NA Edition: Thursday 10th May 2018

Wind Watch

By Jatin Sharma, President, GCube Insurance Services

The US offshore sector needs to find a balance between lowering the levelized cost of energy (LCOE) and retaining the public and political buy-in needed to help it flourish.

INTERNATIONAL EXPERTISE VERSUS LOCAL SUPPORT

Recently, the US government announced 25% tariffs for Chinese imports including the biopharma, robotics and aviation industries. This is just the latest in a series of protectionist tax reforms imposed by the Trump administration which have garnered attention worldwide – much of which has been negative.

Tariffs on solar panels, intended to protect American panel manufacturers, were widely labelled counter-productive when announced in January – and little wonder. With US solar developers no longer able to benefit from the cheap Chinese panels that have, in the past, contributed to project viability, US development schemes – and the revenue and jobs they create – are feared to be under threat.

Experts have warned of similar effects from recently announced steel tariffs, with Wood Mackenzie Power and Renewables analysts pointing out that: ‘Steel and aluminum are important commodities for critical wind, solar and storage components, with few bankable substitute materials available.' The consensus appears to be that import taxes will damage, rather than bolster, the local economy.

Yet these recent examples of addressing the trade deficit highlight an important issue.

For, while international free trade has undoubtedly been integral to the success of sectors such as the global wind industry, helping to drive down costs and accelerate growth, this has often come at the expense of local economic prosperity, undermining public and political support for local development.

Losing public and political support threatens very real damage to nascent markets such as US offshore wind. The benefits of free trade – most notably, its integral role in driving down the Levelized Cost of Energy (LCOE) – must therefore be weighed against the dangers of alienating local communities and governments.

There is a balance to be struck, here – and doing so will be particularly necessary for the US offshore wind market, as it seeks to become a more mainstream provider of...

To read the full post for free on our blog, please click here

GCube Insurance Services is headline sponsor of our Financing Wind New York conference on 30th May. If you haven't yet signed up, please get in touch with a member of our team.