Posts Tagged ‘subsidies’

EU farm subsidies to a Saudi billionaire for breeding racehorses

September 29, 2016

The EU is replete with examples of how a bureaucratic process is made into a god and they lose sight of the objectives intended to be achieved by that process. Process keepers in Brussels have become more important than process objectives.

The latest example is of subsidies paid to a Saudi billionaire for a farm he owns in the UK where he breeds racehorses.

BBC:

Taxpayers are paying more than £400,000 a year to subsidise a farm where a billionaire Saudi prince breeds racehorses.

The Newmarket farm of Khalid Abdullah al Saud – owner of the legendary horse Frankel – is among the top 100 recipients of EU farm grants in the UK.

The system’s critics say Brexit will let the UK redirect £3bn in subsidies towards protecting the environment.

A spokesman for the prince declined to comment.

Farm subsidies swallow a huge chunk of the EU’s budget. They were started after World War Two to stimulate production, but led to food mountains that had to be dumped.

A compromised reform process – the so-called “greening” of the Common Agricultural Policy – resulted in farmers mostly being paid depending on how much land they own.

Frankel (horse).jpg

Frankel owned by Khalid Abdullah al Saud


 

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Swedish investment in wind power collapses while waiting for new subsidies

September 22, 2014

The simple fact is that wind power investment depends upon subsidies. The greater the subsidy offered the greater the investment. The higher the electricity price the greater the value of any subsidies and the greater the investment.

Subsidies just don’t work.

And in the meantime the world has begun to cool.

From Swedish Radio:

During the second quarter of this year, decisions were made to invest in future wind power totaling 37 megawatts, down 83 percent compared with the same period last year according to statistics from the Swedish Federation of Wind Energy.

One reason for the decline is the low price of electricity, another is that the industry is waiting for next year’s so-called checkpoint in parliament on changes to the certificate system, a decision which, according to Annika Helker Lundström, CEO of Swedish Wind Energy, will be of great importance for Swedish wind power company.

……

The certificate system was introduced in 2003 and means that the government supp…orts producers of renewable electricity by handing out certificates worth one megawatt per piece which can then be sold to electricity suppliers. Electricity suppliers are in turn obliged to buy a certain amount of renewable electricity.

The current system is certified to award equivalent to 25 terawatt-hours by 2020, and already has a certificate for over 20 terra watt hours distributed. The Agency has proposed to the government that more certificates to be awarded and the dividend period is extended to 2030.

This should increase the willingness to invest in the electricity generators.

Chinese corporate bonds no longer have a government backstop as solar cell firm defaults

March 7, 2014

Overseas investors have so far assumed that Chinese corporations would be bailed out by banks and the government if there was any danger of them defaulting. That assumption has now gone up in smoke as the Chinese Government – probably intentionally and as a signal – has allowed Chaori Solar to default. Chinese corporate bonds are now going to get a lot less attractive.

The strange fact about solar subsidies – around the world – is that the equipment manufacturers and the consumers have not benefited. Only plant developers have effectively walked away with the subsidies and they are usually very good at milking subsidies. As subsidies dry up it makes more sense for them to just walk-away. Solar (and wind) equipment manufacturers ramped up their production capabilities – sometimes by very expensive acquisitions – and are now in dire straits as subsidy reductions has caused the market to dive.

Bloomberg:Chaori Can’t Make Payment in China’s First Onshore Default

A Chinese solar-cell maker failed to pay full interest on its bonds, leading to the country’s first onshore default and signaling the government will back off its practice of bailing out companies with bad debt.

Shanghai Chaori Solar Energy Science & Technology Co. (002506) is trying to sell some of its overseas plants to raise money to repay the debt, Vice President Liu Tielong said in an interview today at the company’s Shanghai headquarters. The company said March 4 it will only be able to pay 4 million yuan ($653,990) of an 89.8 million yuan coupon due today.

The BBC warns:

Up until now, the Chinese government and state-owned banks have helped bail out or provide last-minute loans to Chinese firms in trouble. That has led many investors to park their funds in the corporate bonds of many Chinese firms, on the belief that the government would help ensure that these firms could continue to repay their debts.

