Australia’s Most Notorious Wind Power Outfit – Infigen – says “Move Over Pinocchio, Here We Come”

Lies, treachery and deceit are the hallmarks of the wind industry – fraud of all manner of descriptions is de rigueur for wind power outfits; and whether it’s bribery and fraud; vote rigging scandals; tax fraud; investor fraud or REC fraud – crooks and corruption rule.

These boys are the grand masters of fleecing customers and shareholders; and hood-winking rural communities alike – see our posts here and here and here.

Fronting up to ‘inconvenient’ facts that tend to interrupt the wind industry’s quest to pocket $billions in taxpayer and power consumer subsidies isn’t one of their strong points.

Oh, no. The usual response from their spruikers and spin-masters is “quick, look over there”. But when that fails to work – and the inquisitor persists – it’s straight back to bare-faced lying.

One of Australia’s most notorious exponents of the ‘craft’ is Infigen (aka Babcock and Brown) – an outfit that was born the bastard child of Enron. Check out the CVs of the characters in these links here and here and here – a fair number of them brag of ‘solid’ backgrounds with Enron, lobbed at Babcock and Brown and – when it went into melt-down – scurried off like indestructible cockroaches to hide elsewhere in the wind industry. No surprises there.

During its first incarnation as Babcock and Brown, these boys fleeced investors and creditors to the tune of something like $10 billion (while its directors pocketed – and somehow managed to retain – 10s of $millions at creditors’ and investors’ expense). Having spectacularly crashed and burned, Babcock and Brown then shamelessly phoenixed into Infigen – which is about to do it all over again: its losses continue to pile up, it’s bleeding cash, its share price is rocketing South and its mountain of debt is fast-becoming insurmountable (see our post here).

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But it’s not just the big ticket items – like proper accounting and disclosure to creditors and investors that the merry band from Babcock and Brown and its profligate-progenitor has trouble with. As this piece from the Brisbane Times shows, it’s the ‘little’ things that seem to attract the very ‘best’ from Infigen’s “truth and reconciliation department” ….

Mystery behind Lake George’s missing wind turbine blades
Brisbane Times
John Thistleton
5 January 2015

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Renewable-energy generator Infigen Energy is adding to the mystery of Lake George near Canberra, saying a rare breakdown on one of its turbines seven months ago, causing it to be partially disassembled, is still under investigation.

On his way to Canberra to visit his mother, Sydney man Andrew MacLean noticed the different colours across the partially water-filled lake, and pulled over at the east-facing lookout near the Federal Highway.

It was late in the afternoon when he took his Canon 70D camera with a 200mm lens attached and snapped several photos of the turbines in the distance before continuing to Canberra.

“Looking through these images on the computer [the following morning], I noticed that one of the turbines seems to have fallen off. I can’t see any equipment around it indicating that it could be under maintenance,” Mr MacLean said.

Turbines from two wind farms can be seen from the lookout – the Capital Wind Farm, which has 67 turbines and has been operational since late 2009, and Woodlawn Wind Farm’s 23 turbines, constructed in late 2011.

The 80-metre-high turbines and their 44-metre-wide blades belong to Infigen’s Capital Renewable Energy precinct, which came under fire in 2014 from Treasurer Joe Hockey who described them as utterly offensive and a blight on the landscape.

The outburst on radio triggered an angry response from one of the turbine’s host farmers, Luke Osborne, who challenged Mr Hockey to a bullfight.

Infigen spokeswoman Marju Tonisson said the bladeless turbine at the Woodlawn wind farm had been off line since the start of this financial year.

Infigen group manager investor relations and strategy Richard Farrell said the blades had been taken down for maintenance.

“The wind turbine had a failure of the main bearing. This is the only known failure of this turbine type and is very rare for wind turbines in general. The cause is still being investigated,” Mr Farrell said in an emailed response.

Wind farm critics say once government support is withdrawn, infrastructure will be left behind to rust throughout rural landscapes.

Uncertainty over the Renewable Energy Target has stalled billions of dollars of investment in wind turbines.

