Posts Tagged ‘subsidies’

“Boom and bust” for solar power in New Jersey

May 14, 2012

As distorting subsidy regimes are reduced or withdrawn and even with the collapse of prices for solar pv modules, solar power shows that it is still a long way from being commercially viable. This report is on the unhealthy and distorted situation in New Jersey where even more “artificial” legislation is planned to keep this non-viable industry alive. It would be far healthier to allow solar power plants to find their natural – unsubsidised – commercial niches. And there are commercially viable niches in industry and in domestic use for solar power  – albeit only as an auxiliary energy source (pv) or in support of domestic heating or of conventional thermal power plants (solar thermal).

Press of Atlantic City

The prices that power companies pay for solar power have all but collapsed, curtailing future development and leaving those who installed systems struggling to repay their loans. A glut of power has meant that prices have fallen by more than 80 percent in the span of a year.

In response, solar power advocates are pushing for state legislation that would limit the amount of solar power that can be produced by large companies, while mandating that power companies buy more solar power. …..

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India, Italy to cut renewable energy subsidies

April 4, 2012

Subsidies for renewable energy only distort the market and are counter-productive. The game in renewable energy (wind and solar) has become the extraction of subsidies rather than the production of electricity. The sooner they are dismantled the better.

Two developments in Italy (which is virtually bankrupt) and in India (where growth is slowing) – both driven by economic considerations – are indicators that that some of the artificial gloss around renewable energy may be peeling off. Exorbitant feed-in tariffs for renewable energy are to be curtailed in Italy while very attractive tax-breaks for wind-power in India are to be reduced.

Italy to cut renewable energy subsidies

Italy will move to reduce taxpayer subsidies to its renewable energy sector after last year’s boom in solar power, Industry Minister Corrado Passera says. The official said Saturday in Cernobbio, Italy, that taxpayer subsidies doled out to the wind and solar power industries had generated “excessive” investments in the sector, The Wall Street Journal reported. “Italy has important goals to meet and even surpass,” he said, but added, “we need to do so without over-reliance on taxpayer resources.”

The government, Passera said, will in the coming years “realign” the level of its incentives to those of other European countries. ….

The Hindu Business Line reports on the new budget measures in India. Windmill developers to lose tax breaks

Windmill developers will no longer enjoy lower tax outgo in the first year, for investing in windmills.

Effective April 1, accelerated depreciation – which allows the investing company to fast track the write-off of certain assets for tax purposes – will not be allowed to wind energy developers. The Income Tax department has amended the rules regarding this, through a notification.

Until FY-12, a deduction of up to 80 per cent was allowed if the wind project was commissioned before September of a fiscal. Projects commissioned in the next half of the fiscal got a 40 per cent deduction. Now developers will only be allowed 15 per cent depreciation.

But wind equipments will still enjoy the 20 per cent additional depreciation prescribed for power equipments in the recent Budget. That would make for an effective 35 per cent depreciation. …….

Subsidies for electricity production in the US show that renewables are far from commercialisation

November 23, 2011

Data for 2010 is now available from the US Energy Information Administration.  Solar and Wind power are still a long way from being commercial with just direct subsidies being equivalent to 7.8 and 5.6 cents/kWh respectively. Indirect subsidies and increased costs for alternate capacity are not included.

My view of subsidies in power generation is that they are usually counter productive and provide windfalls for developers and constructors but rarely lead to benefits for the consumers of electricity.

Factors Affecting Electricity Prices:

The average retail price of electricity in the United States in 2010 was 9.88 cents per kilowatt-hour (kWh). The average prices by type of utility customer were:

  • Residential: 11.6¢ per kWh
  • Transportation: 11.0¢ per kWh
  • Commercial: 10.3¢ per kWh
  • Industrial: 6.8¢ per kWh

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Misguided solar subsidies favoured the wealthy

November 11, 2010

Further confirmation that subsidies in general are counter productive and in the case of solar panels in Australia were misguided:

From ABC News:

A new report has found the Federal Government’s billion-dollar subsidies for solar energy favoured the wealthy and barely reduced Australia’s greenhouse gas emissions. Over the past decade, successive federal governments have provided generous subsidies to households installing solar roof-top panels.

