The Business Plan of the Wind Industry

abandonedwind
The wind industry is here to make money. As we are in a capitalist economy, that is its prerogative. I just wish it would be honest about its true motive instead of portraying itself as an eco-warrior, which wind farmers most definitely are not.

The problem with the profit motive is that once it disappears, big business disappears as well.

And why is that a problem, you ask? We can’t wait to see the backs of those fe….rs!

The problem is that they will leave their turbines behind. Gigantic, towering, rusting monuments to man’s greed, situated in some of our most precious locations and landscapes. “A Nama for wind turbines”, as predicted by Colm McCarthy.

The legacy of the burst property bubble is the ghost estate. And now we can look forward to ghost wind farms, the legacy of the wind bubble.

At the moment the wind industry is clearly hugely profitable, as evidenced by the avalanche of applications for wind farms, and the current flood of new wind farms, seemingly on a weekly basis. This flood is not because the wind industry sees an urgent need to save this country’s energy supply, as it does not need saving. It is perfectly adequate for our foreseeable needs. The flood is more along the lines of a gold rush: get in as quickly as you can, plunder the lode for as much as you can, and then get out when the lode is exhausted.

The extent of the greed of the wind industry was recently illustrated in a template letter composed by the IWEA, advocating a lobbying campaign against Minister Simon Harris in respect of the Valuation Amendment No.2 Bill (2012), which seeks to make the rate valuation system more transparent and fair, based on asset value. The IWEA want the Minister to remove any reference to “wind generators, turbines and generators, together with ancillary plant and electrical equipment, including transformers,” as these expensive assets make up the bulk of a wind farm’s assets and accordingly attract the commensurate rates.

This is the template letter sent out by the IWEA to its members in their attempt to pressurise the Minister to change the content of the Bill. The wind industry is terrified that a fairer rating system has the potential to cut into its profits. The figures quoted are highly suspect but I will leave that for you to work out on your own:

ADD COMPANY LOGO OR HEADED PAPER

Minister Simon Harris T.D.
Minister of State at the Department of Public Expenditure & Reform,
Government Buildings,
Upper Merrion Street,
Dublin 2.

18th February 2015

By email to MoS@finance.gov.ie
Cc. Minister@per.gov.ie; Richard.troy@per.gov.ie ; BrianT.Carroll@dcenr.gov.ie; Eunan.McKinney@dcenr.gov.ie
Dear Minister Harris,

We are writing to you in relation to the Valuation Amendment No.2 Bill (2012) which as Minister you are currently leading through the Dáil.

Introduce your company, employees etc, and outline if relevant your own rates payments (we have paid XX in rates in 2014 alone but are now extremely concerned about our future viability considering the massive increase being proposed.)

We noted your Dáil speeches last week and in particular your closing speech where you stressed repeatedly the need for a bill which is “Fair and equitable.” We agree with you on this need, however, ourselves along with other IWEA members today facing a stark reality under the new Valuation Bill whereby renewable energy, including wind energy will see an approximate 218% increase in rates liability, this aspiration of fairness is not matched by this punishing reality.

As outlined by the Regulatory Authorities of Ireland and Northern Ireland (CER and NIAUR), the average Net Profit per MW of installed wind energy capacity in 2013 was shown to be €13,850 per anum, which for example is far lower than coal at €85,880 and peat at €143,540. By applying the new rate level to wind energy, which is approximately €20,000 per MW this negates all profitability in wind energy and would effectively signal a terminal decline in the Irish wind energy sector.

Under the new proposals clean renewable energy will actually be paying twice the rates per MW of energy of CO2 emitting thermal generation for example a gas plant, a situation which if enacted would be directly contrary to EU law on the promotion of renewable energy.

This reality of rates for renewable energy directly undermines your Dáil statements, as the reality is:
• The current rates system is not fit for purpose.
• The system does not provide a level playing field for similar types of rateable properties.
• There is not a consistency of approach and Individual sectors like the wind energy sector, we believe are clearly being targeted for punitive rates increases.
As a sector contributing to the Irish economy in terms of jobs and investment, we are being massively penalised for innovation and delivery. The Dáil debate last week highlighted that massive rates bills are threatening investment into our communities and forcing businesses to leave. We are facing that reality today under the terms of this legislation.

There is an imperative need to amend the Valuation Amendment Bill (No.2) 2012 as it stands. With this in mind we would like to ask to meet with you to discuss a specific proposal we have for the Draft Valuation Amendment Bill and to ask for your support within the Committee and Dáil deliberations to come. We have attached in annex to this letter a short briefing note prepared by IWEA which outlines the urgent issue and our proposed amendment to the Valuation Amendment Bill (No.2) 2012.