However, a significant portion of this debt is set to mature in 2014 – with more than $1.5 trillion of corporate bonds outstanding at the end of January. …… That is why the Chinese government may be making a strategic decision to let some firms fail – particularly those, like Chaori, that may not have a huge knock-on effect in the market.

China’s solar industry has been suffering from an overcapacity problem for some time, as cheap financing and local government support led to a glut of firms entering the industry. That has led to a sharp fall in price, and the Chinese government has since hinted that it supports consolidation in the industry. ……… 

Yet while some see the default as a good thing for China’s corporate bond market, others worry it could be a sign of a wave of defaults to come. Bank of America analysts wrote in a recent note that the default could be “China’s Bear Stearns moment”. “In the US, it took about a year to reach the Lehman stage when the market panicked and the shadow banking sector froze,” they wrote. “We assess that it may take less time in China, as the market here is less transparent.”

Subsidies for renewables have only done harm

June 25, 2013

There is a place for solar and wind and tidal and wave energy.  But intermittent and unpredictable sources as these all are cannot be used to satisfy our base load demands. If used – when available – to augment our conventional sources (mainly fossil fuels, hydro and nuclear power) they can play a very useful role – eventually – in reducing the cost of producing power. But this presupposes that they are competitive with conventional production. And they can be in specific situations and especially in remote locations or where grid power is limited.

But subsidies have rarely enabled new technologies to become commercially viable. They tend to isolate and preserve the developers of the new technology from commercial pressures and are usually counter-productive.  By loading conventional fossil fuel sources with short-sighted and useless taxes and by providing hefty subsidies for building solar and wind power the electricity market has been distorted to a destructive and unsustainable extent. Two articles recently address the utter failure of the subsidy regime.

1. Agence-France Press June 23, 2013 00:31

Spanish downturn a disaster for green energy

Spain’s wind turbine manufacturers are laying off workers and farmers who installed solar panels are facing ruin as austerity policies afflict the long-coddled green energy sector.

Further cuts are expected this summer.

State subsidies to clean energy producers have already fallen by between 12 and 40 percent on average in recent years, industry analysts say.

They could fall by another 10-20 percent in a new energy sector reform expected mid-July, according to the Spanish media. …. 

In the middle of the last decade when the economy was enjoying strong growth, Spain put a cap on the price of green energies and provided “fairly generous” subsidies, said Carlos Garcia Suarez, expert in the sector at the IE Business School. …..

2. The Commentator, 21 June 2013

The ‘Great Renewables Scam’ unravels

In many parts of northern Europe, wind and solar projects may be highly visible facts on the ground. But the headline economic fact behind renewable energy is, and always has been, its sheer and blatant “unsustainability”.

Energy insiders have long known that the notion of ‘renewable energy’ is a romantic proposition – and an economic bust. But it is amazing what the lure of guaranteed ‘few strings attached’ government subsidies can achieve. Even the Big Oil companies bought into the renewables revolution, albeit mostly for PR reasons. Like Shell, however, many quickly abandoned their fledgling renewable arms. Post-2008, they knew, the subsidy regimes could not last. Neither was the public buying into the new PR message.

Now it was just a question of time before Europe’s world leading pioneers of solar and wind power, Germany and the UK, decided they had had enough of the self-inflicted economic pain. And all the signs are – as Germany’s solar sector just went belly up and the UK is made aware of how much every wind job actually costs – that the slow implosion of the renewables revolution is under way.

The plain fact is that installing solar panels, especially in the northern hemisphere, makes about as much economic sense as Iran heading up a UN Human Rights Commission (which it has done by the way). Equally, the viability of windfarms has always been the renewables industry’s worst kept secret.

And yet, aided by aggressive and heavily-funded green lobbies, leftist social engineers, appalling journalism, naive politicians and unscrupulous opportunistic renewable energy entrepreneurs, wind turbines and the photovoltaic industry quickly became established facts on the ground, giving the appearance of economic ‘viability’. Why else would government back them using our cash? …… 

… In Europe, Germany was a major green pioneer, especially regarding solar energy. The UK, being the windiest country in Europe, focused on wind power. In both countries, however – to mix metaphors – the wheels are fast coming off.

