Energy: rigging the market
Thursday 27 September 2012
Installed EU wind capacity has reached the 100 gigawatt mark, crows the European Wind Energy Association (EWEA). That, it says, is the equivalent of power generated from 39 nuclear plants or a train of coal stretching from Buenos Aires to Brussels.
The top ten, it says, have an installed capacity of 3,218MW, delivering at an average 776MW with a load factor of about 24 percent.
Overall, that 100GW of wind, claims EWEA can produce the same amount of electricity over a year as 62 coal power plants, 39 nuclear power plants, or 52 gas power plants and, to produce the same amount of electricity as 100 GW of wind turbines in a year you would have to mine, transport and burn 72 million tonnes of coal, at a cost of €4,983 million.
I've checked out these figures and while some are roughly correct, others are rather dubious. Given that we are looking at a 24 percent load factor, 100GW capacity is going to deliver only about 24GW of average, and a new nuclear plant might deliver 1.2GW with a load factor of around 90 percent, we are actually looking at 22 plants – compared with the 50,000 high-performance 2MW wind turbines needed to deliver the same amount of power.
It is the omissions, thus, that are as interesting as the information the EWEA deems suitable for us to know. It tells us that the industry cost estimates for installing offshore are €3-4 million per megawatt, compared with around €1.2-1.4 million for onshore.
For offshore, that gives us up to €4 billion per GW of installed capacity and a price tag of €16 billion per GW of usable capacity, compared with about €2-4 billion per GW for nuclear.
The coal figures are interesting as well. The EWEA estimated cost of coal to produce 24GW is about right, of about €5 billion a year. But that is compared with the capital cost of the entire wind estate on the order of €400 billion, with a life per unit of about 20 years. Take coal fuel and capital costs, and we are looking at about one quarter of the cost of wind.
As long as there is a level playing field, therefore, there is no way renewables are going to be competitive with fossil fuels or nuclear, which is why we also see complaints from the sector about the continued financial risk.
Sneaked in a week ago, therefore, was a detailed report addressed to the EU commission, entitled, "Creating the Internal Energy Market". Addressing the lack of profitability of the wind industry, it is promoting no less than a revolution in the way electricity is produced, priced and marketed.
At its heart is the premise we saw yesterday, where it is recognised that, "in contrast to conventional power genera-tion, which is demand driven, wind energy is mainly supply driven according to the availability of its energy source".
It took 20 years to connect the first 10GW of wind power to the grids in European countries, and another 13 years to add 90GW - with over half installed in just the last six years.
Still unable to compete, in order to get its next 100GW, and the next, conventional electricity generation is to be made vastly more expensive, while the market is to be redesigned (i.e., rigged) to fit the renewables supplier rather than the consumer.
COMMENT THREAD
Richard North 27/09/2012
Eurocrash: euro saved – the end
Thursday 27 September 2012
The riot in Madrid, strikers in Athens – the 26th general strike since the crisis erupted - and falling prices in Frankfurt (as well as London and Paris - ed) all may indicate that the Cassandras are on the up, the paper says. But they are wrong. The ECB and ESM provide security, the crisis countries are making progress in their reforms. And the euro survives.
It is now clear, we are told, that September was the month of decisions. The ECB's decision to buy "unlimited" bonds from crisis countries will go down in history; likewise, the trend-setting decision by the Federal Constitutional Court on the ESM bailout.
Both had their effect: it is quieter in the eurozone, even if the fires have not been extinguished all at once. Interest rates on Spanish bonds have risen sharply, Greece struggles for billions more in aid, Portugal's government has been forced to rescind pay cuts and Spain refuses to ask for a bailout.
That, says the paper, sounds as if nothing has changed. But, it says, there is one big difference: the fundamental doubts about the preservation of the euro have been removed. This change in mood is due to ECB chief Mario Draghi. With his announcement on "unlimited" bond purchases, he has made it clear that the euro will survive.
Supporting this line is Nicolaus Heinen, Europe expert at Deutsche Bank Research. "There is now a very reliable firewall", he says. "Thus, the existential crisis has been overcome and the preservation of euro has been secured for the time".
Professor Clemens Fuest offers a similar judgement. In a study for the Bavarian Business Association (VBW), he believes there will be "a persistent economic stagnation in southern Europe". The ECB intervention risks weakening the currency, but there will be no collapse of the eurozone. He expects all member states to remain in the eurozone.
As to the future, Draghi's announcement has bought Europe time, says Heinen, giving the politicians the opportunity to introduce institutional reform. "Either it is possible to create a banking and fiscal union - a framework that prevents future crises – or we are threatened with permanent muddling through at the expense of economic growth".
Heinen believes it is unrealistic to assume that the crisis countries will carry out their reforms immediately. What matters is that the direction is clear, adding: "Investors want to know where the euro zone should be in five years".
However, if that narrative doesn't suit you, you can go with Torsten Riecke in the same newspaper. He says that the ECB's promises and all the talk of politics have not changed anything. The eurozone rescue "was only a summer dream", he says. The crisis is still there and now the short summer fairytale is ending.
It's back, says Riecke, firstly because it had never really gone, and secondly, because chancellor Merkel and her finance minister Schäuble are making it a self-fulfilling prophecy.
So we have it. The crisis is over, and the crisis is just about to start all over again. And that's as accurate a prediction as you will get - or perhaps not.
Riecke thinks he has identified the German dilemma. They are, he says, partners of an unconditional euro bailout they cannot refuse but no longer want. That's why Merkel supports Draghi's "bazooka" policy. That's why she agreed to the plans for a Union Bank in late June. But behind that, the chancellor and her finance minister are sure there will never be a majority to see them through.
And yet, the riots go on and the anger mounts. The non-crisis continues.
COMMENT THREAD
Richard North 27/09/2012
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