting these growing energy needs.

Navigating the Midstream and Upstream Sectors

The midstream sector, which involves the transportation of natural gas, benefits directly from increased volume rather than price fluctuations. Companies like Kinder Morgan, which owns the largest natural gas network in the nation, are strategically positioned to capitalize on this trend. Conversely, upstream companies, which include major natural gas producers like EQT and Southwestern Energy, are more susceptible to price movements of natural gas.

The Resurgence of Nuclear Energy

Nuclear power is experiencing a revival as concerns over safety and efficiency are addressed and the urgency for clean energy sources intensifies. With 60 reactors currently under construction globally and more planned, the sector is on the brink of significant expansion. The U.S. remains a vital player with substantial developments, such as the upcoming completion of Unit four of the Nuclear Plant Vogtle in Georgia, which represents a major milestone in domestic energy capacity enhancement.

Investment Opportunities in Nuclear Power

The nuclear sector presents a range of investment opportunities, from uranium mining to the construction and maintenance of nuclear facilities. Companies like Cameco have seen their stock soar as uranium prices increase, reflecting a renewed interest in nuclear technology. Meanwhile, companies involved in the construction and maintenance of nuclear facilities, such as GE Vernova and Quanta Services, offer promising prospects given their expertise and operational capacity in this renewed energy frontier.

Conclusion: Strategic Investment Amidst Evolving Energy Demands

Investors looking to navigate the complex energy market must consider a blend of traditional and emerging sectors. While natural gas continues to be a cornerstone of the U.S. energy matrix, the growing significance of renewable and nuclear sources cannot be overlooked. Each segment presents distinct challenges and opportunities, requiring a nuanced understanding of market dynamics and future trends. As the global push for efficient and sustainable energy solutions intensifies, strategic investments in these key energy sectors could yield substantial long-term benefits.

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Business Energy Latest Market News

Investment Opportunities in Hydrogen Stocks: Key Picks for May 2024

Amid current financial uncertainties, discerning investors are eyeing the hydrogen sector as a fertile ground for potential opportunities. As the market navigates through the complexities of the 45V tax credits and anticipates shifts in Federal Reserve rates, the sector presents an intriguing play for those looking to capitalize on recent downturns. Former energy secretary Ernest Moniz highlighted the potential slowdown in growth due to current tax setups, emphasizing the industry’s sensitivity to regulatory landscapes. However, significant investments, including a substantial $1.78 billion loan from the Department of Energy to Plug Power, signify a robust interest in advancing hydrogen technologies despite economic headwinds.

Linde (NASDAQ:LIN) currently appears undervalued at $432.42, showing promising signs of recovery. Technical indicators suggest that Linde is oversold, with potential for a rebound. Initial targets post-recovery point towards $440 and, with continued momentum, potentially reaching $460. Investors also benefit from a modest dividend yield of 1.3%, adding to Linde’s attractiveness. The company’s strong fundamentals have led analysts from Mizuho and BMO Capital to project price targets upwards of $500, affirming confidence in its growth trajectory.

Bloom Energy (NYSE:BE) has recently demonstrated resilience, rebounding from a support level around $9 to over $11. It briefly surpassed resistance at $12.50, touching $13.50 before settling back to $12.33. The company’s strategic focus, especially in expanding its presence in the data center market through a new partnership with Intel, positions it well to leverage the ongoing surge in demand for artificial intelligence solutions. This alignment with industry trends underscores Bloom Energy’s potential for significant growth, making its current price an attractive entry point.

Direxion Hydrogen ETF (NYSEARCA:HJEN) offers a broader investment in the hydrogen sector, encapsulating around 30 stocks focused on various aspects of hydrogen technology, from production to storage and fuel cells. After a dip to $10, the ETF showed strength by climbing to $12, now adjusting to a more accessible $11.48. This ETF not only diversifies risk but also taps into the sector’s pivotal players, including Air Liquide and Ballard Power, alongside the aforementioned Linde and Plug Power.