In June, the sun finally set on Germany’s solar sector with power companies, large and small, seeing their £21 billion investment in solar energy disappear into the ether. As one German commentator wryly observed: “the sun does send an invoice after all”.

By mid-June the German company Siemens announced it was winding down its solar division with a view to shutting down completely by next spring. Siemens had entered the solar thermal systems market when it bought the Israeli company Solel, believing market growth would be rapid. The gamble failed. Siemens lost around €1 billion.

In March, Bosch signalled its withdrawal from the solar cell and solar module market. Bosch board chairman Franz Fehrenbach, who had been behind the company’s push into solar energy since 2008 has further admitted that the German solar sector generally is “doomed to die”. Bosch will lose even more than Siemens, probably around €2.4 billion.

But it is the private investors who bore the full brunt of the loss as the former hot shots of the stock exchange, Germany’s SolarWorld and Q-Cells, among other solar companies, lost tens of billions in capital investment.

Meanwhile, in the UK, wind power is again making the headlines, but for all the wrong reasons. A new analysis of government and industry figures revealed that every UK wind industry job is effectively subsidized to the tune of £100,000 per year. In some cases it rises to £1.3 million per job. In Scotland, with its 230 onshore windfarms, the figure is £154,000 per job. Even if the highly optimistic maximum projection of 75,000 wind industry jobs by 2020 is realised the figure would only drop to £80,000.

But, as the Renewable Energy Foundation, a UK think-tank, has pointed out, to meet its EU obligation of providing 15 percent of its generated energy from renewable sources by 2020 – a ridiculously untenable goal – the lavish subsidies will need to rise still further to £6 billion per year. Neither do the figures take into account the cost to the country of an exodus of energy-intensive industries; a very real threat if green levies on energy bills continue to rise. European industry and power stations have already turned to burning millions of imported tonnes of American wood pellets in a desperate bid to keep costs down. And that, as has been reported, is to the detriment of fine forests in the US and a resultant impact on CO2 levels. ….

US approves sale of taxpayer subsidised battery maker to China

January 30, 2013
Image representing A123 Systems as depicted in...

Image via CrunchBase

Not just irony but also further evidence that subsidies are fundamentally unsound.

Back in October last year the US lithium-ion battery maker, A123 Systems, filed for bankruptcy.

10/15/2012: A123 Systems, which had received a $249 million grant from the U.S. government, filed for Chapter 11 bankruptcy protection on Tuesday, giving Republicans fresh ammunition to attack the Obama administration’s subsidies for green energy.

The filing came after the lithium-ion battery maker’s $465 million rescue deal with Chinese auto parts supplier Wanxiang Group collapsed, hobbled by “unanticipated and significant challenges,” A123 said on its website. A123 has agreed to sell its automotive operations, including two factories in Michigan, for $125 million to Johnson Controls Inc, a leading battery supplier and another recipient of federal green subsidies.

….. The U.S. Department of Energy allotted about $90 billion for various clean-energy programs through the administration’s stimulus package. Of that, at least $813 million went to energy companies that eventually filed for bankruptcy, including A123, Solyndra, Beacon, Abound Solar and EnerDel.

But Wanxiang Group persevered and the US Committee on Foreign Investment (CFIUS) has granted its approval for a revised deal to go ahead. In addition to the automotive business divested to Johnson Controls, all government related business was also divested by the bankrupt A123 Systems to Navita Systems (at a fire-sale price of $2.25 million).

Bloomberg: Wanxiang Group Co., China’s biggest auto-parts maker, won approval from the Committee on Foreign Investment in the U.S. to buy most of the assets of A123 Systems Inc. (AONEQ), the bankrupt electric-car battery maker backed with U.S. government funds.

Approval from CFIUS, as it is known, was the final hurdle that Wanxiang needed to overcome to complete the deal. The federal interagency group led by the Treasury Department was reviewing the sale after members of Congress expressed national- security concerns over allowing a foreign competitor to obtain the technology developed with government backing. 

