The unsuccessful success story

Last week there was quite some fuss about the near bankruptcy of a Belgian green energy producer, Electrawinds. They manage installations that produces green power via wind, solar, biomass and also bio-diesel.

I know there were a lot of bankruptcies last year among for example solar panel installers (because of less subsidies given to install solar panels), but Electrawinds isn’t really a small company and received loads of governmental support. Until shortly it was considered a success story. There were many projects, not only in Belgium, but also in France, The Netherlands, Italy, Serbia and Kenya. There were even plans to build a prestigious, futuristic looking new headquarter in Ostend.

But last year they reported a loss of 361 million euro and then things went downhill very fast. Several efficiency measures were taken, involvement in some projects (bio-diesel) was diminished, two rescue plan were rejected. If they don’t come up with a solution this weekend they will file bankruptcy on Monday…

Most news media told about the same story with largely the same words, so I guess they all originate from the same source. According to different sources the amount of subsidies was more than 140 million euro. This amount is without the income of green certificates (money given for the production of green electricity – not really a subsidy, but indirectly paid by the consumers).

The subsidies were detailed in the open letter to Minister vande Lanotte (Dutch), written by Jean-Marie Dedecker (founder of the political party LDD), is very detailed and gives a lot of background information that the media doesn’t bring. Not only a detailed list of the subsidies, but mostly background information about the many political connections between Electrawinds and (the entourage of) the Minister.

How did this happen? Electrawinds went in a short timespan from a successful example of green entrepreneurship to a financial disaster. When looking deeper, there were more darlings of the green economy that are in serious trouble or experienced it in the recent past (4Energy Invest, Enfinity and Thenergo) or stopped altogether (Photovoltech, V&R Solar Company and Solar Living).

People are still claiming renewable sources of energy don’t depend on subsidies anymore and are even cheaper than gas or nuclear. But the gruesome reality is that many of the green companies were dependent on the subsidies and had to file bankruptcy when the subsidies diminished. Take away the subsidies and the system starts to collapse.

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5 thoughts on “The unsuccessful success story

  1. jerrygraf

    These failures stem from failing to ask the basic questions (and answer them honestly):

    How much do the alternative forms of energy generation cost to install, and who is paying?
    How much do they cost to operate and maintain?
    How much useful electricity do they really produce (MWh/year), and how consistent and reliable is it?
    In what other ways could the money be better spent to produce far more consistent & reliable electricity and, at the same time, improve energy strategy in general and reduce emissions of CO2 and other real pollutants.

    Other than the damage to our economies of the waste itself, the real problem with mandating and subsidizing non-viable energy technology projects is that this distracts us and diverts resources from other efforts to improve our energy production strategy. Unfortunately, some of the arguments used to justify the mandates and subsidies are more political and emotional than logical. Effective changes to our energy strategies need to be determined by scientific evaluation of fact and logical analysis of performance and economics; not by emotion, political considerations, and “feel good” methodologies.

    Reply
    1. trustyetverify Post author

      Agreed. The (unproven) belief in CO2 as the main driver of our climate lays at the basis of this. Plus the failure to see wind and solar as intermittent power sources. Those make wind and solar a “perfect” solution for policy makers.
      In the Belgian situation there is also an extra dimension: our government has to comply with the European goal of 20% reduction of greenhouse gases in 2020. The Belgians, being far behind schedule, had to rush wind and solar into production. I remember the previous minister of Energy on the news. Coal: no way! Nuclear: too dangerous! Gas: too much dependence on supply from abroad! The way forward was only “renewables” (wind and solar). Now we pick the bitter fruits of this policy. Many of the current power plants are now obsolete and no match for the intermittent nature of renewables. By (over)subsidizing renewables we came to the awkward situation that there was no money for the needed replacement: because of the huge subsidies on renewables, investments in for example CCTG plants were not cost-effective anymore. And by closing nuclear plants we became dependent on our neighbor countries (in practice nuclear from France because other countries have the same problems) and had an even higher CO2 emissions because of sticking to the obsolete (more polluting) plants…full circle.