In conclusion, despite the financial strain from higher interest rates and uncertainty around tax incentives, the hydrogen sector remains ripe with investment opportunities. For those willing to navigate the volatilities, companies like Linde and Bloom Energy offer substantial upside potential, bolstered by strategic growth initiatives and strong market positioning. Moreover, the Direxion Hydrogen ETF provides a comprehensive way to invest in the sector’s growth, balancing individual stock risks with broader exposure. As the market conditions evolve, these hydrogen stocks and ETFs represent smart choices for investors aiming to capitalize on the energy transition towards more sustainable solutions.

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Energy

The Rising Star of Green Energy: Why Uranium Matters Now

The burgeoning interest in uranium as a cornerstone for sustainable energy solutions underscores its vital role in the transition towards greener alternatives. As discussions around cleaner fuel sources gain momentum, the spotlight turns to uranium’s significant advantage in power generation efficiency. One uranium pellet, for instance, can produce a substantial amount of electricity, far outstripping the capabilities of traditional energy sources. This attribute positions uranium as an indispensable player in the global shift toward environmental sustainability.

However, the enthusiasm for uranium extends beyond its raw form. The real allure lies in the investment opportunities within the uranium sector. A burgeoning number of companies within this space stand to benefit from macroeconomic forces propelling the industry forward. The global push to slash carbon emissions, coupled with the urgent need to address the ongoing energy crisis, has led to an expansion in the nuclear energy domain. Currently, the world hosts 438 operational nuclear reactors, with an additional 58 under construction, signaling a robust demand trajectory, particularly in nations like China and India.

Despite the promising outlook, the uranium market faces its share of challenges, notably supply-side constraints. These include the logistical hurdles of reactivating dormant mines and securing critical materials, not to mention the geopolitical dynamics influencing uranium prices. The past year alone has seen nearly a doubling in prices, breathing life into mines that were once considered economically unfeasible.

Looking ahead, the market anticipates a sustained supply deficit, with projections pointing to a shortfall of 35 million pounds annually over the coming decade. This forecast is set against a backdrop of escalating demand, with the World Nuclear Association estimating a jump from 65,650 metric tons in 2023 to approximately 130,000 metric tons by 2040.

Among the companies poised to capitalize on this uranium bull market, Cameco Corporation (NYSE:CCJ) emerges as a frontrunner. Dominating the landscape, Cameco’s significant presence is evident in key uranium mining ETFs, such as the Global X Uranium ETF (NYSEARCA:URA), where it constitutes over 21% of the portfolio. With a market capitalization standing at $18.13 billion, the potential for growth is substantial. This optimism is anchored in the expectation of a surge in electricity demand driven by the advent of AI technologies, a demand that Cameco is well-positioned to meet.

Key Takeaways:

  1. Uranium’s Central Role: The transition to greener energy sources highlights uranium’s efficiency and indispensability in power generation.
  2. Investment Opportunities: The sector presents lucrative opportunities, with companies like Cameco at the forefront, set to benefit from global trends toward nuclear energy.
  3. Market Dynamics: Supply challenges and geopolitical tensions are influencing uranium prices, yet the long-term outlook remains positive amid growing demand.
  4. Future Prospects: Anticipated deficits in uranium supply versus demand underscore a bullish market scenario, promising substantial growth for industry players.

Conclusion:

The narrative surrounding uranium is one of vital importance and growing investment appeal. As the world grapples with the imperatives of clean energy and sustainable growth, uranium stands out not only for its efficiency but also as a beacon for future energy solutions. Companies operating within this sphere, particularly Cameco, are on the cusp of significant growth, propelled by an increase in global demand for electricity and the strategic shift towards nuclear energy. The uranium market, though faced with its challenges, is on a trajectory marked by opportunity and pivotal role in shaping a greener, more sustainable future.

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Energy

US power and natgas prices soar as extreme freeze hits natgas supplies

FILE PHOTO: First winter storm of 2024 in the U.S. Northeast, in Worcester

By Scott DiSavino

(Reuters) -U.S. natural gas and power prices hit multi-year highs on Friday ahead of extreme cold that was expected to bring record gas demand while also cutting supplies by freezing wells.

Lower gas supplies at a period of surging demand could test power systems in hard-hit areas. Winter storms in 2021 and 2022 caused widespread damage and power outages in part because many power plants lacked sufficient fuel to operate.

