2015 – 066 Germany’s Green Energy Transition May Be Running Out Of Money

From Global Warming Policy Forum
Germany’s Green Energy Transition May Be Running Out Of Money, Study Warns
Bill Gates: Renewable Energy Can’t Do The Job

Greece & Italy see solar energy as path to economic stability
–Steve Leone, Renewable Energy World, 12 April 2012

Germany’s green energy transition has cost more than 100 billion euros so far. It has hit large and small electricity suppliers with force and put traditional business models in question. But 15 years after the start of the transition, experts are asking themselves an anxious question: is the energy transition running out of money? Quite possible, is the answer that the German section of the World Energy Council and the consultants from Roland Berger provide. –Andreas Mihm, Frankfurter Allgemeine Zeitung, 23 June 2015

Germany’s Energiewende was a plan that from the outset reflected all the unexamined beliefs central to the modern green movement, and it’s been plagued by problems at every step. The Energiewende does manage to do some good by serving as a cautionary tale to the rest of the world: this is what happens when you let starry-eyed greens take the reins. –The American Interest, 30 June 2015

1) Germany’s Green Energy Transition May Be Running Out Of Money, Study Warns – Frankfurter Allgemeine Zeitung, 23 June 2015

2) Germany’s Energiewende Finds the Sour Spot – The American Interest, 30 June 2015

3) Bill Gates: Renewable Energy Can’t Do The Job – The Register, 26 June 2015

4) Renewable Stocks Shaken by Greek Woes as Investors Shun Risk – Bloomberg, 30 June 2015

5) U.S. Supreme Court Ruling Spells Trouble For Obama’s Climate Agenda – National Journal, 30 June 2015

Retired software kingpin and richest man in the world Bill Gates says today’s renewable-energy technologies aren’t a viable solution for reducing CO2 levels, and governments should divert green subsidies into R&D aimed at better answers. Gates has said a lot of this before. The main new thing is the firm assertion that renewable energy technology as it now is has no chance of powering a reasonably numerous and well-off human race. This is actually a very simple thing to work out, and just about anybody numerate who thinks about the subject honestly comes to the same conclusion. –Lewis Page, The Register, 26 June 2015

People get a little a misled. They’ll take something like solar PVs and say, when the sun is shining that daytime energy will replace hydrocarbons. That is completely uninteresting, because you still want to heat apartments at night. The system is all about reliability. You can drive the need for daytime energy down to zero and you still want the power company to have that hydrocarbon plant at night. We’ve got a little stuck on inventions that can take us up to 30 per cent of the solution. But because they’re subsidised, they’re not economically viable. –Bill Gates, Financial Times, 25 June 2015

Clean energy stocks plunged this week amid concerns of a Greek default, a slower Chinese economy and a U.S. court ruling that could keep more coal-fired power plants operating. Since Friday’s close, the WilderHill New Energy Global Innovation Index declined 3 percent while the Bloomberg Intelligence Global Large Solar Energy Valuation Peers Index is off 3.4 percent. Those drops exceed the broader S&P 500 index, which has dipped 1.8 percent over the same period. –Ehren Goossens, Bloomberg, 30 June 2015

President Obama has made it clear that his Environmental Protection Agency will use its regulatory power to install limits on carbon dioxide and toxic-air pollutants for everything from power plants to trucks. But Monday’s Supreme Court decision against EPA is a reminder that the biggest threat to Obama’s green legacy and the sweeping regulatory agenda that the administration is racing to cement before the president leaves office comes from the courts. –Clare Foran, National Journal, 30 June 2015

1) Germany’s Green Energy Transition May Be Running Out Of Money, Study Warns
Frankfurter Allgemeine Zeitung, 23 June 2015

Andreas Mihm

The expansion of Green energy is costing billions. The strain on utilities is so heavy that they threaten to fall away as capital providers. Other investors are needed – but that is easier said than done.

Germany’s green energy transition has cost more than 100 billion euros so far. It has hit large and small electricity suppliers with force and put traditional business models in question. But 15 years after the start of the transition of the power sector with the aim of renewable, low-carbon generation, experts are asking themselves an anxious question: is the energy transition running out of money?

Quite possible, is the answer that the German section of the World Energy Council and the consultants from Roland Berger provide. In an unpublished study they come to this conclusion: “The necessary equity funds for the expansion of the network infrastructure and offshore wind can probably be provided only with the participation of alternative and international investors. High risks however make it questionable whether the investment needs can be met at a sufficient capacity and speed.”

