the truth about the cost of renewable$

Whilst I believe that renewable energy should play a part in the production of efficient, clean, baseload electricity.

The dreams of the renewable architects, are fast becoming nightmares. Why? . . . . .

Just as a child who learns how to ride a bike with trainer wheels, thinks they have mastered the machine . . . until said trainer wheels are removed . . . . and through a combination of gravity, and the removal of artificial support, soon finds the harsh reality of gravel rash . . . . the renewable sector has found itself in a similar situation.

The artificial support that the renewable energy sector has been provided with, by Governments with naive parental like views . . . . . . and billions of dollars in training wheels, should have prepared better for the day when the trainer wheels were removed.

Just as a child initially blames the parent who removes the trainer wheels, for their sudden demise in skill and the unavoidable gravel rash . . . . so too, are the manufacturers of solar and wind.

The following article illustrates to me, why the renewable industry is way ahead of its true capabilities . . . . . and is now suffering.

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Courtesy of Bloomberg

Spain Ejects Clean-Power Industry With Europe Precedent: Energy

By Alex Morales and Ben Sills - May 30, 2012 5:46 PM GMT+1000


Spanish renewable-energy companies that once got Europe’s biggest subsidies are deserting the nation after the government shut off aid, pushing project developers and equipment-makers to work abroad or perish.

From wind-turbine maker Gamesa Corp. Tecnologica SA (GAM) to solar park developer T-Solar Global SA, companies are locked out of their home market for new business. These are the same suppliers that spearheaded more than $69 billion of wind and solar projects since 2004 that today supply more than 50 percent of Spain’s power demand on the most breezy and sunny days.


Saddled with a budget deficit more than twice the European Union limit and a ballooning gap between income and costs in its power system, Spain halted subsidies for new renewable-energy projects in January. Photographer: Denis Doyle/Bloomberg
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Saddled with a budget deficit more than twice the European Union limit and a ballooning gap between income and costs in its power system, Spain halted subsidies for new renewable-energy projects in January. The surprise move by Prime Minister Mariano Rajoy one month after taking office helped pierce investor confidence in stable aid for clean energy across Europe.

“They destroyed the Spanish market overnight with the moratorium,” European Wind Energy Association Chief Executive Officer Christian Kjaer said in an interview. “The wider implication of this is that if Spanish politicians can do that, probably most European politicians can do that.”

Spain’s $69 billion of investment in power capacity from 2004 to 2011 was about triple the spending per capita in the U.S. in that period, according to Bloomberg New Energy Finance data and U.S. Census Bureau population estimates. Most of the 2012-2013 spending will be for the legacy of projects approved before the aid cuts to wind, solar, biomass and co-generation.

Spending Skids

Investment in solar photovoltaic alone is headed to skid to as little as $107 million in 2013 from $879 million this year and $1.5 billion last year, New Energy Finance estimated. For new wind projects, investment should plunge to $963 million in 2013 and $244 million in 2014 from $2 billion this year.

T-Solar, which became the world’s biggest solar-farm operator by leveraging its Spanish business, currently has more than 40 running in Spain, Italy and India. While it still makes solar panels in Orense, Spain, they’re bound for Peru.

“We have an important pipeline of projects, and it’s 100 percent outside Spain right now,” T-Solar Managing Director Juan Laso, who also heads the country’s photovoltaic power association, said in a telephone interview. “If you take such a brutal measure, what you do is oblige the industry to move out,” he said of the January moratorium.

Solaria, Gamesa

Solaria Energia y Medio Ambiente SA (SLR), a Madrid-based solar panel maker, slumped as much as 19 percent today to 30 euro cents a share after restating its 2011 earnings. The company lost 96 million euros last year compared with a 6.5 million-euro profit in 2010.

Gamesa, the world’s fourth-biggest wind-turbine maker by market share according to Navigant Consulting Inc. (NCI)’s BTM Consult unit, plans to reduce the factory output of its Spanish plants to 1,000 megawatts by 2013 from 1,200 megawatts at the end of last year.

Instead, Zamudio-based Gamesa is adding capacity in India where it plans to open a third factory this year. In 2011, the company got less than 9 percent of its revenue in its home nation, down from almost 33 percent in 2009. Former CEO Jorge Calvet didn’t mention Spain on a May 10 call with analysts after announcing the company’s first quarterly loss.

“The future is outside of Spain,” said Sean McLoughlin, clean energy analyst at HSBC Bank Plc in London. “Gamesa already moved most of their business out of Spain and the moratorium only helps to accelerate and complete that process.”

Thirty-one years ago, Spain erected its first wind turbine at Tarifa, a city on the peninsula’s southern tip that juts into the gusty Straits of Gibraltar which divide Spain from Morocco.

German Model

In the 2000s, Spain copied the German clean-power aid model, as did nations from Portugal to Israel and Japan, increasing subsidies to a pinnacle in 2007. That’s when a law granted 444 euros ($556) a megawatt-hour for home rooftop solar panels feeding the power grid, compared with an average 39 euros paid to competing coal- or gas-fired power plants.