Through hard work and with the direct support of Government Ireland, has proven to be a leader in renewable energy. The punitive valuation of renewable energy leaves investment and continuity of our green economy under threat. Renewable energy in Ireland is a developing sector, but we are clear that emerging technologies which are being championed in Ireland, will be jeopardised by a valuation profile to be cemented under this Bill, which will see investors looking elsewhere.

As a responsible company and a part of the community where we operate, we clearly support the payment of equitable rates, and in line with other local area payments such as development contributions these payments are part of the lasting developmental and economic legacy which wind projects bring to an area.

In that context we ask you Minister to meet with us and to consider the IWEA proposal in order to ensure fair and equitable rates are applied across Ireland.

Yours sincerely,

ADD SIGNATURE AND TITLE

This letter infuriated John Joseph Dooley, a retired industrial engineer with extensive experience gained from working for multinationals all over the world, including the energy industry. He sent me the following e-mail which I have published with his permission:

Every successful journey takes planning and preparation.

Cartography is the practice of map making. Historians have proposed that map making has been an integral part of human history for possibly 8000 years. In other words, even ‘primitive man’ as far back as 8000 years ago saw the need to plan and prepare prior to setting out on a journey.

The benefits of planning are obvious. If you started to see things which were not marked on your map you knew there were three possibilities:

• You had taken a wrong turn and needed to retrace your steps or work out a new route
• The route had changed by natural means like an avalanche or rockfall and you had to work out a new route.
• The map was wrong.

Accordingly, the value of a plan and a map was obvious. If you went off the planned route for whatever reason, the map would tell you this and it would allow you to adjust your route or alter your objective.

.
The Problem with the Irish Wind Program.

The wind energy program has no plan and no map.

There has never been a Feasibility Study or a Cost Benefit Analysis conducted on the wind energy program.

In other words there is no map available to highlight key points along the road and warn of impending dangers. There is no way to compare actual achievement against expected achievement. This in turn means that no adjustments can be made to bring the actual achievements into line with the plan if reality deviates from the path of the expected route.

Think of the earliest aircraft pilots, before radar was available. You were flying by the seat of your pants, relying on your instincts and reactions. When flying over the flat plains the risks of crashing was very low. However, if you flew over mountainous terrain the risks of crashing rose. If you could not see the mountains because of clouds or fog you crashed. Flying by the seat of your pants is usually dangerous. You see the danger when it is too late and the options for avoiding a crash are limited.

The panic letter by The IWEA on the issue of ratable revaluation of wind turbines displays an attitude that is similar to these early pilots. The proposed increases in ratable valuations crashes the whole project. If profitability was higher, like those being achieved by coal and peat, then these increases would not be a potentially fatal issue. But the wind program is carrying too much fixed debt and cannot effectively cut costs to deal with likely rate increases. They are flying by the seat of their pants, being kept afloat by increasing subsidies paid by the consumer.

 

The Reason for Low Profitability of Wind Farms. Wind Variability.

As everyone knows, you cannot get the wind to blow when the demand for electricity is highest. The wind will blow at any time or not at all. Therefore you will have long periods of excess. The excess cannot be sold, it is wasted. When there is no wind output then conventional power stations carry the load.

Investing large amounts of money to produce excess electricity which cannot be sold, or producing no electricity when it is most required is not a great business plan. You have to pay your bills from what you get from the feed-in price. But you cannot predict your income because you do not know when the wind is going to blow to produce the output that generates your income.

In addition Nature plays games with you. You could have a quiet wind year like 2010 with reduced wind electricity output. Conversely you could have a very windy year that produces vast amounts of electricity that is at a loss because there is no market for it or worse still, that makes it dangerous for your turbines forcing you to shut them down.

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Wind Turbine Reliability.

It is interesting that the majority of planning applications for wind farms ask for twenty years. This is often based on the statement that the life expectation of an industrial wind turbine is twenty years.

Another statement often used when convincing people to invest in wind farms is that the output of that turbine will be constant and unchanging over twenty years.

Both of these statements are utter nonsense.

The supporters of wind energy production say that wind turbines get more reliable as the technology improves. But the fact is that between 1977 and 1990 wind turbines had an average age of 17.6 years and a standard deviation of 3.8 years. In other words a wind turbine could operate between 6.2 years and 29 years. Between 1990 and 2000 the average age was down to 15.6 years with standard deviation of 4.2 years. In other words the operating range was between 3 years and 28.2 years.

