Wednesday, June 24, 2009

The Wind Out of Britain

ExecutiveWindmill We always wish our windy friends well, since we like the aesthetics of windmills and they answer to the need for renewable energy sources, but sometimes you just have to wonder:

The wind industry is suffering from increasing capital costs [this is in the UK] and needs three to four manufacturers competing to bring down construction costs, the association said. Costs of building wind capacity are forecast to rise for the next few years and then decline from current levels until 2015, the group [The British Wind Energy Association} said.

Without putting too fine a point on it, if costs are going to increase over the “next few years,” that about gets us to 2015. Frankly, we imagine wind has the, er, wind at its back and its costs will decrease as economies of scale kick in. Which renders this whole story kind of silly.

“We could see prices fall by as much as 20 percent from today’s 3.1 million pounds ($5.1 million) per megawatt” of installed capacity, McCaffery said. “Government must pull out all the stops to accommodate this program.”

And what stops should government pull? A different story provides some clues:

Demand for turbines outstrips supply so that has pushed up the price. [still kind of silly – see a demand, ramp up supply.]

It is made worse by the value of the pound because turbines are priced in euros.

It is also still difficult to secure the necessary investment.

On top of all of this, power generators still want a strategic plan from the authorities for a full offshore grid, rather than the ad hoc connections preferred by Ofgem. [Ofgen is the electricity/gas regulator in Britain.]

That last part is key. While the story asserts that the electricity grid can handle the intermittency of wind without undue strain – which will allow for a ramp down on coal even while nuclear sticks around – and we really hope that true and not just hopeful - the lack of grid integration with where windmills happen to be does represent a problem. Seems solvable, and the British do have a will to make wind energy work.

We would, however, recommend an enterprising Brit type open a turbine factory. The market’s there – it’s odd that both these stories take it for granted that the turbines have to come from the continent. We’re already seeing companies open fabrication plants for the nuclear industry here – seems plausible for the Brits and wind, too.

This Executive Windmill is solar powered. That’s renewable squared! It’ll set you back $350, which explains the Executive part.

2 comments:

Rod Adams said...

Mark - If demand ramps up and prices go up, it is not always best for business to ramp up production levels, especially if the increased demand may be temporary.

Increasing capacity bring increase fixed infrastructure costs and if the result of the increased capacity is simply to lower the price at which goods can be sold, that lowers profits.

For many businesses, the right decision in the case of increased demand is to hold firm on capacity and enjoy the increased margins that competition for your product can bring in the form of higher prices and steady costs.

I learned the above in Econ 101 and while operating a small business.

Anonymous said...

You people like the aesthetics of windmills? Those things are uuuugggggggly. Hundreds of square miles of otherwise clean, clear land cluttered up with those giants, compared with a few hundred acres for a nuclear unit of similar capacity and greater reliability? No contest.

Here is an interesting anecdote I can't resist telling when this subject comes up. When my Mom was living on the East Coast one of her neighbors up the road decided he was going to be a "pioneer" by going "off grid". Seemed like a reasonable opportunity. He had plenty of state and federal subsidies, his place was on the ocean where there was always a breeze, he had land for a wind turbine tower and ground-level solar panels. So up they went. Within a year his next-door neighbors got a court order to have his windmill feathered because of the whop-whop noise, it cluttered their view, made the sunlight flicker in their living room, and any number of other complaints. So that got scotched. A couple of years later a hurricane came up the coast and blew/washed his solar panels away. But he didn't mind in the end because he got an insurance settlement, and was getting up in years and really was tiring of cleaning the sand and seagull poop off of his solar panels. So the "pioneer" came back on the grid (ironically, he got most of his electricity from the Oyster Creek nuclear plant, about 10 miles up the road from his house) and lived happily ever after.