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Hot air over wind power

Worldwide, the blogosphere pulses with indignation about solar subsidies. But the peculiar thing about all this wrath is how rarely it is directed at what is becoming a remarkably destructive aspect of renewable energy: its ability to drive down wholesale electricity prices.

It must be odd to be in the renewable energy business at the tail-end of 2012.

In the US, presidential hopeful Mitt Romney wants to kill off wind subsidies. In Scotland, Donald Trump has shelved plans for a hotel because he says its views will be wrecked by "industrial monstrosities" of bird-butchering wind turbines. In Canada, authorities are studying claims that living near a wind farm can give you anything from high blood pressure to headaches. Worldwide, the blogosphere pulses with indignation about solar subsidies.

But the peculiar thing about all this wrath is how rarely it is directed at what is becoming a remarkably destructive aspect of renewable energy: its ability to drive down wholesale electricity prices.

For anyone rendered slack-jawed by the latest monthly power bill, this might sound like good news. But it is not quite that simple, especially for companies that derive a lot of profits from generating power via conventional fossil fuels such as coal or gas.

Some utilities risk having as much as half their power generation profits wiped out by 2020 as renewables reshape energy markets say analysts at UBS, which recently downgraded RWE, the German power... more [truncated due to possible copyright]  

It must be odd to be in the renewable energy business at the tail-end of 2012.

In the US, presidential hopeful Mitt Romney wants to kill off wind subsidies. In Scotland, Donald Trump has shelved plans for a hotel because he says its views will be wrecked by "industrial monstrosities" of bird-butchering wind turbines. In Canada, authorities are studying claims that living near a wind farm can give you anything from high blood pressure to headaches. Worldwide, the blogosphere pulses with indignation about solar subsidies.
 
But the peculiar thing about all this wrath is how rarely it is directed at what is becoming a remarkably destructive aspect of renewable energy: its ability to drive down wholesale electricity prices.

For anyone rendered slack-jawed by the latest monthly power bill, this might sound like good news. But it is not quite that simple, especially for companies that derive a lot of profits from generating power via conventional fossil fuels such as coal or gas.

Some utilities risk having as much as half their power generation profits wiped out by 2020 as renewables reshape energy markets say analysts at UBS, which recently downgraded RWE, the German power company, EDF of France, and the Czech Republic's CEZ Group as a result. Other effects are only starting to be understood as the growth of renewable power soars.

Just four years ago, there were fewer than 136 gigawatts of wind and solar power capacity worldwide, enough to power about 80m households. By the end of last year there were more than 300GW. In countries such as Germany, where green generators delivered more than a quarter of electricity in the first six months of this year, there is now so much renewable power available at certain times of the day that it meets a sizeable chunk of demand.

When this happens, market prices can crash because renewable power generators, which have large subsidies, low operational costs and free fuel, can offer cheaper prices than owners of plants running on conventional fossil fuels.

One fine day in May this year, average wholesale prices during peak hours in Germany were only €26 per megawatt hour - a third of what they were on the same day in 2008, according to research by Zouk Capital, a London-based private equity firm focused on the clean-tech market.

The critical word here is "peak". The hours of peak weekday demand are when power generators generally make most money because it is when both prices and volumes of power sold are highest. But in Germany, solar power is starting to eat away at this earning opportunity, because it turns out to be much more effective than expected in a country with such dismal weather.

Wind power is having a similar impact, though not necessarily during times of peak demand. This is happening in other countries installing a lot of solar and wind power. It is even said to be causing a surge in so-called negative prices, when power is effectively sold at a loss. In Texas, which has the most wind power capacity of any US state, a recent study by the Northbridge Group of energy consultants shows negative pricing has increased sharply as wind farms spread over the past four years. Those findings are contested, but what is clear is that lower market prices are not being translated into lower household bills.

The reasons vary from country to country, but it is partly because consumers are sharing the cost of building new green power infrastructure and plants. That is evident in Germany, where power transmission companies recently announced a near doubling of a renewables levy - a contentious move given that the burden falls heavily on consumers as many businesses are exempted so as to protect their international competitiveness. Those charges should eventually come down once the new infrastructure is built and depreciated, but until then, renewables will keep shaking up energy systems - with mixed results.

On the upside, more renewable energy should mean fewer carbon emissions. But if you invested your pension money in what you thought was a solid, safe utility, you may want to reconsider. And lower market prices could discourage new power plant investment. More importantly, non-hydroelectric renewables only generated about 6 per cent of electricity worldwide last year. We can only imagine what lies ahead as this share grows, but it has to be at least as important as a wind turbine spoiling a pretty view.


Source: http://www.ft.com/intl/cms/...

OCT 22 2012
https://www.windaction.org/posts/35221-hot-air-over-wind-power
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