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How are wind and solar cost-competitive when they can exist in Germany only with extreme high subsidies? Look at the new windfarm called "Wikinger" that German

How are wind and solar cost-competitive when they can exist in Germany only with extreme high subsidies? Look at the new windfarm called "Wikinger" that Germany built near the island of Ruegen: https://de.wikipedia.org/wiki/Offshore-Windpark_Wikinger https://de.wikipedia.org/wiki/Offshore-Windpark_Wikinger Cost: 1.4 billion Euros Lifetime: 20 years Power: 350 MW Max. capacity: 0.4 (40%) Price at the electricity stock exchange Leipzig: 36 Euro/MWh Thus: 3500.42436520*36 = 883 million Euros Result: 517 million Euros loss

wjnc 7y ago
Interest in Germany: ~0-1%, expected inflation: 1-2%, terminal value: X unknown (but not 0). Just adding these parameters would change the conclusion of your valuation model significantly. Secondly losses are not subsidies. Subsidies are what governments dole out, losses are for investors and companies.
- hobofan 7y ago
  I don't know the specifics, but there are subsidies in place through the EEG[0] to prevent such losses. In general energy also seems to be a low-risk business, where if the energy companies would ever loose money, they are either already covered by the government or can sue the government for losses due to changed regulations with a good chance of winning. [0]: https://en.wikipedia.org/wiki/German_Renewable_Energy_Sources_Act https://en.wikipedia.org/wiki/German_Renewable_Energy_Source...
  - VyperCard 7y ago
    EEG Sites are phased out in favor of Direktvermartung though
Gravityloss 7y ago
The turbines have grown and a lot of recent wind park bids are at a pretty competitive price without subsidies. https://cleantechnica.com/2019/09/23/uk-offshore-wind-prices-reach-new-record-low-in-latest-cfd-auction/ https://cleantechnica.com/2019/09/23/uk-offshore-wind-prices...
aurelwu 7y ago
Why do you set a fixed price of 36 Euro / MWh for the next 20 years. At least take the phelix Futures to get a somewhat reasonable picture: https://www.eex.com/en/market-data/power/futures/phelix-de-futures https://www.eex.com/en/market-data/power/futures/phelix-de-f... (45€ Base / 53€ Peak). With the EU-ETS Certs getting more an more sparse and expensive over time, coal will be phased out more and more which will increase the price.
- m0zg 7y ago
  Germany already has the highest power prices in Europe. How much higher can this really go?
black_puppydog 7y ago
Then again the German government seems dead set on also subsidizing coal/gas by not internalizing their societal costs. So just removing those "subsidies" would already make wind/solar more attractive. Turns out, energy needs to be more expensive, and we should probably save energy.
brlewis 7y ago
> Lifetime: 20 years Power Is that really the lifetime of the farm, or is it just when turbines need to be replaced?
- TheGallopedHigh 7y ago
  What’s the difference
  - brlewis 7y ago
    The platforms, towers and undersea cables are already paid for. Replacing one piece of the system isn't starting over. The math presented was of all return on investment ending at 20 years.
ocschwar 7y ago
> Cost: 1.4 billion Euros Lifetime: 20 years Power: 350 MW Max. capacity: 0.4 (40%) Price at the electricity stock exchange Leipzig: 36 Euro/MWh Because wind farms have 0 fuel costs, they will operate at any price above a few eurocents per MWH. Which means once a critical mass of wind farms is operating in an area, the price frequently dives all the way to near 0. Sucks if you operate wind farms. Sucks less if you ALSO operate natural gas generators which you can then idle. And sucks a lot less if you're a consumer with dispatch able loads.

wjnc 7y ago

Interest in Germany: ~0-1%, expected inflation: 1-2%, terminal value: X unknown (but not 0). Just adding these parameters would change the conclusion of your valuation model significantly. Secondly losses are not subsidies. Subsidies are what governments dole out, losses are for investors and companies.

hobofan 7y ago
I don't know the specifics, but there are subsidies in place through the EEG[0] to prevent such losses. In general energy also seems to be a low-risk business, where if the energy companies would ever loose money, they are either already covered by the government or can sue the government for losses due to changed regulations with a good chance of winning. [0]: https://en.wikipedia.org/wiki/German_Renewable_Energy_Sources_Act https://en.wikipedia.org/wiki/German_Renewable_Energy_Source...
- VyperCard 7y ago
  EEG Sites are phased out in favor of Direktvermartung though

Gravityloss 7y ago

The turbines have grown and a lot of recent wind park bids are at a pretty competitive price without subsidies. https://cleantechnica.com/2019/09/23/uk-offshore-wind-prices-reach-new-record-low-in-latest-cfd-auction/ https://cleantechnica.com/2019/09/23/uk-offshore-wind-prices...

aurelwu 7y ago

Why do you set a fixed price of 36 Euro / MWh for the next 20 years. At least take the phelix Futures to get a somewhat reasonable picture: https://www.eex.com/en/market-data/power/futures/phelix-de-futures https://www.eex.com/en/market-data/power/futures/phelix-de-f... (45€ Base / 53€ Peak). With the EU-ETS Certs getting more an more sparse and expensive over time, coal will be phased out more and more which will increase the price.

m0zg 7y ago
Germany already has the highest power prices in Europe. How much higher can this really go?

black_puppydog 7y ago

Then again the German government seems dead set on also subsidizing coal/gas by not internalizing their societal costs. So just removing those "subsidies" would already make wind/solar more attractive. Turns out, energy needs to be more expensive, and we should probably save energy.

brlewis 7y ago

> Lifetime: 20 years Power Is that really the lifetime of the farm, or is it just when turbines need to be replaced?

TheGallopedHigh 7y ago
What’s the difference
- brlewis 7y ago
  The platforms, towers and undersea cables are already paid for. Replacing one piece of the system isn't starting over. The math presented was of all return on investment ending at 20 years.

ocschwar 7y ago

> Cost: 1.4 billion Euros Lifetime: 20 years Power: 350 MW Max. capacity: 0.4 (40%) Price at the electricity stock exchange Leipzig: 36 Euro/MWh Because wind farms have 0 fuel costs, they will operate at any price above a few eurocents per MWH. Which means once a critical mass of wind farms is operating in an area, the price frequently dives all the way to near 0. Sucks if you operate wind farms. Sucks less if you ALSO operate natural gas generators which you can then idle. And sucks a lot less if you're a consumer with dispatch able loads.