Slash Wind Power Subsidies & Bring Power Prices Back to Earth

subsidies

What sustains the wind industry and punishes power consumers.

With Australia’s wind industry gasping its last breath, their hired spruikers at the Clean Energy Council have taken to peddling the incredible tale that wind power has led to a REDUCTION in our power bills.

Trouble is that wind power generation (the product of the mandatory RET – which has been in operation since 2001) has been a key contributor to Australian household electricity costs rising 110 per cent in the past 5 years (see our post here). But the way the CEC plays it, it’s as if we hadn’t noticed.

But step back a moment. Assume that the CEC is not speaking with “forked tongue”.

If it were true – as the CEC asserts – that wind power was in fact delivering power at prices equal to or less than conventional generation sources – so as to lower retail power prices – then why the need for the mandatory RET?

Why the need for Renewable Energy Certificates? Why the need for the shortfall charge (fine) of $65 per MWh for every MW the retailer falls short of the mandated RET, which “encourages” (we mean “forces”) retailers to enter Power Purchase Agreements and, thereby, purchase RECs from wind power generators? Why the need for unsecured, taxpayer underwritten loans from the Clean Energy Finance Corporation?

If there was a shred of substance to the CEC’s spin, then surely, wind power generators wouldn’t need any extra pennies from hard pressed power punters – in the form of RECs, or at all; nor would they need to have inbuilt threats to retailers to purchase RECs; and there would be no need for “soft money” to back their projects.

Hell, retailers and power consumers would be knocking each other over in the rush to get the cheapest power around; and, what with all those willing customers for wind power, there wouldn’t be any need for taxpayer subsidised loans from the CEFC – commercial lenders would be piling in to wind power projects, ready to reap the returns.

Call us just a tad “cynical” – but STT for one doesn’t buy it.

The hint that there’s something rotten in Denmark is in the “die in a ditch” efforts the CEC and its wind industry clients are currently making to retain the mandatory RET at its current 41,000 GWh annual target – and to, therefore, preserve the REC price, at all costs.

So which is it?

Is wind power really competitive with conventional generation sources? If so, then there’s simply no need for a mandated target at all – this stuff will sell itself.

Or is wind power simply the product of ideological nonsense – a power generation source which can only ever be delivered at crazy, random intervals – requiring 100% of its capacity to be backed up 100% of the time by fossil fuel generation sources, including ridiculously expensive OCGTs (with that exorbitant, additional and unnecessary cost borne by power consumers) – and which, for wind power generation to be commercial, has to be sold to retailers at guaranteed rates 3-4 times the cost of conventional sources, as stipulated in Power Purchase Agreements with retailers?

Call us “suspicious”, but STT thinks that it’s only ever been about a guaranteed stream of other peoples’ money. But on that score, we’ll leave the final word to America’s most successful corporate investor (see below).

Staying with the US, the Americans are catching on quick that their political betters have signed them up to a future of crippling power prices through the exorbitant subsidies guaranteed to wind power generators.

America’s equivalent to our Clean Energy Council is the American Wind Energy Association (AWEA). Lately, they’ve been singing from the same hymn sheet – both claiming that power prices are falling, thanks to wind power.

Where the CEC ignores the cost of the REC as a direct subsidy to wind power generators (and its concomitant cost as a tax on power consumers) its American doppelganger, the AWEA ignores the Production Tax Credit (PTC) – which, in substance and effect, is precisely the same thing.

Here’s a neat little summary from Ohio.

Wind farms come with big cost
limaohiho.com
Dawn Davis Contributing Columnist
17 April 2014

Don’t believe claims that wind energy does not cost Ohio a penny. Although the fuel is free, this industry has an addiction to subsidies. Subsidies do cost someone.

The Wind Production Tax Credit is a federal subsidy given to the wind industry which amounts to $0.022/kWh for electricity produced. It was designed, in 1992, to help a new industry grow. Is an industry still an infant after 20 years? This subsidy has been renewed eight times, with this year being the 9th. The U.S. Senate, with the help of five Republicans (including Sen. Rob Portman), recently, agreed to renew this credit. A two-year extension will cost our children $12 billion in additional debt, not including interest. After 20 years, the entire renewable industry generates less than 5 percent of our nation’s electricity.

Despite their low output, renewables were given 75 percent of the energy subsidies in 2013. Wind is currently being subsidized more than 80 times that of conventional fossil fuels, per unit of energy production. The American Tradition Institute hired analysts George Taylor and Thomas Tanton to calculate the cost of wind generation, as a FULL-time replacement. Their analysis shows wind costs $0.15/kWh if natural gas is the back-up and $0.192/kWh if coal is the back-up. What do you pay per kWh?

Our Energy Information Administration estimates that federal subsidies, alone, give the wind industry $56.29/MW hour. This is so high that it allows wind producers to pay the grid to take their electricity even when it is not needed, so they can claim the federal credit. Foreign-owned companies are making a huge profit, at our expense, despite selling their product at a loss, because our tax dollars make up the difference; meanwhile, wind interrupts the efficient operation of our traditional plants.