…… “Nothing provided by CFIUS has changed my opinion that the core technology developed by A123,” and the related intellectual property, “can be separated along A123’s business lines,” said Representative Bill Huizenga, a Republican representing Michigan’s 2nd Congressional District, in an e- mailed statement. “American taxpayers should not be funding technology that will in turn be used in competition against American companies,” he said, adding that he will look into legislation to prevent sales of taxpayer-funded “sensitive technologies” to foreign companies in the future.

….. “The Energy Department’s Recovery Act grant to A123 was used for the construction of brick and mortar advanced battery manufacturing facilities at two Michigan locations,” Bill Gibbons, a department spokesman, said in an e-mailed statement. The funds weren’t used for the company’s research and development of battery technology, he said.

“The purchase of these assets includes the Energy Department’s requirement that the plants and equipment partially paid for by the Recovery Act stay in Michigan and continue to operate, generating job opportunities for American workers,” Gibbons said.

….. As part of the purchase Wanxiang, based in Hangzhou, China, will get A123’s cathode powder plant in China and its share of a joint venture with Shanghai Automotive Industry Corp., called Shanghai Advanced Traction Battery Systems Co., in addition to the battery technology used in Fisker Automotive Inc.’s Karma sedan. Fisker, A123’s main customer, said it was awaiting the sale of the company’s Michigan plant so it could resume production of the $103,000 plug-in Karma sedan. A123, whose automotive business supplies electric-car batteries to about a dozen customers, has facilities in the Michigan cities of Livonia and Romulus.

The A123 Systems bankruptcy itself raised some questions about who had walked away with all the benefits. In a sense the subsidies have served the purpose of those investors who got away in time! For the US this now appears to be a damage control exercise to stop the bleeding where some local jobs are temporarily “saved” but the long term benefits are all to the account of Wanxiang. If indeed A123 Systems used government funds only for the building of factories and not for R & D, then Wanxiang have – fairly cheaply – bought themselves a foothold into the US market But if the US market develops – which it may not – then some or all of these jobs will eventually move to a low-cost country. Wanxiang has in any case bought themselves a technology cheaply which may address a world-wide market. But the jobs that creates will not be in the US. If the technology fails or the US market does not develop, then Wanxiang can just walk away from the US but they will retain the technology for whatever it is worth.

Paradoxically the only way in which the US taxpayer wins is if the technology is a dud and the deal represents future losses and liabilities being exported to Wanxiang!

Now Toyota sees sense and backs away from all-electric cars

September 24, 2012

The hype about electric cars is just one more example of environmental alarmism leading to bad decisions. The list of “bad decisions” made to appease environmentalism is long and getting longer. Wind power before its time and solar power before it  was commercially viable have only helped to increase the costs to the consumer but they have been a windfall for those who have managed to “milk” the subsidies. The electric car fiasco is no different. Billions have been wasted in subsidising something that is not commercial and in trying to skew the market in the hope of artificially creating a demand where there is none. But a few have managed to live very well off the subsidies. Some day electric cars may well become commercially viable and when they do it will not be because an environmental lobby group or a government  merely wished for it but because the technology and supply network then will be sufficiently developed to offer the consumer a superior product at a reasonable price.

The simple reality is that:

  • electric car batteries are still too heavy and take too long to charge
  • the range they provide is too short
  • the cars are too expensive

More importantly the ostensible reason for subsidising the technology  – as being for the cutting of carbon dioxide emissions to try and reverse natural climate change –  is both based on a false premise and futile.

“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said, Uchiyamada, who spearheaded Toyota’s development of the Prius hybrid in the 1990s.

Reuters reports:

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Solar Energy is in crisis

September 20, 2012

The solar energy industry is in crisis and I keep reading that it is because subsidies are being reduced or eliminated. As if subsidies come for free. I don’t believe subsidies work and the current crisis only proves that the fundamental issue is not subsidies but that solar energy is not (yet ?) commercially viable. It surely has a place in some very particular situations and the best use of solar energy remains with some isolated users or as a “support” for other energy sources. But for base-load power generation it is just  not viable.