      Reply
    1. Oldfarmermac

      I am not expert in financial analysis and can’t be sure wind ands solar aren’t cost effective solutions without subsidy but if they were, in the opinion of the business and banking world, then business men would be building them regardless of the subsidies, would they not?

      However it seems pretty obvious to me that the results of such studies are entirely dependent on the assumptions plugged in by the authors.
      Consider the possibility that coal and natural gas prices rise sharply- more sharply than the authors anticipate; in that case the value of the electricity produced by wind and solar farms would also increase sub substantially, and they might be profitable.

      There is another argument to be made too, in favor of e wind and solar, to the extent they are deployed. Every Kilowatt hour produced by wind and solar is one less produced by burning fossil fuels which are becoming ever , more expensive.

      If wind and solar can be a ramped up to produce say twenty percent of our needs, this would have an enormous damper effect on the price of coal and natural gas.

      i have no idea just how big this effect might be, but I think it might be more than ample to repay any subsidies provided to wind and solar industries thru tax dollars.

      Suppose I pay twenty bucks in taxes that go to wind and solar subsidies next year.
      Considering that I use a lot of natural gas and coal indirectly, in the form of purchased electricity, that might turn out over the long term to be an excellent use of my twenty, because it is helping ramp up industries that deduce demand for coal and natural gas.

      Reply
      1. trustyetverify Post author

        Thanks for passing by and commenting.

        Until some years ago I also believed that for example when a windmill is turning that this was saving fossil fuels somewhere else. I was thinking that way because I didn’t understand the intermittent nature of wind energy. Windmills turn only when wind speed is above a minimum value and below a maximum value. Below the sails will not turn, above they will be blocked to prevent damage to the turbine.

        Demand on the other hand is much more predictable: more during the day than during the night, maximum peak somewhat before noon and early evening, then a steep decline. With fossil fuels this can be emulated by powering up or down turbines. There will always be an overproduction though. There have to be some reserves for a peak.

        Problem with wind for example is that the production is depending on the wind, not on demand, so it is not reliable as fossil fuel is. The same for solar: it is only available during the day (this is a good thing), but there is less available when we need it most (during winter) and most when need it less (in summer).

        This has consequences for integrating intermittent energy sources in a power grid: just adding intermittent power to an existing grid is just producing extra power above what is already there. When we want a reduction, this means we need to power off some fossil fuel turbines, otherwise there will be no reduction in fossil fuel use. But then what to do in case of a sudden peak if we depend on wind energy and there is no/not much wind?

        So the problem is double: if we don’t power off existing fossil fuel turbines we don’t gain in the form of a decrease in fossil fuel use, just add extra power to the grid (hopefully not too much – electricity can not be stored in large quantities). And if we power off a fossil fuel turbine we need a system that can provide energy when energy production of renewables is lower than expected. In Belgium we only have a very limited capacity to do this and we came several time to the brink of a brown/blackout in the last years because of this. I had a post on one of them: too much green power.

        The question is would we gain from using renewable energy sources? Our government deploys these sources, because they want to reduce carbon dioxide emissions, not for financial gain (it costs more). But a Belgian study showed only 4% emission reduction could be achieved (our politician assume 100%, as I also did before) in the best case scenario (which we don’t have). Some studies in for example The Netherlands show an increase in emissions in some cases (because of turbines that have to be on stand-by to counter the intermittent nature of renewables, so they still using fossil fuels in a non-optimal way).

        At this moment we don’t have the ability to have 20% of our needs from wind/solar, we would risk overloading our grid (with sunny weather, much wind and not much demand) or risking brown/blackouts (when less wind and solar than expected). Another issue is the materials used to make wind generators and solar cells. Some of the materials are made of rare metals, mostly produced in China. Which is a very polluting process in those countries, so we create a real pollution somewhere else to prevent an assumed one. Those elements are not available in the huge amounts needed to do this. Also a problem will be the space needed (Belgium and especially Flanders has a high density population).

        I have no problem with alternative energy sources. We will need other sources of energy than fossil fuel sooner or later. But we should not rush into sources that we can’t deal with yet. Just my 2 cents.

        Reply

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