Over the last 20 years there has been a dramatic decline in the average life of a wind turbine. Between 2000 and 2014 the average life span of an industrial wind turbine was 6.2 years.

And what of the claim that wind turbines produce a constant predictable output from year to year? A number of recent studies prove this not to be the case. One study detected a 50% reduction in capacity factor over a 6 year period. In other words, in only six years it was only as half as productive compared to when it was new. Added to this are the inevitable increases in maintenance and component replacement costs as wind turbines age. Like the gear box failure after 2 to 4 years of operation or shaft bearing beginning to wear after less than a year.

This is a long way from the 20 years claimed on the box. Talk about misleading advertising!

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Conclusion.

The Irish Wind Program is like an over heavy airplane that is perpetually low on fuel and without radar, but is continuously having to fly over an unexpected mountainous area. It might survive and fly over one dangerous mountain. But by doing so it uses up more precious fuel which means it cannot anticipate, or have the wherewithal to clear the next dangerous mountain.

This makes the wind industry extremely vulnerable to any economic hiccup, and reliant for their profit margins on the embattled consumer. This is why the wind industry is so terrified about the proposed rates increase, as it is essentially a bubble industry – utterly non-viable in an open economy.”

Thanks very much, John.

.

What does this mean? As I understand it, it means that in order to keep the wind industry profitable, despite its fatally flawed business plan, it will be necessary to keep on increasing the subsidies paid to the wind industry. As more wind farms are built, and as the existing wind farms become less productive and more expensive to run, the consumer will need to pay more and more to keep the wind industry afloat, causing the price of electricity to continuously rise. This is what has happened in Germany, with a consequent massive increase in the cost of living, causing many multinationals to leave, taking their jobs with them. Whilst the wind industry claims to employ over 3000 people (a debateable figure, and in any event describing low-end short-term jobs), it destroys far more jobs, not only with the aforementioned multinationals leaving the country, but also in the tourism and food industries, and of course the bloodstock / horse racing industry.

Finally, when even the constant propping up of the system by the embattled electricity customer is no longer enough to return a handsome profit, the wind industry will turn tail and flee our shores, leaving these huge monstrosities to rust and forever ruin the skyline.

And such is the business plan of the wind industry.

About Neil van Dokkum

Neil van Dokkum (B. SocSc; LLB; LLM; PGC Con.Lit) Neil is a law lecturer and has been so since arriving in Ireland from South Africa in 2002. Prior to that Neil worked in a leading firm of solicitors from 1987-1992, before being admitted as an Advocate of the Supreme Court of South Africa (a barrister) in 1992. He published three books in South Africa on employment law and unfair dismissal, as well as being published in numerous national and international peer-reviewed journals. Neil currently specialises in employment law, medical negligence law, family law and child protection law. He dabbles in EU law (procurement and energy). Neil retired from practice in 2002 to take up a full-time lecturing post. He has published three books since then, “Nursing Law for Irish Students (2005); “Evidence” (2007); and “Nursing Law for Students in Ireland” (2011). He is an accredited and practising mediator and is busy writing a book, with Dr Sinead Conneely, on Mediation in Ireland. His current interest is Ireland’s energy policy and its impact on the people and the environment. He is also researching the area of disability as a politico-economic construct. Neil is very happily married to Fiona, and they have two sons, Rory and Ian.
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2 Responses to The Business Plan of the Wind Industry

  1. Willem els says:

    I have enjoyed reading your articles Neil. Having been an electrical engineer in the Municipal Electricity Distribution sector since 1977 I have seen many changes in the way we run our businesses. Forward thinking people are addressing the possibility of future energy shortfalls by introducing the most profitable of the remaining means of producing electrical energy so that by the time the most profitable resources are depleted, alternative energy resources like wind energy are well known and properly implemented. The unknowns of hitherto untapped resources are a challenge to meet. We hope that by resourceful investigation into these new industries we offer our children the best possible solutions for the growing demand for electrical energy. Thank you for your valuable contribution.

  2. Pat Swords says:

    Willem

    As an engineer myself, I really don’t know what you are talking about other than some random musings. Forward looking? The turbines will be shot and blown out in fifteen years at most. So really can you tell me with proper engineering analysis what energy crises is facing us in the fifteen year plus window? I don’t apologise for being pedantic, but a vague wish list and a lack of proper analysis is just not what a proper assessment is all about.

    http://www.windsofjustice.org.uk/2015/03/clean-energy-what-is-it-and-what-are-we-paying-for/

    This lack of proper analysis and assessment is the core issue of what is wrong, that is why it is simply not acceptable.

    Regards

    Pat

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