Peter Glover writes in the Energy Tribune:

The global solar power industry is in crisis. The industry blames widespread national subsidy cuts and over productivity; China, in particular, being widely vilified on the second count. However, the real cause of the solar industry’s malaise runs deeper, rooted, as it is, in the inescapable fact that, in terms of current technology, commercial scale solar energy remains a non-viable proposition.

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Fisker Karma electric hybrid car is a gold-mine – for someone

August 20, 2012

As Fisker recalls all its Karma cars because of a fire risk, I observe that it represents yet another case of the fundamental failing of subsidies.

1. Fisker has received government subsidies of $528million

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Spain to tax renewable energy

July 13, 2012

Yet another unwanted consequence of having subsidies in the first place.

First the Spanish Government encouraged a “renewables boom” by providing feed-in tariffs which were obscenely generous (about 4 times higher than the going rate) and irresistible to developers.  This was only one of the many acts of profligacy which has led to the current crisis.

And now the Spanish Government is to try and redress the balance by imposing “a levy to spread the expense of closing a gap between costs and revenue in the country’s electricity business, which has racked up debts of 25 billion euros” . Since the largest gap between true cost and revenue is of course with solar and wind plants they will be hardest hit by the levy.

Bloomberg:

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Subsidy madness in the name of environmentalism is unsustainable

July 6, 2012

I don’t believe in subsidies.

In over 30 years in power generation I have yet to see a convincing case of public subsidies in the market place actually helping to commercialise new technologies. I have seen cases where Government support at the research stage has helped to bring new areas into focus and which has eventually led to commercially driven investments which have deployed the technology. But temporarily distorting the market place by means of public subsidy is unsustainable and does not – in itself – help to make a new technology commercially viable. In fact an artificially distorted market in favour of a new technology only helps to cuccoon and insulate it such that there is no incentive left to make it competitive. Subsidies shift the focus from technology development to  subsidy maximisation and when subsidies begin to be removed all creativity is wasted on prolonging subsidies.

The case of subsiding the market place for the deployment of renewable energy is a case in point. Developing technology for wind and solar power is desirable but distorting the market place to deploy wind and solar is just plain stupid and unsustainable.

1. Der Spiegel

Solar subsidies cost German consumers billions of dollars a year and are widely regarded as inefficient. Even environmentalists are concerned that Berlin’s focus on solar comes at the detriment of other renewables. But the solar industry has a powerful lobby, and politicians have proven powerless to resist.

…… A new study by Georg Erdmann, professor of energy systems at Berlin’s Technical University, reveals just how far Germany’s current center-right governing coalition — made up of Chancellor Angela Merkel’s CDU and the business-friendly Free Democrats (FDP) — has strayed from its own self-imposed goals. Erdmann has calculated the effects that the latest changes to the EEG will have between now and 2030. He believes that subsidies for renewable energy, including an expansion of the power grid, will saddle energy consumers with costs well over €300 billion ($377 billion). ….

2. BBC News

Fight on for wind power subsidies

Wind power firms warn they may take the government to court if they get caught in a political row over subsidies. After conducting technical studies, the energy department proposed a subsidy cut of 10% for power from onshore wind. But the chancellor is under pressure from back-benchers to scrap subsidies, and is said to favour a 25% cut.

The industry body, Renewable UK, says it may take legal action if the government makes a decision that overrides its own technical evidence. … 

3. GWPF / IVN

California’s Green Suicide

New economic impact study on California’s Global Warming Solutions Act finds that the average California family will end up paying an additional $2,500 annually by 2020. In addition, the state is expected to lose an additional 262,000 jobs, 5.6 percent of the gross state product, and a whopping $7.4 billion through decreased annual state and local tax revenues as a result.

The California Manufacturers and Technology Association released a new report last week that suggests costs associated with AB 32 may be a lot higher than previously estimated. AB 32, otherwise known as the California Global Warming Solutions Act of 2006, was signed into law by Governor Arnold Schwarzenegger- propelling California to the forefront in the fight against global warming. Successful passage of the law effectively turned the state into one of the most stringent regulators of green house gas emissions in the nation and globally. Some would argue that the move all but eliminated California’s competitive edge in today’s market. ……


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