21 ms·

It is cheap because it is a poor power source, the energy is delivered at inopportune times. C&I doesn't want to sign PPAs with them, which is why they have to

by jamez1 9y ago

It is cheap because it is a poor power source, the energy is delivered at inopportune times. C&I doesn't want to sign PPAs with them, which is why they have to discount heavily to get them. This article then takes that fact and pretends it means wind can undercut gas? Gas, especially gas peakers command the highest prices per MW because they run at the times when we need energy the most. That then covers the cost of having them idle for the rest of the year. Wind has low operating costs but the maintenance and depreciation are huge, so looking at it from an operating cost perspective completely undermines this. The simple litmus test we should use is that there are no profitable wind companies. It's not very hard to run one - so if this article is accurate, where the hell are they?

verelo 9y ago
I actually love that it's cheap, for the reasons you state. If nothing else this just encourages the market to look at storage more seriously, if there is money being left on the table that could be redirected to storage this might be a good means of replacing gas down the road.
dpierce9 9y ago
https://www.eia.gov/todayinenergy/detail.php?id=30112 https://www.eia.gov/todayinenergy/detail.php?id=30112 If you can't get a loan to build wind farms, why was new 7.7 GW of capacity added in 2016? Also, Alstom, Invenergy? I know you are trolling but come on.
- jamez1 9y ago
  Where did I say anything about loans? You do realize renewable energy is subsidized by RECs, who wouldn't want to add capacity when the government will pay the shortfall! They aren't profitable on their own, and barely turn a profit when you look at the full life cycle of these businesses due to the maintenance/depreciation costs which are hidden when you look at pure operating profit. Invenergy has huge natural gas generation and seems to want to sell every wind farm they build. I don't know why you think they're an example of a profitable wind farm operator, there isn't any evidence that they make money off it. Alstom makes nothing off it's wind either.
  - dpierce9 9y ago
    C&I? PPAs are effectively the collateral for project finance in these cases so you can't build one of these things unless you have a PPA in place (unless you are vertically integrated or running a pilot). A solid percentage of new wind is being built in states without RECs (also the government doesn't pay RECs, ratepayers do). The PTC is being phased out but it is gravy at this point. Wind is profitable without subsidies in a lot of places (and the government subsidizes nuclear [insurer of last resort] and coal [socializing negative externalities]). Regarding margin, coal and nuclear also barely make money. Natural gas steam barely makes money. CT peakers make high margins when operational but they are barely operational. None of this is surprising. Electricity is a commodity business (for IPPs at least), you sort of expect razor thin margins.
epistasis 9y ago
>Wind has low operating costs but the maintenance and depreciation are huge, so looking at it from an operating cost perspective completely undermines this. Sorry, what type of analysis do you have that refutes what everybody else is saying? Take for example Lazard's analysis from last year: https://www.lazard.com/perspective/levelized-cost-of-energy-analysis-100/ https://www.lazard.com/perspective/levelized-cost-of-energy-... Not sure why the maintenance or depreciation would refute the cheapness of wind.
- jamez1 9y ago
  These analysis are not comparing apples for apples. Renewables don't supply base load and hence they sell energy when people don't need it, which is why they are achieving lower prices. Maintenance and depreciation are much larger costs because the asset is the business for wind farms. Who cares how much operating profit you make, if your depreciation is higher than it? To understand depreciation, consider a guy driving Uber making $30/hr in an $80k merc. He might be making good operating profit, but when you consider he has to replace the car in 5-10 years, spending another $80k, is it really that good?
  - epistasis 9y ago
    Are you claiming that profits don't cover depreciation? Because that directly contradicts the LCoE analysis from Lazard. The LCoE, takes that into account. Dispatchability has no relevance to the profits/depreciation game. Based on these comments I have to agree with another commenter that you're just trolling.
  - dbenhur 9y ago
    You make no sense with your statement about depreciation. Depreciation is expense which lowers profit. It's the accounting mechanism we use to spread one-time capital cash outlays over the service life of an asset so as to more realistically calculate profit and loss on an ongoing basis.
  - nate_meurer 9y ago
    "Baseload" power is an outdated concept, a relic from a model of generation and distribution that is rapidly disappearing. Here's what the chief economist of the American Petroleum Institute says about it: "Baseload is kind of a historical term. It’s not really relevant to how electricity is produced today…What you need is dispatchability… and [coal and nuclear] are far slower when you compare them to a lot of the technology natural gas plants have."
simongray 9y ago
> The simple litmus test we should use is that there are no profitable wind companies. It's not very hard to run one - so if this article is accurate, where the hell are they? "Vestas Rises to 9-Year High as Quarterly Profit Quadruples" (https://www.bloomberg.com/news/articles/2017-05-05/vestas-quarterly-profit-beats-estimates-maintains-2017-guidance https://www.bloomberg.com/news/articles/2017-05-05/vestas-qu...)
- jamez1 9y ago