U.S. gas output was on track to drop by 3.7 billion cubic feet per day (bcfd), or 3.4%, over the past five days to a preliminary 10-week low of 104.5 bcfd on Friday, according to financial firm LSEG. [NGA/]

That decline so far was small compared with gas supply losses of around 19.6 bcfd during a winter storm in December 2022, and 20.4 bcfd during another winter storm in February 2021, according to LSEG data.

Still, U.S. gas demand, including exports, was on track to reach 165.9 bcfd on Jan. 15, 174.3 bcfd on Jan. 16 and 172.9 bcfd on Jan. 17, according to LSEG.

Those daily demand forecasts would top the current all-time high of 162.5 bcfd set on Dec. 23, 2022, according to federal energy data from S&P Global Commodities Insights.

“TAKE EXTRA CARE”

The freeze is expected to move from the U.S. Pacific Northwest to the central and eastern parts of the country over the next few days. Power grid operators in its path have already told generator owner members to prepare their units to run before electric demand starts to increase.

In a sign of what may be coming, next-day power prices at the Mid Columbia hub in the Pacific Northwest soared to a record high of around $1,075 per megawatt hour, according to LSEG data going back to 2010. That compares with averages of $81 in 2023 and $52 from 2018 to 2022.

“Generator owners must take extra care to maintain equipment so that it doesn’t freeze in the cold … particularly as natural gas pipelines may become constrained as the cold spell progresses,” PJM Interconnection said in a release.

PJM is the nation’s largest grid operator covering parts of 13 states from Illinois to New Jersey.

Grid operator Southwest Power Pool (SPP) and the Electric Reliability Council of Texas (ERCOT) have also issued weather advisories.

Projected overnight temperatures in Midland, Texas, in the Permian shale, the nation’s biggest oil and second biggest gas producing basin, will drop below freezing every night from Jan. 13-16, falling to a low of 6 degrees Fahrenheit (minus 14 degrees Celsius) on Jan. 15, according to meteorologists at AccuWeather.

Freezing weather can lead to so-called freeze-offs, which can reduce oil and gas production.

GAS PRICES JUMP

Spot gas prices at the Eastern Gas South hub jumped from around $2.45 per million British thermal units (mmBtu) on Thursday to $10.40 on Friday, their highest since July 2008, according LSEG data.

That compares with averages of $1.68 per mmBtu in 2023 and $2.96 from 2018 to 2022.

Other next-day gas prices soared to their highest since the February freeze in 2021, including the U.S. Henry Hub benchmark in Louisiana at $13.20 per mmBtu, Waha in West Texas at $17.23 and Chicago at $23.35.

In Canada, meanwhile, next-day gas prices at the AECO hub in Alberta soared to around $9.71 per mmBtu, their highest since February 2014. The Alberta grid operator on Friday asked electricity users to conserve power, following record demand Thursday.

(Reporting by Scott DiSavinoEditing by Marguerita Choy and Chris Reese)

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Energy

Oil climbs 2% on Mideast conflict and Libya outage

A view shows oil terminal Kozmino near Nakhodka

By Nicole Jao

NEW YORK (Reuters) -Oil prices climbed around 2% on Tuesday as the Middle East crisis and a Libyan supply outage pared the previous day’s heavy losses.

Brent crude futures settled $1.47, or 1.9%, higher at $77.59 a barrel, while U.S. West Texas Intermediate crude (WTI) ended $1.47, or 2.1%, higher at $72.24.

Prices drew support from the closure of Libya’s 300,000 barrels per day (bpd) Sharara oilfield, one of its largest, which has been a frequent target for local and broader political protests, and Middle East tensions.

The Israeli military has said its fight against Hamas will continue through 2024, stoking concerns the conflict could escalate into a regional crisis that disrupts oil supplies.

Meanwhile, some major shipping companies are still avoiding the Red Sea following attacks by Iran-aligned Houthi militants in response to Israel’s war against Hamas. However, the impact on oil tanker movements has been less than expected, according to a Reuters analysis.

“The more attractive alternative for (oil tankers) right now is to make a dash for the United States, where crude oil is cheaper than Brent,” said Bob Yawger, director of energy futures at Mizuho.

Brent and WTI posted 3% and 4% losses respectively on Monday after sharp cuts to Saudi Arabia’s official selling prices (OSP), prompting both supply and demand concerns.