New investors must be found

It is not about small change. At least 280 billion euros would need to be invested in the next 15 years in order to promote the politically demanded goal of the transformation of the energy system: from wind turbines, biomass plants and solar power plants to local, regional and national electricity distribution networks to large offshore wind farms. This calculation already includes “sustained political support”. Otherwise, it could get even more expensive.

The traditional energy companies – whether they be public utilities or large corporations – are no longer reliable. “Many traditional utilities, which previously financed investments in the electricity sector, mainly through their shareholders’ equity, are today with their backs to the wall,” says Uwe Franke, president of the German section of the World Energy Council, a global association of energy companies. He previously ran the business of BP Europe. Franke says, private and municipal suppliers lacked the investment funds. Therefore, new investors would have to be found to ensure “the energy transition and the security of supply.”

The prerequisites for this will vary. Money for photovoltaic systems, wind turbines on land and for biomass is there. “The necessary funds can still be provided by banks, households and project planners in the future”, according to the Berger study. In addition, the state could possibly easily help out with incentives.
“High risk and market entry barriers” and a “significantly tighter situation” are however applying to investments in offshore wind farms and networks.

In 2012 two-thirds of offshore capacity were located in the hands of utilities, which had invested between one and 2 billion euros per wind farm. Here a greater commitment of other investors would be needed in the future. But that is easier said than done: “The high risk of investing in offshore wind farms, however, contradicts the risk profile of institutional investors.” Not least because laws and capital market regulations make the business hard for investors.

When it comes to the distribution networks, weakened public utilities are faced with a significant need for investment. Investors are additionally deterred by structural reasons: the fragmentation in 900 network operators and the trend towards re-municipalisation. For the expansion of the distribution networks, the German Energy Agency estimates costs from 28 to 43 billion euros by 2040.

Required equity questionable

For the transmission systems that transport electricity over long distances double-digit billion investments are needed too. Given the high amounts, it is questionable whether Tennet, Amprion, 50Hertz and Transnet BW “can muster the necessary capital resources on their own.” Funds and institutional investors could be discouraged by the associated risks of major projects like network expansion such as delays in approvals and construction. The current big resistance of the state of Bavaria against the network expansion could be included here.

According to the study, the utilities get under pressure from two sides. On one hand, many lack the capital for green energy investments. At the same time, big investors entered the market, driven by low interest rates and searching for attractive investments. Utilities could therefore lose their role as financiers and owners of installations and networks. At the same time its role as operators will be questioned by specialized project engineers and possibly soon also by equipment manufacturers.

Utilities should be more flexible, understand themselves more as a mediators and think in terms of cooperation. They could take the roles of fund initiators, fund service providers and financial investors. A business model opens at the interface of project developers and investors. “But this transition will not happen automatically,” says Franke. Utilities would have to change and understand the “energy transition as a capital transition”.

Translation Philip Mueller

Full story (in German)

2) Germany’s Energiewende Finds the Sour Spot
The American Interest, 30 June 2015

Every time we see Germany’s eco-energy transition, dubbed the energiewende, in the news lately, someone’s upset about it. The plan is a raft of different energy policies that can be boiled down to the following plan: phase out nuclear energy while boosting wind and solar by guaranteeing producers long-term, above-market rates called feed-in tariffs. It was a plan that from the outset reflected all the unexamined beliefs central to the modern green movement, and it’s been plagued by problems at every step.

Der Spiegel criticized the energiewende‘s “aggressive and reckless expansion of wind and solar power,” rightly pointing out that German consumers are shouldering the costs of those feed-in tariffs in the form of sky-high electricity bills. Those power bills have encouraged some of Germany’s heavy industry to look abroad for a better environment in which to do business. The Financial Times observed that by shuttering its nuclear reactors, Berlin was increasing its consumption of much dirtier coal and making it “ever more reliant on imports of Russian natural gas.” Shutting down those reactors hasn’t been a cheap undertaking, costing much more than was initially estimated.