We are frequently told these incentives make the market fair since coal, gas, and nuclear receive subsidies; however, wind requires the constant back-up from those fossil fuel burning power plants because their energy output looks like a polygraph test. It forces fossil fuel plants to ramp up and down as wind speeds vary every moment across a region. Not only does this require fossil fuel plants to remain fully operational, but it makes their electricity more expensive. Wind facilities in Ohio have not, annually, even produced 30 percent of their advertised potential. Ohio wind speeds at 100 meters average a mere 6m/s, which does not place even place us in the top 20 states for wind generation potential.

Yet, current Ohio law mandates the purchase and generation of renewable energy. When wind comes to a town, county commissioners are asked to approve a payment-in-lieu-of-taxes which allows developers to pay up to $9,000/turbine. Their payments create an annual media frenzy, with big checks given to local governments and schools. If they abided by the rules of the Ohio tax code, though, they would pay, an estimated, $45,000/turbine annually. County commissioners give them an 80 percent tax reduction when they say yes to a PILOT.

History tells us that these handouts will, eventually, cost each of us in our electric bills.

Denmark has more turbines, per capita, than any place in the world, and their electric bills have tripled in the past 20 years.

Germany has announced that renewable subsidies will be slashed because electricity rates have increased more than 80 percent since 2000. They are building 10 coal plants to be completed in the next two years.

Last year, England paid wind developers 32.6 million pounds to turn OFF because their energy was produced when it wasn’t needed. Their rates have risen 50 percent. In Scotland, 80 million pounds have been paid to wind producers to shut them OFF and 40 percent of their residents live in fuel poverty.

Spain recently announced slashes to their wind subsidies. In 2009 a Spanish economics professor claimed that each green MW of energy destroyed 5.39 jobs in the private sector and each green job cost them $774,000. These events have driven wind developers here, where the subsidies are still flowing.

China is home to some of the largest turbine manufacturers in the world. They also have 90 percent of the world’s Neodymium, required for every industrial wind turbine. They produce a mere 0.23 percent of their energy from renewables. We sell them a lot of coal, though.

In the USA, electricity rates are rising in 9 out of 11 of the top wind power consumption states. According to the Energy Information Administration, the rates are: Colorado up 14 percent, Idaho up 33 percent, Iowa up 17 percent, Kansas up 29 percent, Minnesota up 22 percent, North Dakota up 24 percent, Oklahoma down 1 percent, South Dakota up 26 percent, Texas down 19 percent. Many economists agree that Texas rates are dropping because of deregulation, not because of the wind.

Electricity rates affect the cost of everything Ohio produces, sells, buys, and consumes. According to the steel manufacturers association, the industry employs 60,000 people and spends $18 billion on electricity annually. A 10 percent increase in electricity rates translates to $30,000/year/employee. Timken, a steel company in Ohio, estimates spending $2 million this year just for our renewable energy riders.

Last year, for the first time, the American Wind Energy Association hosted an Ohio Wind Energy Summit. They are here because of our mandates, our generous PILOT, and our vast land. In addition to our two operational wind sites, the Ohio Power Siting Board has certified eight more to begin construction. Ohio Senate Bill 310, being debated now, will freeze our mandates. Encourage our senators to support it. Ohio Senator Cliff Hite is an obstacle.

Do you remember what, then U.S. Sen. Barrack Obama, said about his energy policy? Under his policy, electricity rates will necessarily skyrocket. Get ready, Ohioans, someone is getting ready to pay a lot more for energy.
limaohio.com

The equation detailed above holds the world over – a subsidy paid to any firm supplying goods or services to households has to picked up by someone else. Where the subsidy is levied directly against household power bills (as the REC is) it’s householders that pay the subsidy, adding to the cost they would otherwise pay for power. That inescapable fact is simply Economics 101 – and provides a perfect explanation for spiralling power prices – wherever giant fans have sprung up.

And subsidies – like the REC and PTC – provide the ONLY explanation for the wind industry – as recognised by the “Sage of Omaha”, billionaire Warren Buffett – whose company Berkshire Hathaway has invested $billions in wind power in order to get at federal subsidies – namely the PTC – which is worth US$23 per MW/h for the first 10 years of operation.

A subsidiary of the Buffett-owned MidAmerican Energy Holdings owns 1,267 turbines in the US with a capacity of 2,285 MW – eventually when the company’s Wind VIII expansion is finished, MidAmerican will own 1,715 turbines with a capacity of 3,335 MW. Buffett has piled into giant fans for one reason only: to lower the tax rate paid by Berkshire Hathaway.

As Buffett recently put it at his annual investor jamboree in Omaha, Nebraska:

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate. For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

There, Warren Buffett said it, not us.

At least he had the honesty and integrity to explain the only conceivable basis for the greatest rort of all time. And isn’t it so much better when those that profit from it choose not to speak with “forked tongue”. Maybe the CEC and AWEA can take a leaf out of Warren’s book?

lone ranger and tonto

You know CEC speak with forked tongue, Kemosabe.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Warren Buffett can certainly pick where to the easy money is to be had. Not only does his investment company Berkshire Hathaway Inc. exploit the heavily subsidised wind scam but it has also made a healthy dollar recently from the the insurance business, trading on the same apocalyptic hype that under-pins the wind scam.

Trackbacks

  1. […] In both the US and here, the wind industry has been making the explicit pitch that wind power is now so cheap that it’s driving down household power prices (see our posts here and here). […]

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