But the cost effectiveness and fairness of the solar voltaic rebate program is being questioned. Andrew Macintosh, the associate director of the Australian National University’s Centre for Climate Law and Policy, has reviewed the program. He says it has barely reduced Australia’s greenhouse gas emissions, and it has favoured the rich. “What we found was that the cost of the program was very high,” he said. “It cost the government about $1.1 billion. For that we got about a six-fold increase in solar generation, but still solar constituted only 0.1 per cent of total generation, so a relatively small technology in the overall grid,” he said.

“We’ve been handing out a lot of subsidies for solar systems, but the most people who pick up these subsidies tend to be from wealthier households … and as a result we’re basically providing middle and upper class welfare.”

In June last year the Federal Government cancelled the program at short notice.

 

Solar power subsidies go wrong even in Australia

October 31, 2010

The evidence that subsidies are inherently unhealthy and can be counter-productive continues to grow :

Now the Sydney Morning Herald reports that in NSW

HOUSEHOLDS will pay an extra $600 on their electricity bill over six years to cover the $2 billion cost of the failure of the state government’s overly generous solar power scheme. If elected in March, the opposition will have the scheme, which runs to the end of 2016, reviewed by the auditor-general so that it can decide on its future.

From midnight last Wednesday, the government slashed from 60¢ to 20¢ per kilowatt hour the tariff paid to households installing solar panel systems because the surging number of applications has blown out the scheme’s cost.

In reports tabled in Parliament last week, the government disclosed that it had been advised that even after slashing the tariff for solar panels, it anticipated 777 megawatts of solar panels would be installed by the time the scheme closed. Already, 200 megawatts of capacity has either been installed or ordered. The reports detailed the total cost to households is forecast to reach $1975 million by 2017, placing a burden on homes at a time when power prices are rising sharply already.

The government refused to indicate when it first became aware that the initial 50-megawatt target had been breached, which triggered an automatic review of the scheme. The government began that review in August. However, Country Energy, one of the largest distributors in NSW, was informing solar industry officials as early as May that the target had already been reached. Even so, the government ”dithered until August” before holding its review, with the report only completed last week, opposition climate change spokeswoman Catherine Cusack said yesterday.

‘Labor’s billion-dollar blowout will be passed on to families who will pay at least an extra $100 per year on their electricity bills every year until 2017,” she said. The total cost to families in some regional areas could be $1000.

The NSW scheme paid existing solar clients 60¢ per kilowatt hour for all energy produced; other states have ”net” schemes that pay for surplus power after domestic use is taken off. NSW had the most generous scheme – now the least. Victoria’s net scheme pays 60¢ per kilowatt hour, Queensland pays 44¢ and Western Australia pays 40¢.

Solar power subsidies are not sustainable

October 28, 2010

 

The power plant.

Planta termosolar Andasol: Image via Wikipedia

 

In Spain the huge subsidies (with feed in tariffs as much as ten times the average cost of electricity production) had led to a rush of developers getting into projects which is now proving unsustainable. Bloomberg reports that

Solar investors  were lured by a 2007 law passed by the government of Prime Minister Jose Luis Rodriguez Zapatero that guaranteed producers a so-called solar tariff of as much as 44 cents per kilowatt-hour for their electricity for 25 years — more than 10 times the 2007 average wholesale price of about 4 cents per kilowatt-hour paid to mainstream energy suppliers. Now more than 50,000 other Spanish solar entrepreneurs face financial disaster as the policy makers contemplate cutting the price guarantees that attracted their investment in the first place.

