Wind -- April 5, 2015

The hypothesis is this: if wind and solar are "so good" and economically competitive with fossil fuel, this country would be saturated with solar and wind farms, and after 30 years of advocacy, subsidies, grants, and tax credits, renewable energy would be the dominant energy source in the US.

They say the stock market is "efficient." I don't know. But the free market / capitalism is certainly more "efficient" than the alternative(s), and free market / capitalism is certainly an example of economic "survival of the fittest."

With that in mind, after 30 years of advocacy, subsidies, grants, and tax credits, solar electricity when rounded to the nearest whole number, accounted for zero (0) percent of US energy consumption last year. That number is expected to double over time. How much time, I don't know. But it will double.

Now, on to wind, the energy source that has governmental carte blanche to slice and dice migratory birds at will with the blessing of local Sierra Club franchises.

The other day I linked a wiki article on "energy return on energy invested" (EROEI) for various forms of energy sources. I could tell by the numbers that there were a lot of assumptions made when working out the numbers. In addition to EROEI and EIEIO, the acronym GIGO came to mind (garbage in, garbage out).

Two things caught my eye: a) EROEI for ethanol; and b) EROEI for wind. I thought the numbers were way too generous for both but did not comment at the time.

Three data points.

First, from a reader speaking directly to the wiki numbers. From another source, the reader sent me this regarding wind:

...EROEI for turbines is usually based on 30 years at utilization greater than 0.3, while actual turbine life is less than 20 years and actually closer to 15 years, and actual average utilization is under 0.2, just this two things drop the EROEI of wind turbines from 18 to 6.

Add reserve grid capacity and you will be lucky to get over 1 for EROEI.

Add dismantling - and you will be firmly under 1.

I understand that probably there are some factors I don't know regarding wind turbines. So there could be mistakes in my calculations. But still even if any one of the angles proves to be reasonable - wind power EROEI is greatly exaggerated.

Along with that note, the reader sent me this most interesting article -- the largest wind operator in Germany declared bankruptcy last year:

Prokon, which has been rumored for the past weeks to be teetering on the brink of default, finally filed for insolvency.

The company, which runs over 50 wind parks with hundreds of windmills in Germany and Poland, and employs 1,300 workers, is Germany’s biggest, with a capital of 1.4 billion euros, collected from over 75,000 private investors.

These, however, are not shareholders in the normal sense; the “shares” they own at Prokon are certificates only, which do not give holders any say in the running of the company, nor any sound legal base for requesting detailed information from the management on the company’s doings. All they learn comes from media reports on Prokon.

Certificates operate in a legal gray zone in Germany, and the Prokon default has prompted new calls for legislation to impose strict controls or better, a total ban on these “financial products.”

There have been voluminous withdrawals of capital, altogether 280 million euros in the past weeks, after critical reports appeared in the German media that questioned whether Prokon’s profits matched its interest payments: indeed, accounts published on Prokon’s own website show, that in the first nine months last year, it paid out interest of [Euro]67.2 million, double its earnings before interest, tax, depreciation, and amortisation of [Euro]33.5 million for the same period.

With a yield of 6-8 percent promised to certificates owners, Prokon has particularly attracted people whose normal savings accounts did not offer any revenue near that. The company apparently ran a classic Ponzi scheme, paying old investors from the money new investors brought in. Prokon last week denied running a Ponzi scheme, claiming: “Our projects are merely unconventionally financed.” The end of Prokon is, however, a rather conventional one, appropriate for a Ponzi scheme. The state prosecutor’s office in Luebeck, northern Germany, is investigating Prokon.

Think about this. If XOM went bankrupt this year, do you think that would have been reported by ABC, NBC, CBS, Rachel Maddow, and the Huffington Post? Do you think you might have heard about that? Quick: name Germany's biggest wind energy operator that went bust last year. I couldn't, and I'm somewhat well read. This speaks volumes on the slanted reporting by ABC, NBC, and CBS.

By the way, doesn't that story on Prokon above read like the Solyndra story here in the US?

Instead of Herbalife, perhaps Ackerman should have taken on Prokon.

Now, for the third data point, another article, this time sent by another reader. From Crain's, can this wind power company ever make money? (You may have to go through google to get the full article.)

Peter Duprey's top priority when he became CEO of Broadwind Energy in 2010 was to ensure that the wind was at the Cicero-based manufacturer's back.

Instead, he's still fighting headwinds.

Six years after Broadwind began trading on the Nasdaq stock market, the company has yet to turn an annual profit and its stock has lost most of its value on Duprey's watch, slumping to $4.89 on April 2, down 80 percent since touching $24.30 in January 2011.

Broadwind is one of a clutch of manufacturers in the Chicago area, including Chicago-based S&C Electric, Winergy in Elgin and Vernon Hills-based ZF Services, that depend at least in part on the development and operations of wind farms.

Like the others, the company stands to gain if wind becomes a bigger part of the energy mix around the country—a recent U.S. Department of Energy report predicts that the U.S. could derive 20 percent of its power from wind by 2030, up from 4.5 percent in 2013.

Later in the article:

For manufacturers focused on wind energy, the need for a federal tax credit has “been less and less over time as technology has matured, but it's still a key component and it has a pretty noticeable effect on the construction pipeline when the credit goes away,” says Steve Piper, a Boulder, Colo.-based associate director at SNL Financial who focuses on energy and power markets. 

For wind, we are still talking about "federal tax credits."

But, for the oil and gas industry, we are talking about:

• extraction taxes
• production taxes
• untold billions in royalties for average citizens who won the lottery
• stifling regulation
• criminal proceedings if one migratory duck commits suicide in a waste pond
• corporate taxes
• income taxes on some of the highest paid blue-collar workers in the country
• double taxation (taxes on corporate profits, followed by taxes on dividends)

But for wind, it's all about "federal (and state) tax credits."

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