Renewable Energy follies: Subsidies discourage maintenance

A key problem with subsidising “renewable energy” is that the economics become so distorted that developers/owners focus first on maximising the extraction of subsidies and not on the long-term operation of the plant or the production of power. As soon as payback is achieved the focus is on generating revenues while minimising  expenditure on operation and maintenance (O & M). Inevitably such plants are abandoned as soon as the O & M costs approach the level of revenues. Whereas conventional power plants (coal, gas, hydro and nuclear) have a design life of 30 – 40 years and often carry out maintenance to extend this lifetime, subsidised “renewable energy” plants have a lifetime of less than 10 years and often even less.

For example grants for construction and high tariffs were used for many years to encourage sugar producers in India and Brazil and other countries to build power plants burning bagasse (the waste matter left after crushing sugar-cane to extract juice). But the consequence was that sugar producers could generate more revenue by producing power rather than sugar – especially when the sugar price was low. Sugar producers built power plants which were larger than they needed themselves and based solely on the level of grant that could be extracted. Access to the grid was guaranteed. But again many of these plants were abandoned as soon as the O & M costs became too onerous. Effectively the developers had recovered all the investment (which was mainly grant money anyway) and more from the allowed 16 – 20% rate of return (which in practice was more like about 30-50% ) of the supposed investment. As plants were “cashed out” and abandoned, the grid just had to absorb the disturbances – which were not negligible.

The subsidies in Europe for wind and solar power are encouraging the same behaviour. In Germany the almost profligate subsidy regime has encouraged the implementation of less than serious power projects by less than serious developers. The game has been the extraction of subsidies not of generating power. In Germany wind turbine and photo-voltaic solar cell plants popped up everywhere. Farmers and shop-keepers and schools all have became power generators. Grid stability has been weakened to cope with the plethora of small plants cutting in and out of the grid. The obscenely high feed-in tariffs in Spain have encouraged solar plants to burn more gas than permitted and pass off the power generated as being “renewable power” at the high tariff. But as the subsidy regime weakens and tariffs reduce and grants are scaled down, the likelihood of these plants being abandoned is increasing. Certainly there is no incentive to spend any money on maintenance.

P. Gosselin at NoTricksZone has this about a pv solar plant (2.7 MW) after less than 2 years:

Weed-Covered, Neglected Solar Park: 20 Acres, $11 Million, Only One And Half Years Old! 

solar plant weeds

Over the next few years we shall see many more solar and wind power plants in Europe where money will not be spent on maintenance unless it is absolutely necessary for the generation of short-term (subsidised and inflated) revenues. Long-term maintenance will just not happen. And when the O & M costs become too onerous the plants will simply be abandoned. No doubt bankruptcies will be arranged when the plants are cashed-out such that there is no recourse to the developers/owners for any remaining liabilities.

Subsidies just don’t work for their intended purpose in power generation – but they are short-term gold mines for some developers.

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