Oil futures also were also supported on Tuesday after Saudi Arabia emphasized its desire to support efforts to stabilize oil markets and following reports that Russia curbed its crude oil production level in December, said Price Futures Group analyst Phil Flynn.

“It’s an early sign of compliance by Russia,” he said.

Russia is part of the OPEC+ group of oil producers that has agreed to cut production by around 2.2 million bpd.

In the U.S., crude production will hit record highs over the next two years but grow at a slower rate, the Energy Information Administration (EIA) said, as efficiency gains offset a decline in rig activity. Output will rise by 290,000 bpd to a record 13.21 million bpd this year.

Crude stocks fell by 5.2 million barrels in the week ended Jan. 5, according to market sources citing American Petroleum Institute figures on Tuesday.[API/S]

Government data on stockpiles is due Wednesday. [EIA/S]

Core U.S. inflation data on Thursday will also be in the spotlight.

(Reporting by Nicole Jao in New York, Robert Harvey in London, Arathy Somasekhar in Houston and Emily Chow in Singapore; editing by David Goodman, Marguerita Choy and Jonathan Oatis)

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Energy

SolarEdge sees moderate growth in U.S. solar industry this year

Illustration shows SolarEdge logo

By Nicole Jao

NEW YORK (Reuters) – The U.S. solar industry will experience modest growth in 2024, as electricity prices decline and support from the Inflation Reduction Act (IRA) rolls in, SolarEdge Chief Financial Officer Ronen Faier said on Thursday.

“We’ve bottomed in the last two quarters,” Faier told investors at a Goldman Sachs conference in Miami, Florida. Macroeconomic uncertainties in the back half of the year weighed on demand for solar products in the United States, he added.

The solar product manufacturer sees demand improving with expectations for lower interest rates this year.

Incentives from the IRA in top solar markets like California are also beginning to improve the economics and prices of solar products and components, said Faier.

The U.S. Department of the Treasury in December unveiled proposed guidelines for manufacturers of clean-energy products seeking to claim a tax credit, created under the IRA, in a bid to power the energy transition with American-made products.

Battery installation is also expected to continue to grow in both the U.S. and European markets, Faier said, as manufacturers clear out large inventories of battery panels and other equipment.

(Reporting by Nicole Jao; Editing by Aurora Ellis)

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Energy

Oil prices settle down 3% as Red Sea shipping disruptions ease

Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang

By Shariq Khan

BENGALURU (Reuters) -Oil prices fell 3% on Thursday as more shipping companies said they were ready to transit the Red Sea route, easing concerns about supply disruptions as Middle Eastern tensions stay elevated.

The more active Brent crude futures for March delivery settled down $2.39, or 3%, at $77.15. Brent futures for February delivery, which expired after settlement, fell 1.3% to $78.39 a barrel.

U.S. West Texas Intermediate crude futures fell by $2.34, or 3.2%, to $71.77 a barrel. On Wednesday, oil prices dropped nearly 2% as major shipping firms began returning to the Red Sea.

Denmark’s Maersk will route almost all container vessels sailing between Asia and Europe through the Suez Canal from now, and divert only a handful around Africa, a Reuters breakdown of the group’s schedule showed on Thursday.

France’s CMA CGM is also increasing the number of vessels travelling through the Suez Canal, it said earlier in the week.

“The perception is that the Red Sea route is reopening and will bring supply to market weeks faster,” Price Futures Group analyst Phil Flynn said.

Major shipping companies stopped using Red Sea routes and the Suez Canal earlier this month after Yemen’s Houthi militant group began targeting vessels.

The U.S. Energy Information Administration reported a much larger-than-expected draw in U.S. crude oil inventories last week, which limited price declines for awhile.

Later, prices fell further, likely as traders focused on a bulk of the draw coming from the U.S. Gulf Coast region, where refiners are scrambling to clear inventories to avoid high taxes on storage at the end of the year, UBS analyst Giovanni Staunovo said.

U.S. crude stockpiles fell by 7.1 million barrels in the week ended Dec. 22, EIA data showed, while analysts polled by Reuters had expected a draw of 2.7 million barrels. Crude oil stocks at the U.S. Gulf Coast fell by 11.03 million barrels, the biggest decline since Aug, the data showed. [EIA/S]

Investors expect interest rate cuts in Europe and the U.S. in 2024, which could boost oil demand.