But Infigen says once a turbine has been installed, its operating costs for 25-plus years are much lower than revenue that can be achieved from selling the electricity it generates, largely because there are no fuel costs.

“The up-front costs have been paid by the original debt and equity providers. Therefore there is no reason not to continue to operate them throughout their useful lives,” Infigen said in its statement.

Infigen says there are no government subsidies associated with wind turbines in Australia. “The renewable-energy target legislation requires that an increasing amount of electricity is generated from renewable sources between now and 2020.”

Renewable-energy consumers paid the higher cost of renewable energy through the large-scale generation certificates but, because renewable energy has low operating costs, it displaces more-expensive gas generation, thereby lowering the wholesale electricity costs, Infigen says.
Brisbane Times

Let’s start with the little lies.

Infigen says the breakdown of turbines is “rare” and that – in relation to “bearing failure” – “This is the only known failure of this turbine type and is very rare for wind turbines in general”.

The latter furphy concerning bearing failure “in general” is pretty easy to skewer: mechanical wear and tear, including bearing failure is one of the most common reasons for turbines to be put out of action; and is one of the key factors that accounts for the fact that the ‘economic’ life of wind turbines is 10-12 years, which runs contrary to Infigen’s wild claims about them lasting for “25-plus years” (see our post here and this paper).

Top flight German fan maker, Siemens booked a €223 million write down (ie loss) last year due to the fact it has had to replace bearings in a fleet of turbines that are less than 2 years old. Siemens talking about the loss said: “The charge is related to inspecting and replacing bearings due to the early degradation in certain turbine models. We believe this is related to recent batches of bearings and we are in discussions with the supplier” (see our post here).

Now to the claims about Infigen’s turbines.

The turbines Infigen speared into the communities at Woodlawn and Capital in NSW are all Suzlon s88s – just about the worst designed and built turbine there is.

Suzlon – aka Suzlon REPower, aka Senvion – have planted hundreds of its S88s all over the Australian countryside: in addition to those Infigen operate in NSW, Trustpower planted 47 at Snowtown, in South Australia’s Mid-North; and AGL speared a hundred or so into SA’s Mid-North, around Jamestown and Hallett.

To keep their workings lubricated and operating, wind turbine gearboxes have oil-reservoirs, like the sump in a car engine, and – like a car engine – the oil needs to be drained and changed on a regular basis.

At Woodlawn and Capital – the wind farms Australia’s Treasurer, Joe Hockey rightly called “utterly offensive” – STT hears that the maintenance crew – charged with the job of changing the oil in Infigen’s Suzlon s88 turbines there – are finding the task getting more difficult over time.

Apparently, the gearboxes are wearing out a whole lot faster than expected, with metal filings gumming up the oil-reservoirs; which has required the mechanics to make special efforts to first clear away the munched-up metal, in order to get the metal/oil mixture to drain out of the oil-reservoir.

Repairs, general maintenance, metal fatigue, wear and tear, blade and bearing failure all cost – and, together, help make intermittent, unreliable and intermittent wind power insanely expensive; and smash to bits the wind industry’s nauseating falsehood about wind power being “free”.

Wind farm operating costs are typically in the range of $25 per MWh dispatched to the grid. That is, every additional MWh delivered, costs an additional $25 to produce; therefore, the marginal cost of production is (at least) $25 per MWh, not zero. And – due to the need for repairs to blades, gearboxes, generators, cooling systems, etc – or wholesale replacement thereof – that cost naturally increases over the life of the turbines used.

In this glossy tissue of lies (click here for the pdf) Infigen sets out the financial “performance” of its American and Australian operations. From page 26, here’s Table 16 relating to its Australian operations, where it reports “Operating Cost (A$/MWh) as $23.93 for 2012/13 compared to an “Average Price” of electricity sold of $96.57 per MWh.

From page 29, here’s Table 20 where, on total operating costs of $36.3 million, $17.2 million is attributed to “Turbine O&M” (ie operation and maintenance); $0.9 million to “Balance of plant”; and $7.5 million to “Other direct costs”. Infigen’s US operations reported similar operating costs of US$24.18 per MWh for 2012/13 (refer to Infigen’s report at page 20 and Table 15 on page 24).