  They sell turbines, they don't run wind farms. Selling the equipment is very profitable because every purchase is hugely subsidized by the government. Their profit is tied to the volume of wind farms deployed, not the profit generated per MW of wind.
  - gaius 9y ago
    In a gold rush, sell shovels
  - davedx 9y ago
    Ah, great argument: as soon as examples are provided, just move the goalposts, or start talking about subsidies.
gpm 9y ago
> It is cheap because it is a poor power source This makes no sense. How good a power source something is has nothing to do with how cheap it is to produce. Otherwise horses running in circles around poles would be a dirt cheap power source and oil/solar (depending if you rank by convenience or environment) would be insanely expensive.
- epistasis 9y ago
  You're right, it is completely illogical. But so are the rest of the claims. Just as there are many people that are stalwart anti nuclear, and will say anything to fight against it without regards to honest analysis, there are a ton of anti-wind energy people.
- jamez1 9y ago
  Imagine you run an aluminium plant (where you can't have the plant lose power or the metal solidifies and costs you millions). Would you rather be powered by coal or wind? I should also point out that power prices vary wildly depending on where and when the energy is delivered, the time of day is hugely important. Electricity isn't stored - it must be consumed as soon as it is created. If you are delivering it at times when nobody uses it, then the only people who can pay you will give you much lower prices. Do you see how little relevance these lower prices are? It doesn't mean that coal is much more expensive, it just means coal commands a higher price because it sells when it has no competition.
  - raesene6 9y ago
    I think the variability of a lot of renewables is why grid-scale energy storage projects are taking off (e.g. http://www.independent.co.uk/news/business/news/tesla-south-australia-renewable-energy-worlds-largest-grid-scale-battery-a7828171.html http://www.independent.co.uk/news/business/news/tesla-south-...). With a decent quantity of storage and good interconnects to shift power from areas of high generation to other areas, it seems possible to balance out some of the issues you're referring to.
  - sobani 9y ago
    re aluminum plant: https://www.greentechmedia.com/articles/read/german-firm-turns-aluminum-smelter-into-huge-battery https://www.greentechmedia.com/articles/read/german-firm-tur...
haser_au 9y ago
...there are no profitable wind companies I'm not sure where you got your information from, but there are plenty of profitable wind companies. Since a lot of them are publicly listed companies, they have an obligation to invest shareholder money responsibly to generate a profit. Additionally, many diversify their risk by being 'renewable energy' companies (e.g. solar, hydro, etc.) These companies wouldn't be building wind turbines or operating wind farms if it wasn't profitable. Example: Meridian Energy, 866 employees, NZD$2.37 billion revenue, $NZD185 million profit. Generates ~35% of electricity in New Zealand, with operations in Australia as well (3 wind farms) https://en.wikipedia.org/wiki/Wind_power_in_Australia#Major_wind_power_companies https://en.wikipedia.org/wiki/Wind_power_in_Australia#Major_... http://www.investopedia.com/investing/wind-stocks/ http://www.investopedia.com/investing/wind-stocks/
alphydan 9y ago
There is a lot of ignorance in this post. But just to counter your litmus test, here's the first obvious example I can think of: https://www.edpannualreport.edp.pt/en/key-numbers https://www.edpannualreport.edp.pt/en/key-numbers with over 70% of renewable energy generation, the equivalent of a couple small nuclear plants in wind capacity (10GW) ... they are making hundreds of millions (sometimes billions) in profit. They are one of the largest wind turbine operators in the world and know how to evaluate an energy project. The key number is $/kWh over the whole lifetime of the project (including CAPEX, OPEX, financing, decommissioning, etc). This is called LCOE or levelized cost of energy. Over the lifetime of the machine, they make a lot of money. For your information, other companies investing heavily (and profitably) in operating wind turbines are Iberdrola, Enel GreenPower, Dong Energy, etc (all billion $ operations)
davedx 9y ago
> no profitable wind companies https://www.vestas.com/~/media/vestas/investor/investor%20pdf/financial%20reports/2016/fy/170208_03_companyannoncement.pdf https://www.vestas.com/~/media/vestas/investor/investor%20pd... I'm a happy Vestas shareholder :) Also see Dong Energy. European wind companies are doing pretty well at the moment.
suihkulokki 9y ago
I think the article is about price of producing electricity rather than the price on market... We've gone from the "Renewables are theoretically good but too expensive" to "Renewables are too cheap" stage surprisingly fast. The growing influx of intermittent renewable energy means either you adapt and use the cheap electricity for you benefit. Or pay a higher price for more expensive electricity sources if you can't be flexible. A lot of power dependent things are going to start being priced like AWS spot instances.
danmaz74 9y ago
> Wind has low operating costs but the maintenance and depreciation are huge, so looking at it from an operating cost perspective completely undermines this. Source? I would expect inshore windmills to have very low maintenance costs.
- pjc50 9y ago
  http://www.windmeasurementinternational.com/wind-turbines/om-turbines.php http://www.windmeasurementinternational.com/wind-turbines/om... quotes maintenance figures between 3% and 1.5% of the initial construction cost.
  - danmaz74 9y ago
    Thanks; reading the source, the 3% figure is for old technology turbines, while 1.5%/2% is for newer ones. Doesn't look like so high to me.

