Wind Energy: Freedom From Fossil Fuels or Tempest in a Teapot? Part I

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BY JOSEPH L. SHAEFER — I’m a realist. No matter how many times one wishes snowflakes were dollar bills and soot was green, it isn’t going to happen. Get over it. Soot is dirty and, while technology is likely to make it cleaner, it’s never going to be squeaky clean.

Because I am a realist and a long-time energy analyst, I have written some articles about nuclear and fossil fuel energy that had some readers whining that my realistic review of the facts means I’m a “throwback” and “out of touch” and “blah blah blah…” (Reality is tougher on some people than others.)


For that small but oh-so-vocal sector of the audience, the clue bird is about to wend its way through a forest of death-dealing turbines. The giant bubble currently ensnaring Europe was partly created by massive subsidies for wind turbines, massive subsidies for generators to capture that intermittent power, and massive subsidies for transmission lines to deliver that power to the cities. Those subsidies have now come to an ignominious end. When the subsidized-by-taxpayers trough went dry, Europeans found out what the real economics were. Not that we haven’t seen that firsthand in the states to the geographic left of me (California and Hawaii) as well.

Solar energy may have been the first energy for mankind as well as for plants and animals. Laying in the sun for a moment after a cold night in the cave got prehistoric man moving in those barbarous pre-coffee days. And wind energy wasn’t far behind this form of solar “energy.” It’s not as if either of these are new technologies. Man has been tangentially harnessing the difficult-to-focus power of the sun and the intermittent good fortune of the wind for millennia. Sailing ships were the only form of cross-ocean travel for centuries. (Galley slaves would have had to have eaten so much to generate the same energy, without the wind the ships could carry nothing but men to row and food to feed them — and even then the wind would have blown them where it chose.)

It is today a brilliant solution to use hydroelectric, solar, geothermal, biomass and wind wherever possible. But it is clear, after a few centuries, that avoiding the massive already-focused, already-condensed forms of energy Mother Nature has generously placed under the land and seas would force us to revert to living in caves. I think of oil, gas, coal and nuclear as giant “batteries” that are there for us to use while we (attempt to) transition to renewable resources. If you think drilling 10,000 feet down for oil or fracturing shale “rock” to release natural gas is difficult, try focusing the power of the sun into a storable, usable, convenient, steady source of power. Or to store the wind’s intermittent ability to generate power. None of this is easy so I believe we should use what we have while we are working on and dreaming about alternatives.

The Europeans are learning this first-hand. Years of fiscal extravagance and junk science have taken their toll on Europe. (The great incongruity in approaches is not limited to energy production; just as the Europeans are having to abandon some of their profligate health care promises, the US is moving to the European model…)

Europe’s biggest windfarm, Whitelee, near Glasgow, boasts 140 turbines which last year ran at less than 25 per cent of capacity.
According to a recent article in Britain’s Daily Mail, more than half of Britain’s wind farms are operating at less than 25% capacity – and the figure rises to nearly 3 out of 4 onshore developments! 70% of the land-based wind farms / power plants on land only get enough wind to power a turbine 25% of the time. You don’t build a church to handle every worshipper who comes once a year on Easter Sunday and is 3/4 empty the rest of the year; why would you build a power source that follows just that model?

From the article: “Experts say that over-generous subsidies mean hundreds of turbines are going up on sites that are simply not breezy enough… Michael Jefferson, the professor of international business and sustainability who carried out the analysis, says financial incentives designed to help Britain meet green energy targets are encouraging firms to site their developments badly. Under the controversial Renewable Obligation scheme, British consumers pay £1 billion a year in their fuel bills to subsidise the drive towards renewable energy… Nick Medic, of Renewable UK, which represents the wind industry, said talk of efficiency was ‘unhelpful’.” [I love that last quote. Of course it’s ‘unhelpful’ — if you are the flack for the subsidized wind industry!]

It can be argued that Europe’s headlong rush to heavily subsidize wind energy was a primary contributing factor to their current debt crisis. By establishing punitive “feed-in tariffs” to coerce utilities (or simply direct, rather than coerce, if they were a state-owned monopoly) to use renewable energy sources, ready or not, they raised costs to government, utilities and, ultimately, the consumer. Using feed-in tariffs, electric grid utilities are obligated to buy renewable-source electricity from anyone capable of selling it to them. EU governments sold government securities to support their utilities now encumbered by feed-in tariff costs. But in 2009, as the specter of bankruptcy hung over the wind-enamored EU, the subsidy bubble burst.

Speaking at a Heritage Foundation seminar recently, Dr. Gabriel Calzada, a Madrid university economist and professor, described what has happened in Spain:

The feed-in tariff… would make (utility) companies go bankrupt eventually. So…the government guarantee[d] to give back the money in the future — when [they] are not going to be in the office any more. Right now there is a debt related to these renewable energies that nobody knows how it is going to be paid — of 16 Billion Euros.

In reviewing what happened in Spain in 2009, when the government was forced to reduce alternative energy subsidies by 30%, the professor concluded:

At that point the whole pyramid collapsed… BP closed down the two largest solar production plants in Europe. They are firing between 25,000 and 40,000 people… What do we do with all this industry that we have been creating with subsidies that now is collapsing? The bubble is too big. We cannot continue pumping enough money… The President of the Renewable Industry in Spain (wrote a column arguing that) …the only way is finding other countries that will give taxpayers’ money away to our industry to take it and continue maintaining these jobs.

(Well, they may have been pretty clever about this last one. The contract for the massive solar plant recently announced by President Obama to create jobs in “America” went to Abengoa Solar, the big Spanish renewable energy firm.)

Following, in Part II: Before we get too smug about these Europeans driving themselves into recession by making un-economic choices in energy usage, there is an equally expensive lesson rather closer to home. We’ll take a look at the recent history of subsidizing wind energy in America and suggest some alternatives, including ways to profit if you are still hell-bent on believing the hucksters’ windy story…

Author’s Disclosure: There are no recommendations in Part I. Please see Part II.

Joseph L. Shaefer is the CEO and Chief Investment Officer of Stanford Wealth Management, LLC, a Registered Investment Advisor.