Colonial Pipeline back in action

One thing to start: An end to the Colonial pipeline chaos, which led to a run on petrol stations in eastern US states, is in sight after the pipeline cranked back into gear last night.

But a restart will still take time. That is the topic of our first note.

Our second is the other big energy news from the US this week, the federal approval of the Vineyard Wind offshore power project. We spoke to Dennis Arriola, chief executive of Avangrid, one of the companies behind the project.

Finally, thanks to all our readers who supported us since our relaunch last year. We are proud to say that at the Sabew awards for business journalism this week, Energy Source came in second behind our sister newsletter, Moral Money. Congrats to them — and thanks to you.

If this was forwarded to you, please sign up here. Please let us know your thoughts by emailing us at energy.source@ft.com. — Derek

Colonial restarts operations

The Colonial Pipeline restarted operations last night after a shutdown that lasted nearly a week.

It came in the nick of time. Panic-buying had drained many petrol stations across states in the US south-east.

Analysts said all along that if the shutdown of a key artery to the region — with capacity to deliver 2.5m barrels a day, or about 15 per cent of US supply — went beyond a week, severe market distortions would have ensued. Stocks in the east would have drained; and Gulf Coast refiners, lacking an outlet for their products, would have cut production.

Panic-buying at petrol stations had gone from bad to worse. As of yesterday, two-thirds of filling stations in North Carolina were out of fuel. Virginia, Georgia and South Carolina were not far behind.

All of which leaves the fundamental question: when should things return to normal?

Not overnight.

Colonial said last night that it would take “several days for the product delivery supply chain to return to normal”.

It is not clear from the statement if the restart is manual or if the hackers have gone away. Colonial Pipeline company has a new cyber-response website, but it is definitely not bamboozling anyone with details.

It did, though, indicate that things would not necessarily be plain sailing from here on, warning of “intermittent service interruptions during the start-up period”.

In the meantime, any imports needed from Europe are still days away. US vessels allowed to ship cargo between US ports under a Jones Act waiver will also take time to reach affected areas of the south-east. (The Jones Act ordinarily prohibits non-US-flagged vessels from moving between US ports).

Even the piped supplies will take time to travel from the Gulf Coast to the eastern seaboard: the fuel travels at about 3-5mph, and the pipeline network totals more than 5,000 miles when all its spurs are included.

(Myles McCormick and Derek Brower)

Wind boss urges Biden to expedite approvals

President Joe Biden wants the US to build a domestic offshore wind industry — and wants American manufacturers to build all its parts.

But if it is to happen, his government needs to speed up the approvals for new projects, said Dennis Arriola, chief executive of Avangrid, one of the companies behind the Vineyard Wind development offshore Massachusetts that got the green light this week.

Too many federal agencies — “silos”, he said — had complicated the process.

“It really comes down to, you know, co-ordination, collaboration and efficiency at the federal government side,” Arriola said. “What I’ve been doing is talking to the different senior folks in the different agencies and departments to say, ‘you’ve got to get people to come together at the federal side’.”

Arriola said he was depending on Gina McCarthy, the former Environmental Protection Agency head whom Biden appointed to co-ordinate climate policy in his government, to begin speeding up the process.

Slow permitting is a complaint across the energy industry, from pipelines to clean energy. Onshore wind developers have faced similar obstacles, especially in trying to build transmission lines to send electrons from windy areas of the country to cities and other big consumer areas.

The US has lagged far behind Europe in offshore wind, but the Biden administration wants capacity to rise from almost nothing now to reach 30GW by 2030. (Nameplate natural gas power generation capacity, by comparison, was more than 540GW in 2019, and solar photovoltaic more than 36GW).

Vineyard’s approval on Tuesday, the first large-scale project to get the go-ahead from the administration, heralded the birth of a new industry, supporters said. Avangrid is joined by Copenhagen Infrastructure Partners in the project.

Erik Milito, head of the National Ocean Industries Association, described it as an “American energy milestone”, saying that “an entire supply chain is ready to mobilise and get to work, providing Americans with thousands of jobs and billions of dollars of investment”.

ClearView Energy Partners, a Washington consultancy, was more cautious, saying that opponents — fishermen and commercial landowners — would raise legal challenges.

Assuming it proceeds, Vineyard should start operating in 2023 with 800 megawatts of capacity. Avangrid, a subsidiary of Spain’s Iberdrola, has two other proposed projects off the east coast: the 804MW Park City Wind, offshore Connecticut, and Kitty Hawk, off Virginia and North Carolina. In total, east coast states have already also approved another 12GW of offshore wind power purchases from an array of developers.

“I think the industry and the customers are ready for probably 30GW [of new capacity] or more in the next five years,” said Arriola. “It will really come down to can we get these projects properly approved within the processes that we have?”

The administration has been vocal about offshore wind’s role in meeting the broader goals of decarbonising the nation’s power sector by 2035 and halving emissions compared with 2005 levels by 2030.

But the sector’s contribution will be modest.

Vineyard said its project would eliminate 1.7m tonnes of CO2 emissions from the US’s total each year. If US capacity hits 30GW as planned, this would remove 78m tonnes a year, says the Department of Energy. Yet total US emissions in 2019 were more than 6.5bn — yes, billion — tonnes of CO2 equivalent.

And, for now, the industry will be far from satisfying Biden’s pledge “to ensure the future is made in all of America by all of America’s workers”.

The “vast majority” of the materials and parts used in building Vineyard would be shipped in from overseas, said Arriola. That could change for future projects, he said. But for now the manufacturing base does not exist in the US.

Until it does, the scale needed to drive down costs would also be missing, leaving offshore wind — a far more expensive form of power generation than onshore wind, solar or fossil fuels — dependent on subsidies.

“Today these projects benefit from a tax incentives and other incentives,” said Arriola. “But down the road, and I’m not sure what year that is, we think that the economies of scale and new technologies will make these [projects] competitive on a standalone basis.”

(Derek Brower)

Power Points