Via WattsUpWithThat
Guest Post by Willis Eschenbach
Sounds like a scam, huh? But it’s real. Let me explain how people (no, not you or me, don’t be foolish) can make a guaranteed 29% return on their investment. However, to make it clear, I’ll need to take a short digression. I ran across a National Geographic article on where the world gets its electricity. Here are their figures:
Figure 1. World electricity production by fuel type. Renewables (defined by AGW activists as solar-, geothermal-, wind-, and biomass-generated electricity, but not hydroelectricity) are 2.7% of the total electricity use. Data from National Geographic
You can see why the AGW supporters’ heads are exploding as the Durban climate party approaches. It is obvious from the chart that years and years of subsidies and tax breaks and IPCC reports and various urgings by well-meaning but clueless pundits and billions in wasted taxpayer dollars have not succeeded in getting renewables up to even 3% of the total electricity generated. Less than 3%. It must drive them round the twist to contemplate their stunning lack of success at making water flow uphill.
Despite that history, you know how they say on those TV commercials, “But wait! There’s even more!”? In this case, it’s “But wait! There’s even less!”
And I don’t mean just a bit of money to get them over the hump. Huge subsidies. Because of the total failure of renewables to penetrate the market, the AGW supporters are desperately throwing money at renewable technologies. The New York Times showed a graphic for one such power plant in California. Their graphic is reproduced below as Figure 3.
Figure 3. Federal and State Subsidies for the California Valley Solar Ranch.
Unfortunately, the Times didn’t really discuss the business implications of this chart, so let me remedy that omission.
First, how much money did the investors have to put in? Since the project will start earning money once the key is turned and the market is guaranteed, the investors only had to put up the total capital outlay of $1.6 billion. Less, of course, the generous government grant of nearly half a billion dollars. Total invested, therefore, is $1,170 million dollars.
On that money, the investors stand to make a net present value of $334 million dollars … which means that due to the screwing of the taxpayers and ratepayers, a few very wealthy investors are GUARANTEED A RETURN OF 29% ON THEIR INVESTMENT!!!
How is this fair in any sane universe? AGW supporters talk about the 1% having too much money, and here the same folks are shoveling the money into the one percenters’ pockets. The 1% weren’t rich enough already, so I have to foot the bill for them to get a GUARANTEED 29% RETURN on their investment?
Note also that a huge part of the money, some $462 billion dollars, is coming from the California electricity ratepayers, including yours truly, through increased charges for electricity. This means that these solar scam artists are being allowed to sell their power at 50% ABOVE MARKET PRICES!!! Not just a little bit above market. Fifty percent above the market price! Where is the California Public Utilities Commission whose job is to protect the consumer? Oh, I see … the are the ones who agreed to the 50% above market rate hike … for shame.
Read the rest here.
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Wood, they aren’t guaranteed that return.
The incentives and subsidies are generous enough. No need to exaggerate.
Note that the analysis includes $1.4 billion NPV for power sales over the next 25 years. If the power isn’t produced, the revenue doesn’t roll in.
Likewise, many of the other numbers make assumptions about expenses and market conditions during the 25 years. Do you think anyone knows how gas and coal prices will move over the next 25 years?
Not apparent on the chart is the fact that some of the $462 million benefit from “above market rate” prices for power sales will be paid voluntarily by utility customers who sign up to buy “renewable electricity”. I have no estimate of how much, though, and am quite willing to believe it might be a small fraction.
Nor does the chart consider the liquidity of the investment. If you have to commit your money for the full 25 years, that comes into the analysis.
Anyway, I don’t argue the basic point that the subsidies are quite generous.
The current percentage of renewable electricity is an irrelevant factoid when considering the current subsidies, however. But, if you want to bring it into play, I’d offer the following alternative interpretation: if we want to make our electricity supply less sensitive to price disruptions in coal/oil/gas, we need to ramp up the renewables by a huge amount over the next few decades. Diversification is a recognized method to improve your risk-adjusted return on power-generation investments just as it is for financial investments. If you don’t have the alternatives, you can’t diversify.
Personally, I’d prefer to see subsidies and incentives pushing solar domestic hot water systems in Southern CA, and to develop improved technologies and construction techniques for residential central heating/cooling systems with underground geothermal loops to take advantage of the steadiness of soil temperatures relative to air temperatures. But, I have all the influence of an empty coffee cup on the matter.
I realize it is not guaranteed. I’m pretty sure for the author it was tongue-in-cheek. Maybe not. Anyway, I was just marveling at the cost to the taxpayer.
And really, rather they choose renewable or not, they will still pay for it in increased taxes.
What really gets me, and what the author discusses at the end (not posted above):”In particular, the rate hikes hit the poor much harder than the wealthy, so we are billing the poor to line the pockets of the 1% … and all this in the name of enlightened carbon fears.”
And also this: Finally, the total subsidies for this plant were $1,430 million dollars. So this single “successful” green project will cost the consumer three times what Solyndra cost. And in return … we get energy priced at 50% above the market. Thanks, Energy Department, glad to know you have my back.”
Again, the 99% get hosed.
As for ramping up the renewables – absolutely. Just don’t ramp them up with public tax dollars. That being said, I’m all for ending oil/gas subsidy as well. Let everyone compete on the merits of their business models, with private investors deciding where to place their bets.
Drill baby, drill!
FYI they have been doing it in Canada for a few years now.
Put up solar and we will pay you 6-10 times the normal rate what hog wash.
I hear ya