Bear in mind that wind farm operating costs of $25 per MWh compare with the ability of Victorian coal fired power generators to profitably deliver power to the grid at less than $25 per MWh.

The bulk of wind farm operating costs are taken up by maintenance and repairs: see Table 20 above (and see our post here for more detail).

Although some ‘repairs’ are more costly than others – if a ‘repair’ is possible, that is.

In this recent post we reported on a cluster of Suzlon s88s at a wind farm in Nicaragua that burst into flames and threw their blades to the four-winds – after which, one of them collapsed and hit the deck – all in spectacular fashion: the cause was said to be a “failure in their emergency braking systems”.

Then there’s the cost of a more mundane class of ‘repairs’.

The pictures below are of the bits and worn out pieces of Suzlon s88s taken at Suzlon’s yard in Jamestown, South Australia.

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The picture above is of the gearbox assembly of a Suzlon s88 that literally ground itself to a halt at (what was then) AGL’s Hallett 2 wind farm in SA. The main ring-gear in the planetary section split into multiple pieces, destroyed the housing and sent about 250 litres of gear oil – contained in the housing – raining down the inside of the tower.

The turbine in question was out of action for over 3 months: the replacement was under warranty, meaning Suzlon was liable to stump up for the cost of doing so. That it took so long is no wonder, as Suzlon – which suffered India’s biggest convertible-bond default in 2012 – was seriously struggling then and isn’t in any better shape now – even a name change to “Senvion” hasn’t helped.

As well as the gearbox self-destruction episode at Hallett 2, the 34 Suzlon’s s88s used there suffered a raft of generator failures, all requiring complete replacements.

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The photo above is of 4 ‘worn out’ generator assemblies from Hallett 2’s s88s that were replaced some time ago. The photo below is of a suite of new generator assemblies lined up to ready to replace other failed or failing s88 generators.

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The gearbox and generator failures in Suzlon’s s88s at Hallett 2 (a wind farm that only started operating in June 2009), stand alongside what was the wholesale replacement of blades at the Hallett 1 (Brown Hill) wind farm south of Jamestown. There, 45 Suzlon s88s were used; commencing operation in April 2008. Not long into their operation, stress fractures began appearing in the 44m long blades; Suzlon claimed that there was a “design fault” and was forced by AGL to replace the blades on all 45 turbines, under warranty.

That probably just about covers the waffle, lies and spin pitched up by Infigen about the “rarity” of wind turbine breakdowns – especially in relation to the highly ‘reliable’ Suzlon s88s that it uses in NSW.

Not content with telling whoppers about the true operating costs of its wind turbines, Infigen goes on with it, claiming that: “because renewable energy has low operating costs, it displaces more-expensive gas generation, thereby lowering the wholesale electricity costs”.

Infigen setting up yet another couple of easy gets there.

We think we’ve well and truly covered the drivel put up by Infigen about wind power’s purported “low operating costs” above – not least by using its very own financial reports.

Far from “displacing” gas powered generation, wind power guarantees the need for it. However, it’s highly inefficient and extremely costly to run Open Cycle Gas Turbines (OCGTs) that have come to the fore – thanks to the power generation chaos being delivered on a daily basis by outfits like Infigen (see our post here).

In Australia – as elsewhere – whatever wind power capacity is installed requires 100% of that capacity be backed up 100% of the time with fossil fuel generation sources (see our posts here and here).

And that back-up has to be available in a heartbeat to cover routine, unpredictable and total collapses in wind power output – which means additional spinning reserve held by coal and gas-steam plants (including CCGTs) or fast-start-up OCGTs and diesel generators (see our post here).

Compared to the average wholesale price of $35 per MWh, OCGTs cost around $200-300 per MWh to run – depending on the spot price for gas. And the cost of providing peaking power cover when wind watts go missing is astronomical: the dispatch price quickly skyrockets from $30-40 per MWh towards the regulated cap of $12,500 per MWh; and often hits it (see our posts here and here and here) – the cost of which is ultimately born by retail customers – especially in Australia’s wind power capital, South Australia – at least those South Australians who can still afford power at all (see our posts here and here).