By 2009, the consumer bill for clean-energy aid had risen to 6 billion euros a year, ahead of the 5.6 billion euros in Germany, whose economy is almost four times bigger, according to the Council of European Energy Regulators.

Rolling Subsidy Cuts

After four successive reductions in subsidies since then, the government on Jan. 27 this year announced the moratorium on aid for new projects. The next month Spain saw itself drop out of the 10 most attractive markets for renewable-energy investors for the first time, due to reduced aid, on an Ernst & Young ranking. Spain led the list from October 2003 through July 2006.

“What happened in Spain is that abruptly, they changed the industry by changing the policy, and that doesn’t help build a sustainable industry,” said Stephan Ritter, general manager of General Electric Co.’s European renewables unit.

“The history of Spanish wind energy policy is ‘We’re going to keep it stable’ and suddenly out of the blue this comes, and it’s a bomb,” the EWEA’s Kjaer said.

The decline started before this year. The 75,466 renewable energy jobs that existed in Spain at the industry’s peak in 2008 shrank to 54,925 in 2010, according to the Renewable Energy Producers Association’s most recent data. Including indirect jobs, the tally slumped from 131,229 to 111,455.

Iberdrola SA (IBE), based in Bilbao, became the world’s biggest owner of wind farms, taking its Spanish experience abroad over the past decade. It campaigned for solar subsidies to be ended, because much of the power-tariff deficit sits on the utilities’ balance sheets straining their finances. Iberdrola, which also runs gas, hydro and nuclear plants, is Spain’s biggest utility.

Solar Drag

Solar energy was the biggest drag on the system, accounting for almost half of the annual 6 billion euros of liabilities and producing just above 2 percent of the power, said Eduardo Tabbush, an analyst in London at Bloomberg New Energy Finance.

With peak electricity demand at less than half of capacity, the country doesn’t need more power plants, he said. Spain has a capacity of 99 gigawatts, and peak demand of 44 gigawatts.

Spain’s power-system debt swelled to 23 billion euros as successive governments set electricity prices for consumers that didn’t cover the revenue utilities booked. Even with January’s moratorium, the electricity system racked up another 762 million euros of debt in the first two months of the year, according to the energy regulator.

Scapegoat for Policies?

“You’re making renewables a scapegoat for a problem that was created as a result of incredibly bad policies,” said Kjaer.

Spain is the world’s fourth-biggest wind energy market by cumulative installed capacity, and in solar photovoltaic power, it ties the U.S. for fourth, according to data compiled by Bloomberg. The nation installed at least a gigawatt of wind power capacity every year since 2001, peaking at 3.5 gigawatts in 2007, according to the Spanish Wind Energy Association.

“At the moment there’s not a single project planned for 2013,” Heikki Willstedt, director of energy policy at the Spanish Wind Energy Association, said in an interview. “We have to keep a rhythm of installation over the next two or three years to keep the industry here in Spain.”

Solar power installations have been bumpier, totaling 550 megawatts, 2,760 megawatts, 70 megawatts, 390 megawatts and 430 megawatts for the five years through 2011, according to Bloomberg New Energy Finance data.

Even before the moratorium was established, opportunities were dimming for renewable power in Spain. The so-called pre- registry of wind projects, which had been approved to receive above-market electricity prices, was set to expire at the end of 2012. And a retroactive cap was set on the number of hours when solar generators can earn higher rates.

Acciona, Abengoa

Acciona SA (ANA), a developer of wind and solar projects that in 2011 derived more than three quarters of electricity sales in Spain, has less than half of its pipeline of new projects for 2012 in Spain. Energias de Portugal SA’s renewables division, based in Spain, has less than a fifth of its pipeline there.

At Abengoa SA (ABG), the portion of revenue from Spain fell to 27 percent last year from 39 percent in 2007. Abengoa has 1,210 megawatts of solar thermal plants either in construction or in a pre-construction phase, a third of it in Spain.

“It reaches a point where if more interesting markets open up and you have to export to those markets, many times it’s better to take the factories there,” said Willstedt. “All of this know-how could be lost quickly, or it’ll move away, or it could be bought by competitors.”

In a country where unemployment in April rose to 24.4 percent, the subsidy moratorium puts more positions at stake, according to Willstedt.

’Five Years on Ice’

In its March 30 budget, Spanish Premier Rajoy’s government gave no sign of when it would bring back subsidies, and the National Energy Commission, an advisory body, has published scenarios including a suspension until 2017.

“I don’t know any sector that can be put on ice for 5 years and then be taken out intact,” said T-Solar’s Laso.

Abengoa Chief Executive Officer Manuel Sanchez Ortega said Feb. 28 in an interview he thought the moratorium would last 18 months at the most.

“Then the industry will pick up the pace again,” Ortega said. “If it lasts more than 18 months we are running the serious risk of driving all this industry out of the country.”

To be sure, Spain is headed to meet its European Union target of getting 20 percent of all its energy from renewables by 2020. The country generated 23 percent of its electricity from renewable sources in 2010.

To contact the reporters on this story: Alex Morales in London at [email protected]; Ben Sills in Madrid at [email protected]

To contact the editor responsible for this story: Reed Landberg at [email protected]
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Swiss