(Reporting by Shariq Khan, Natalie Grover, Yuka Obayashi and Sudarshan Varadhan; Editing by Tomasz Janowski, Kirsten Donovan Barbara Lewis and David Gregorio)

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Energy

US offshore wind poised for success next year after turbulent 2023

FILE PHOTO: A view of the turbines at Orsted's offshore wind farm near Nysted

By Scott DiSavino

NEW YORK (Reuters) – The U.S. offshore wind industry is eying a brighter 2024, with work expected to start on several projects following a year marked by stalled developments and billions of dollars in write-offs.

The offshore wind industry is expected to play a major role in helping several states and U.S. President Joe Biden meet goals to decarbonize the power grid and combat climate change.

But progress slowed in 2023 after offshore developers canceled contracts to sell power in Massachusetts, Connecticut and New Jersey, and threatened to cancel agreements in other states, as soaring inflation, interest rate hikes and supply chain problems increased project costs.

European energy companies Orsted, Equinor and BP took about a combined $5 billion in writedowns on U.S. offshore wind projects that were in development because existing power sales contracts would not cover the cost of building and financing the projects.

Next year, developers hope to revive projects with canceled or threatened power sales contracts by bidding their facilities in upcoming solicitations in several states, including New York, New Jersey, Massachusetts and Connecticut.

“While auction clearing prices may increase, states appear to remain committed to clean energy goals,” said Eli Rubin, senior energy analyst at energy consulting firm EBW Analytics Group.

There were only two small offshore wind projects operating in the U.S. at the start of 2023, one in Rhode Island and another in Virginia, with total capacity of just 41 megawatts (MW). Capacity is set to jump to almost 1,000 MW in 2024 as commercial-scale projects off New York and Massachusetts enter service.

One thousand megawatts of offshore wind can provide power to around 500,000 U.S. homes.

“State procurements and policies will continue to drive demand for offshore wind energy and federal support will enable more job creation, supply chain investment and domestic energy production,” said Ryan Ferguson, spokesman at Danish energy company Orsted.

STATE SUPPORT

New York last month launched a solicitation that allowed companies to exit old contracts and re-offer projects at higher prices. It will announce winners of an expedited solicitation for offshore wind in February.

The state accelerated the solicitation in October after several developers, including Orsted, BP and Equinor, threatened to cancel contracts to sell power that were awarded in 2019 and 2021 before the Federal Reserve started hiking interest rates in March 2022 to fight soaring inflation.

New York’s first offshore wind farm, Orsted’s 132-MW South Fork provided first power in December.

In New Jersey, Governor Phil Murphy directed state utility regulators in November to launch an accelerated offshore wind solicitation in early 2024 after Orsted, the world’s biggest offshore wind company, canceled its two Ocean Wind projects.

Elsewhere in New Jersey, Shell and France’s EDF continue to develop the 1,510-MW Atlantic Shores wind farm, which should produce power by 2027-2028, according to the project’s website.

In Virginia, U.S. energy company Dominion Energy said its roughly $10 billion, 2,587-MW Coastal Virginia Offshore Wind project remained on budget and on track to start offshore construction in May 2024. First power is expected in the second half of 2025 and completion is set for late 2026.

In Massachusetts, Avangrid and Copenhagen Infrastructure Partners’ 806-MW Vineyard Wind 1 project is on track to produce first power in the near future.

Avangrid, which canceled contracts to sell power from projects off Massachusetts and Connecticut in 2023, said it plans to re-bid its 1,232-MW Commonwealth Wind off Massachusetts and 804-MW Park City off Connecticut in future solicitations.

“What you’re going to see in 2024 is a lot of competitive bids that will lead to contracts that will enable projects to go forward,” said Ken Kimmell, chief development officer for offshore wind at Avangrid.

Avangrid is majority owned by Spanish energy company Iberdrola.

Orsted, meanwhile, said it plans to start offshore construction in the spring of 2024 on its roughly $4 billion Revolution Wind project, which will supply 704 MW to consumers in Rhode Island and Connecticut.

(Reporting by Scott DiSavino, Editing by Rosalba O’Brien)