Articles by

Jérôme Guillet

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The (currently terrible) mood in renewables…

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Jérôme Guillet

So, for power generation and the wider energy transition, unexpectedly maybe, small is and will be beautiful, even as the overall volumes are gigantic. For renewables, no headlines is probably a good thing (as most stories seem to be scary ones). And for offshore wind, a lack of “animal spirits” may be a pity, but the sector will remain a niche (very useful in some places) and a relative minnow compared to solar, onshore wind and, increasingly, storage.
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Offshore wind requires Contracts for Difference – not subsidies

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Jérôme Guillet

Governments procure renewables through a variety of mechanisms. Contracts for difference (CfDs) have been used for more than 50% of the global offshore wind supply. The payments awarded through CfDs are sometimes labelled subsidies, suggesting that they support uneconomic activity. Here, we argue that the primary role of CfDs is rather risk management by creating a market for electricity supply at stable long-term prices. Similar to its use in other sectors of the economy, this contract type transforms a variable to a fixed price to reallocate volatility risks. Such long-term contracts are often necessary for renewables financing due to limited hedging options in existing markets.
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How to design a good offshore wind auction

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Jérôme Guillet

As the offshore wind sector struggles with cost increases and the often-hostile scrutiny that this brings, it is worth taking a step back to think about how governments should design auctions to get projects built at the lowest possible cost. Several of the recent highly publicised project cancellations or delays are directly linked to poor auction design, so it makes sense to avoid or correct certain mistakes. The goals of auctions are many, and some governments may prioritise some over others, but it is worth listing them explicitly.
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Five grand challenges of offshore wind financing in the United States

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Jérôme Guillet

We identify and describe five grand challenges affecting offshore wind finance in the U.S. Failing to address these challenges may put deployment targets at risk. The challenges include (1) Early years financing: navigating the complexities, timing mismatches, and high costs of projects in the development phase; (2) Policy support for project financial solvency: addressing the uncertainty and systematic transfers of tax credits away from offshore wind, characteristic of the U.S. Investment Tax Credit; (3) Workforce development: building a skilled workforce for an emerging market; (4) Transmission and integration barriers: upgrading the power grid to reliably support large scale offshore wind integration; and (5) Floating wind development: financing the development and scale-up of floating offshore wind technologies. The second challenge has already been solved to a large extent by the Inflation Reduction Act.
Three Mile Island Nuclear Power Plant, Middletown, Pennsylvania.circa 1976.

What was the French-German spat on energy really about?

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Jérôme Guillet

The French nuclear programme was a great success, but the conditions to replicate it are gone, and there will be no new nuclear plants built because they cannot be financed, and there are cheaper alternatives (and baseload is not adapted to our new system).
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A few basic truths about offshore wind

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Jérôme Guillet

So offshore wind has become, almost unexpectedly, a significant part of the picture when future renewable energy systems are considered - at least in OECD countries. It provides diversification, opportunities to Big Energy to go green, possibly less public hostility and potentially reasonable economics. But it’s worth remembering that even in Europe, it’s just 10% of the overall wind capacity installed (and a bit more of actual generation, thanks to higher capacity factors).
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Bravo to Northern Power

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Jérôme Guillet

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Offshore wind and big company lobbying

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Jérôme Guillet

Don’t do tenders based on price if you don’t know when the project can get built (ie if projects are still subject to permitting processes or legal recourse or other uncontrollable delays). That’s a sure way to get unrealistic bids that will then be subject to lobbying and renegotiation.
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Some positive thoughts about the UK CFD 5 auction

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Jérôme Guillet

There were no successful bids from offshore wind projects in the latest CfD auction in the UK, and that is already described variously as a setback for net zero plans in the UK, and yet another nail in the coffin of the industry, already struggling from headwinds in the US and UK, where various projects are being cancelled or postponed, and PPAs abandoned or renegotiated. But I actually take it as a good thing, in that (i) it reflects cost discipline, and (ii) it proves that the tariff design is smart in that it avoids crazy bids like we have seen in other markets.
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The cost of wind, the price of wind, the value of wind

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Jérôme Guillet

Oscar Wilde famously wrote that people “know the price of everything and the value of nothing” suggesting there is a difference between the two concepts of price and value. In the power market, due to some of its structural features, it is even more confusing as you also need to deal with the cost of power, which may again be different. The below, derived from an article I wrote almost 15 years ago, tries to make sense of the differences between the 3, and how these are ultimately decided by political choices.
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Dear governments – stop listening to whining utilities

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Jérôme Guillet

So, to the UK government: the CfD is actually is an excellent design for a tariff (as is the OFTO mechanism, as an aside), developers and financiers understand it and like it, there is no need to tinker with it on the basis of the whining or blackmail of utilities.. The design of lease auctions is something else - it could be tweaked given how it currently encourages irresponsible bidding for leases that have no connection to the reality of the price of the sector but favor the deepest-pockets players at the expense of the long term viability of the sector.
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Jérôme Guillet on Substack

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Jérôme Guillet

Insightful analysis by an authority on wind energy and energy policy with extensive experience in the offshore wind sector.
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