by jamez1 9y ago

verelo 9y ago

I actually love that it's cheap, for the reasons you state. If nothing else this just encourages the market to look at storage more seriously, if there is money being left on the table that could be redirected to storage this might be a good means of replacing gas down the road.

dpierce9 9y ago

https://www.eia.gov/todayinenergy/detail.php?id=30112 https://www.eia.gov/todayinenergy/detail.php?id=30112 If you can't get a loan to build wind farms, why was new 7.7 GW of capacity added in 2016? Also, Alstom, Invenergy? I know you are trolling but come on.

jamez1 9y ago
Where did I say anything about loans? You do realize renewable energy is subsidized by RECs, who wouldn't want to add capacity when the government will pay the shortfall! They aren't profitable on their own, and barely turn a profit when you look at the full life cycle of these businesses due to the maintenance/depreciation costs which are hidden when you look at pure operating profit. Invenergy has huge natural gas generation and seems to want to sell every wind farm they build. I don't know why you think they're an example of a profitable wind farm operator, there isn't any evidence that they make money off it. Alstom makes nothing off it's wind either.
- dpierce9 9y ago
  C&I? PPAs are effectively the collateral for project finance in these cases so you can't build one of these things unless you have a PPA in place (unless you are vertically integrated or running a pilot). A solid percentage of new wind is being built in states without RECs (also the government doesn't pay RECs, ratepayers do). The PTC is being phased out but it is gravy at this point. Wind is profitable without subsidies in a lot of places (and the government subsidizes nuclear [insurer of last resort] and coal [socializing negative externalities]). Regarding margin, coal and nuclear also barely make money. Natural gas steam barely makes money. CT peakers make high margins when operational but they are barely operational. None of this is surprising. Electricity is a commodity business (for IPPs at least), you sort of expect razor thin margins.