When Germany decided against levying an extra charge on its older coal plants last week, we noted that Berlin was struggling to find a balance between its vaunted green ideals and harder economic realities. Now, as Reuters reports, some analysts are saying that, by failing to bill those dirtier facilities, Germany has taken a route that satisfies neither green nor economic goals:

Analysts warn that safeguarding the utilities’ income stream could drive up climate protection costs and hurt consumers, and prevent the depressed power market from shedding overcapacity. […] “It may make sense politically, but it is not economic and not the best solution for climate policy,” [said Roland Vetter, head of research at energy risk management firm CF Partners].

If this were some computer simulation it might be worth celebrating—creating an energy policy that so consistently fails to satisfy the concerns of such a wide variety of stakeholders is truly remarkable. But this isn’t a virtual strategy, and it’s hurting real businesses and real households. The energiewende does manage to do some good by serving as a cautionary tale to the rest of the world: this is what happens when you let starry-eyed greens take the reins.

3) Bill Gates: Renewable Energy Can’t Do The Job
The Register, 26 June 2015

Lewis Page

Retired software kingpin and richest man in the world Bill Gates says today’s renewable-energy technologies aren’t a viable solution for reducing CO2 levels, and governments should divert green subsidies into R&D aimed at better answers.

Bill Gates. Pic: DfID
Bill Gates says renewables are rubbish

Gates expressed his views in an interview given to the Financial Times yesterday, saying that the cost of using current renewables such as solar panels and windfarms to produce all or most power would be “beyond astronomical”. At present very little power comes from renewables: in the UK just 5.2 per cent, the majority of which is dubiously-green biofuel burning1 rather than renewable ‘leccy – and even so, energy bills have surged and will surge further as a result.

In Bill Gates’ view, the answer is for governments to divert the massive sums of money which are currently funnelled to renewables owners to R&D instead. This would offer a chance of developing low-carbon technologies which actually can keep the lights on in the real world.

“The only way you can get to the very positive scenario is by great innovation,” he told the pink ‘un. “Innovation really does bend the curve.”

Gates says he’ll personally put his money where his mouth is. He’s apparently invested $1bn of his own cash in low-carbon energy R&D already, and “over the next five years, there’s a good chance that will double,” he said.

The ex-software overlord stated that the Guardian‘s scheme of everyone refusing to invest in oil and gas companies would have “little impact”. He also poured scorn on another notion oft-touted as a way of making renewable energy more feasible, that of using batteries to store intermittent supplies from solar or wind.

“There’s no battery technology that’s even close to allowing us to take all of our energy from renewables,” he said, pointing out – as we’ve noted on these pages before – that it’s necessary “to deal not only with the 24-hour cycle but also with long periods of time where it’s cloudy and you don’t have sun or you don’t have wind.”

So what are the possible answers, in Gates’ view?

Gates is already well known as a proponent of improved nuclear power tech, and it seems he still is. He mentioned the travelling-wave reactors under development by his firm TerraPower, which are intended to run on depleted uranium stockpiled after use in conventional reactors. He also spoke of methods of using solar power to produce liquid hydrocarbons, which, unlike electricity, can be stored practicably in useful amounts: “one of the few energy storage things that works at scale”, as he put it.

Gates also spoke of the radical plan of high-altitude wind farming using kite-balloons flying high up in the jet stream – though he admitted that that one was something of a long shot.

In Gates’ view, decades from now a few of today’s new-energy companies will have become massive and early investors will have reaped the sort of rewards that he, Paul Allen and Steve Ballmer have from Microsoft. But many others won’t be so lucky.

“Now there’s a tonne of software companies whose names will never be remembered,” he told the FT interviewers.

Analysis

Gates has said a lot of this before. The main new thing is the firm assertion that renewable energy technology as it now is has no chance of powering a reasonably numerous and well-off human race. This is actually a very simple thing to work out, and just about anybody numerate who thinks about the subject honestly comes to the same conclusion.

Gates has said a lot of this before. The main new thing is the firm assertion that renewable energy technology as it now is has no chance of powering a reasonably numerous and well-off human race. This is actually a very simple thing to work out, and just about anybody numerate who thinks about the subject honestly comes to the same conclusion – examples include your correspondent, Google renewables experts, global-warming daddy James Hansen, even your more honest hardline greens (they typically think that the answer is for the human race to become a lot less numerous and well-off).

Unfortunately a lot of people aren’t numerate and/or aren’t honest, so it’s far from sure that the colossal subsidies pumped into today’s useless renewables will get diverted into R&D which could produce something worthwhile. In the UK at least this would be quite difficult, as the subsidies are not actually subsidies as such – no tax money is paid out to windfarmers and solar-panellists from the Treasury.