Spain stands as a lesson to other aspiring green-energy nations, including China and the U.S., by showing how difficult it is to build an alternative energy industry even with billions of euros in subsidies, says Ramon de la Sota, a private investor in Spanish photovoltaic panels and a former General Electric Co. executive. “The government totally overshot with the tariff,” de la Sota says. “Now they have a huge bill to pay — but where’s the technology, where’s the know-how, where’s the value?”

The situation in Germany is equally disturbing. The New Scientist reports

Solar power is intermittent and can arrive in huge surges when the sun comes out. These most often happen near midday rather than when demand for power is high, such as in the evenings. A small surge can be accommodated by switching off conventional power station generators, to keep the overall supply to the grid the same. But if the solar power input is too large it will exceed demand even with all the generators switched off. Stephan Köhler, head of Germany’s energy agency, DENA, warned in an interview with the Berliner Zeitung on 17 October that at current rates of installation, solar capacity will soon reach those levels, and could trigger blackouts.

Subsidies have encouraged German citizens and businesses to install solar panels and sell surplus electricity to the grid at a premium. Uptake has been so rapid that solar capacity could reach 30 gigawatts, equal to the country’s weekend power consumption, by the end of next year. “We need to cap installation of new panels,” a spokesperson for DENA told New Scientist.

The experience with highly subsidised feed-in tariffs is proving to be less than successful. In country after country the use of such subsidies is proving to be a major distortion, unhealthy and unsustainable. Countries such as India which are contemplating the use of similar subsidies for promoting intermittent, wind or solar power are beginning to have second thoughts and are now having to consider caps. It is beginning to sink in that such intermittent capacity cannot be counted into the generating base and does not reduce the need for alternative, backup generating capacity. Moreover the use of intermittent power from solar and wind only ensures that the operating conditions for the alternative capacity and for the grid are fundamentally more inefficient. This in turn leads to a hidden cost as a consequence of using the solar or wind power.

It is likely that these subsidies will have to be scaled down drastically.

Following fiasco in Spain, electric car sales slump in the UK

October 23, 2010

 

G-Wiz Electric Vehicle parked outside 37 Savil...

G-Wiz Electric Car:Image via Wikipedia

 

In August it was apparent that Spain’s much-publicized plans to put thousands of electric cars on the road as part of a drive for a greener economy were way off target, with only 16 sold so far compared to the 2000 target for this year.

The Guardian reported today that

Sales of new electric cars in the UK plummeted by nearly 90% in 2009 compared with their peak in 2007, according to motoring trade association figures released this week. Just 55 of the green cars – whose fans include Boris Johnson, Jonathan Ross and Jade Jagger – were registered in 2009, in contrast to 397 in 2007, says the Society of Motor Manufacturers and Traders.

The huge fall is a blow to UK efforts to meet tough carbon emission cut targets in a decade, and comes just months before the government introduces a subsidy of up to £5,000 off new electric cars.

Nearly half of the electric vehicles sold last year were the tiny G-Wiz car. The latest modelhas a top speed of 50mph and a range of 48 miles between charges.

In January, the coalition will begin offering up to £5,000 towards the price of a series of newly launched electric cars, as part of a subsidy announced by the former Labour government. The Department for Transport (DfT) anticipates around 8,600 of the cars will be sold in the first year of the scheme. The government has so far committed £43m for the scheme to run until March 2012, with a review taking place in January 2012, but in yesterday’s spending review it talked of “supporting consumer incentives for electric and other low-emission cars throughout the life of this parliament,” suggesting the subsidy would continue after March 2012 though possibly at a lower rate.

In Spain the Industry Ministry’s plan was to have 2,000 electric cars on the road by the end of 2010 and 20,000 electric and hybrid vehicles operating the following year.

I cannot help concluding that most of these highly artificial “green” subsidies – whether for cars or for solar energy or  for wind turbines – are badly thought through, are chasing a mirage and will be counter-productive.


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