epistasis 9y ago

>Wind has low operating costs but the maintenance and depreciation are huge, so looking at it from an operating cost perspective completely undermines this. Sorry, what type of analysis do you have that refutes what everybody else is saying? Take for example Lazard's analysis from last year: https://www.lazard.com/perspective/levelized-cost-of-energy-analysis-100/ https://www.lazard.com/perspective/levelized-cost-of-energy-... Not sure why the maintenance or depreciation would refute the cheapness of wind.

jamez1 9y ago
These analysis are not comparing apples for apples. Renewables don't supply base load and hence they sell energy when people don't need it, which is why they are achieving lower prices. Maintenance and depreciation are much larger costs because the asset is the business for wind farms. Who cares how much operating profit you make, if your depreciation is higher than it? To understand depreciation, consider a guy driving Uber making $30/hr in an $80k merc. He might be making good operating profit, but when you consider he has to replace the car in 5-10 years, spending another $80k, is it really that good?
- epistasis 9y ago
  Are you claiming that profits don't cover depreciation? Because that directly contradicts the LCoE analysis from Lazard. The LCoE, takes that into account. Dispatchability has no relevance to the profits/depreciation game. Based on these comments I have to agree with another commenter that you're just trolling.
- dbenhur 9y ago
  You make no sense with your statement about depreciation. Depreciation is expense which lowers profit. It's the accounting mechanism we use to spread one-time capital cash outlays over the service life of an asset so as to more realistically calculate profit and loss on an ongoing basis.
- nate_meurer 9y ago
  "Baseload" power is an outdated concept, a relic from a model of generation and distribution that is rapidly disappearing. Here's what the chief economist of the American Petroleum Institute says about it: "Baseload is kind of a historical term. It’s not really relevant to how electricity is produced today…What you need is dispatchability… and [coal and nuclear] are far slower when you compare them to a lot of the technology natural gas plants have."

simongray 9y ago

> The simple litmus test we should use is that there are no profitable wind companies. It's not very hard to run one - so if this article is accurate, where the hell are they? "Vestas Rises to 9-Year High as Quarterly Profit Quadruples" (https://www.bloomberg.com/news/articles/2017-05-05/vestas-quarterly-profit-beats-estimates-maintains-2017-guidance https://www.bloomberg.com/news/articles/2017-05-05/vestas-qu...)

jamez1 9y ago
They sell turbines, they don't run wind farms. Selling the equipment is very profitable because every purchase is hugely subsidized by the government. Their profit is tied to the volume of wind farms deployed, not the profit generated per MW of wind.
- gaius 9y ago
  In a gold rush, sell shovels
- davedx 9y ago
  Ah, great argument: as soon as examples are provided, just move the goalposts, or start talking about subsidies.

gpm 9y ago

> It is cheap because it is a poor power source This makes no sense. How good a power source something is has nothing to do with how cheap it is to produce. Otherwise horses running in circles around poles would be a dirt cheap power source and oil/solar (depending if you rank by convenience or environment) would be insanely expensive.