Rather, the system works by artificially pumping up the price of ‘leccy and gas and channelling the extra cash – minus various margins for various people involved – to the windfarmers and panel people, such that they get paid vastly more than the market price of the power they produce.

Full post

4) Renewable Stocks Shaken by Greek Woes as Investors Shun Risk
Bloomberg, 30 June 2015

Ehren Goossens

Clean energy stocks plunged this week amid concerns of a Greek default, a slower Chinese economy and a U.S. court ruling that could keep more coal-fired power plants operating.

Since Friday’s close, the WilderHill New Energy Global Innovation Index declined 3 percent while the Bloomberg Intelligence Global Large Solar Energy Valuation Peers Index is off 3.4 percent. Those drops exceed the broader S&P 500 index, which has dipped 1.8 percent over the same period.

Solar stocks “tend to outperform when the market is going up and underperform when it’s going down,” said Pavel Molchanov, an analyst at Raymond James Financial Inc. in Houston.

Greece closed banks and imposed capital controls after its prime minister called for a July 5 referendum on austerity measures demanded by creditors, pushing stocks lower worldwide.

Clean energy investors are also reacting to “concerns around potential rate increases” and a ruling Monday by the U.S. Supreme Court blocking certain Environmental Protection Agency rules on coal-fired power plants, Ben Kallo, an analyst with Robert W Baird & Co. in San Francisco, said by e-mail.

“We believe this is short-term volatility,” he said. “Demand for renewables will continue to increase in the U.S.”

Full story

5) U.S. Supreme Court Ruling Spells Trouble For Obama’s Climate Agenda
National Journal, 30 June 2015

Clare Foran

Monday’s ruling could compel agencies to take costs into account when deciding to regulate.

President Obama has made it clear that his Environmental Protection Agency will use its regulatory power to install limits on carbon dioxide and toxic-air pollutants for everything from power plants to trucks.

But Monday’s Supreme Court decision against EPA is a reminder that the biggest threat to Obama’s green legacy and the sweeping regulatory agenda that the administration is racing to cement before the president leaves office comes from the courts.

The 5-4 decision, with the majority opinion penned by Justice Antonin Scalia, ruled that EPAviolated the law by failing to consider cost in deciding to regulate toxic-air pollution from power plants. That verdict is a setback to the administration at a time when all hands on deck are needed to defend the president’s climate agenda.
It creates uncertainty over the fate of a key pillar of the president’s efforts to curb air pollution and hands a fresh set of talking points to opponents of the rule as they argue that the administration overreached.

The biggest impact, however, may be felt down the road—and across the entire federal government.

Some legal experts contend that the ruling could send a message to federal agencies that they must demonstrate that they have taken cost into account when deciding to regulate—and that if an agency ignores cost, it does so at its own peril.

“This is a groundbreaking administrative-law case,” said Justin Savage, a former Justice Department environmental lawyer who served under the administrations of George W. Bush and Obama and a partner with the law firm Hogan Lovells. “It essentially says that when a statute is ambiguous an agency must consider costs.”

“The reason I’m struck by this and a bit troubled is that there’s a real question of whether this decision applies broadly. And I read it as applying broadly,” said Lisa Heinzerling, a Georgetown law professor and senior climate-policy counsel to former EPA Administrator Lisa Jackson.

If that precedent sticks, it could throw a wrench into the gears of the regulatory machine if agencies must devote additional time and resources making sure their cost calculations hold up in court.

“After this decision, an agency would not want to walk into court saying, ‘Your Honor, we did not consider costs at all when deciding to take regulatory action on an issue,’” said Jonathan Adler, an environmental law professor at Case Western Reserve University.

Even if the court decision does not set such a precedent, Republicans and industry challengers say Monday’s verdict proves that the administration overstepped the limits of the law.

“The mere fact that the EPA wished to ignore the costs of its rules demonstrates how little the agency is concerned about the effects it has on the American people,” House Majority Leader Kevin McCarthy said after the ruling was handed down. “From its ozone, to greenhouse gas, to navigable waters rules, the EPA continues to burden the public with more and more costs, even as so many are still struggling to get by and improve their lives in this economy.”

The Supreme Court’s decision to side against the agency also serves as a painful reminder to the administration that it may not always see its regulatory actions upheld in the face of legal challenges.

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