Without the need to compensate for daily collapses in wind power output there would be no need for growing fleets of OCGTs at all.

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While Infigen – predictably – sticks to the wind industry script about ‘wholesale prices’, as we’ve pointed out once or twice before, households and businesses couldn’t care less what the wholesale price of electricity is; they get served with power bills from retail providers which, funnily enough, set out to recover the retail price.

Adding rafts of peaking power from OCGTs and diesel generators – at exorbitant cost – can only add to retail prices. And just precisely how wind power can possibly have any downward impact on wholesale prices when the combined output of all wind farms connected to the eastern grid struggles – on hundreds of occasions each year – to top 10% of their total capacity and – on plenty of occasions – half that and less (see our post here), is somewhat of a ‘divine’ mystery?

But we’ve left the really big fish until last. It’s come from some kind of parallel universe, so we’ll set it out in full and highlight it:

Infigen says that “there are no government subsidies associated with wind turbines in Australia”.

Hmmm …

The Power Purchase Agreements (PPAs) struck between wind power outfits and retailers (which you’ll never once see the likes of Infigen talk about publicly) are built around the massive stream of subsidies established by the Large-Scale Renewable Energy Target (LRET) – which is directed to wind power generators in the form of Renewable Energy Certificates (RECs aka LGCs).

Under PPAs, the prices set guarantee a return to the generator of between $90 to $120 per MWh for every MWh delivered to the grid. In a company report last year, AGL (in its capacity as a wind power retailer) complained about the fact that it is bound to pay $112 per MWh under PPAs with wind power generators: these PPAs run for at least 15 years and many run for 25 years.

Wind power generators can and do (happily) dispatch power to the grid at prices approaching zero – when the wind is blowing and wind power output is high; at night-time, when demand is low, wind power generators will even pay the grid manager to take their power (ie the dispatch price becomes negative)(see our post here). However, the retailer still pays the wind power generator the same guaranteed price under their PPA – irrespective of the dispatch price: in AGL’s case, $112 per MWh.

PPA prices are 3-4 times the cost that retailers pay to conventional generators; as noted above, retailers can purchase coal-fired power from Victoria’s Latrobe Valley for around $25 per MWh – and the dispatch price ranges from $30-$40, on average.

Underlying the PPA is the value of the RECs that are issued to power generators and handed to retailers as part of the deal.

The issue and transfer of RECs under the LRET sets up the greatest government mandated wealth transfer seen in Australian history: the LRET is – without a shadow of a doubt – the largest industry subsidy scheme in the history of the Commonwealth. That transfer – which comes at the expense of the poorest and most vulnerable; struggling businesses; and cash-strapped families – is effected by the issue, sale and surrender of RECs. As Origin Energy chief executive Grant King correctly puts it:

“[T]he subsidy is the REC, and the REC certificate is acquitted at the retail level and is included in the retail price of electricity”.

It’s power consumers that get lumped with the “retail price of electricity” and, therefore, the cost of the REC Subsidy paid to wind power outfits, like Infigen. The REC Tax/Subsidy has already added $9 billion to Australian power bills, so far.

Between 2014 and 2031, the mandatory LRET requires power consumers to pay the cost of issuing 603.1 million RECs to wind power generators. With the REC price likely to be at least $65 (by 2017) – and tipped to exceed $90 – the wealth transfer from power consumers to the wind industry will be somewhere between $40 billion and $60 billion, over the next 17 years (see our posts here and here).

Far from there being – as Infigen tries to spin it – “no government subsidies associated with wind turbines in Australia” – in the absence of the LRET – that forces retailers to buy RECs or suffer the $65 per MWh shortfall charge (see our post here) – and the $billions in REC Tax/Subsidy directed to wind power outfits under it – there would be NO wind industry in Australia at all: and that’s a FACT.

But dealing with the facts and the truth has never been the wind industry’s strongest point, a bit like that cute little wooden boy/puppet called Pinocchio.