epistasis 9y ago
You're right, it is completely illogical. But so are the rest of the claims. Just as there are many people that are stalwart anti nuclear, and will say anything to fight against it without regards to honest analysis, there are a ton of anti-wind energy people.
jamez1 9y ago
Imagine you run an aluminium plant (where you can't have the plant lose power or the metal solidifies and costs you millions). Would you rather be powered by coal or wind? I should also point out that power prices vary wildly depending on where and when the energy is delivered, the time of day is hugely important. Electricity isn't stored - it must be consumed as soon as it is created. If you are delivering it at times when nobody uses it, then the only people who can pay you will give you much lower prices. Do you see how little relevance these lower prices are? It doesn't mean that coal is much more expensive, it just means coal commands a higher price because it sells when it has no competition.
- raesene6 9y ago
  I think the variability of a lot of renewables is why grid-scale energy storage projects are taking off (e.g. http://www.independent.co.uk/news/business/news/tesla-south-australia-renewable-energy-worlds-largest-grid-scale-battery-a7828171.html http://www.independent.co.uk/news/business/news/tesla-south-...). With a decent quantity of storage and good interconnects to shift power from areas of high generation to other areas, it seems possible to balance out some of the issues you're referring to.
- sobani 9y ago
  re aluminum plant: https://www.greentechmedia.com/articles/read/german-firm-turns-aluminum-smelter-into-huge-battery https://www.greentechmedia.com/articles/read/german-firm-tur...

haser_au 9y ago

...there are no profitable wind companies I'm not sure where you got your information from, but there are plenty of profitable wind companies. Since a lot of them are publicly listed companies, they have an obligation to invest shareholder money responsibly to generate a profit. Additionally, many diversify their risk by being 'renewable energy' companies (e.g. solar, hydro, etc.) These companies wouldn't be building wind turbines or operating wind farms if it wasn't profitable. Example: Meridian Energy, 866 employees, NZD$2.37 billion revenue, $NZD185 million profit. Generates ~35% of electricity in New Zealand, with operations in Australia as well (3 wind farms) https://en.wikipedia.org/wiki/Wind_power_in_Australia#Major_wind_power_companies https://en.wikipedia.org/wiki/Wind_power_in_Australia#Major_... http://www.investopedia.com/investing/wind-stocks/ http://www.investopedia.com/investing/wind-stocks/

alphydan 9y ago

There is a lot of ignorance in this post. But just to counter your litmus test, here's the first obvious example I can think of: https://www.edpannualreport.edp.pt/en/key-numbers https://www.edpannualreport.edp.pt/en/key-numbers with over 70% of renewable energy generation, the equivalent of a couple small nuclear plants in wind capacity (10GW) ... they are making hundreds of millions (sometimes billions) in profit. They are one of the largest wind turbine operators in the world and know how to evaluate an energy project. The key number is $/kWh over the whole lifetime of the project (including CAPEX, OPEX, financing, decommissioning, etc). This is called LCOE or levelized cost of energy. Over the lifetime of the machine, they make a lot of money. For your information, other companies investing heavily (and profitably) in operating wind turbines are Iberdrola, Enel GreenPower, Dong Energy, etc (all billion $ operations)

davedx 9y ago

> no profitable wind companies https://www.vestas.com/~/media/vestas/investor/investor%20pdf/financial%20reports/2016/fy/170208_03_companyannoncement.pdf https://www.vestas.com/~/media/vestas/investor/investor%20pd... I'm a happy Vestas shareholder :) Also see Dong Energy. European wind companies are doing pretty well at the moment.

suihkulokki 9y ago

I think the article is about price of producing electricity rather than the price on market... We've gone from the "Renewables are theoretically good but too expensive" to "Renewables are too cheap" stage surprisingly fast. The growing influx of intermittent renewable energy means either you adapt and use the cheap electricity for you benefit. Or pay a higher price for more expensive electricity sources if you can't be flexible. A lot of power dependent things are going to start being priced like AWS spot instances.

danmaz74 9y ago

> Wind has low operating costs but the maintenance and depreciation are huge, so looking at it from an operating cost perspective completely undermines this. Source? I would expect inshore windmills to have very low maintenance costs.

pjc50 9y ago
http://www.windmeasurementinternational.com/wind-turbines/om-turbines.php http://www.windmeasurementinternational.com/wind-turbines/om... quotes maintenance figures between 3% and 1.5% of the initial construction cost.
- danmaz74 9y ago
  Thanks; reading the source, the 3% figure is for old technology turbines, while 1.5%/2% is for newer ones. Doesn't look like so high to me.