Why Europe's Renewables Roadshow Is Rolling Stateside
Peter C. Glover
May 01, 2009
Drive out of London west along the M4 motorway and you´ll see the shape of things to come: one of the new generation of giant wind turbines. Completed in 2005 and dominating every vista for a hundred miles, the 280 ft mega turbine at Green Park was designed to power up to 500 local businesses and 1000 homes. And so it does. But not by wind power alone you understand. The wind only turns the blades for up to 40 percent of the time. For the other 60 percent they have to be powered by electricity – to prevent them rusting and seizing up.
You might think a 40 percent return on the massive investment and on-going maintenance costs associated with such ´free´, renewable wind power, disappointingly low. You´d be right. But here´s the thing. The return ratio at Green Park is actually high for an industry where the norm is 25 percent or less – this in Europe´s windiest land, and in the renewables flagship industry. Worst of all, during January´s bout of severe cold, Britain´s turbines were reported as operating at a mere 10 percent of capacity. The simple fact is that periods of severe cold often coincide with a lack of wind. So at a time when most power is required, wind turbines consistently prove themselves to be at their least reliable.
All of which explains why the European wind industry and green energy schemes are struggling to raise finance. Private investors don´t want to know. Who but Government would throw vast amounts of someone else´s cash at such a commercially non-viable industry? While the green energy tab has been picked up by Europe´s long-suffering taxpayers, giving the socialist EU its much-vaunted world lead, it seems the publicly-funded European green energy ´road-show´ is fast running out of steam. With funds increasingly hard to come by and with its wheels constantly mired in planning disputes, Europe´s green energy big-hitters are hitching up their wagons and heading West, to where the next rich vein of easy public subsidy pickings lies untapped: Obama´s $80 billion renewable energy stimulus bonanza.
European Shell-out
While European Big Oil and power companies nightly parade their green credentials in TV adverts, by day they are ditching their Europe-wide green energy programs. BP has opted out of the UK renewables market altogether, citing it commercially unviable. Spanish utility company Iberdrola, the big investor in Spain´s wind farms and owner of Scottish Power, has slashed its renewables spending by 40 percent. The future of NPower´s massive Gwint Y Mor wind farm off the Welsh coast is in doubt. But the biggest blow to the green energy flagship wind industry came when the world´s second largest oil company, Royal Shell, pulled out of the London Array, the world´s largest offshore wind farm project, in late 2008. The $4.5 billion project due to be built in the Thames estuary would prospectively have powered up to 750,000 homes. While the London Array´s other backers, Germany´s E.On and Denmark´s DONG Energy, are currently in urgent talks for new funds with the European Investment Bank, the project remains shelved.
The reality is, however, that Shell´s volte face turns out to be nothing of the sort. Having made a big show of signing the pre-Bali conference low carbon communiqué, Shell subsequently quietly sold off its solar business. Environ Energy Global of Singapore bought its photovoltaic operations in India and Sri Lanka. The sale of Shell´s solar operations in Philippines and Indonesia quickly followed along with its solar module production business, with its manufacturing plants in the US, Canada and Germany.
While Shell vehemently denies it is giving up on green energy – maintaining it will concentrate on biofuel initiatives – both it and other European Big Oil companies are letting it be known they are ´returning to their roots´ and concentrating on primary energy initiatives. As the green lobbies duly vented their anger against Shell, it was left to Michael Eckhart, president of the American Council on Renewable Energy to put his finger on the real reason: "Big Oil does not consider renewable energy to be a mainstream industry", he said. However, it seems it is not as simple as that. During the course of damping down criticism over its London Array pullout, Shell let it be known that it still intended to pursue wind power projects in the US where there were far more competitive US government incentives.
Whether or not Big Oil (and Big Power) considers the green energy business mainstream, its prevailing business philosophy seems less green and more greenback-orientated, especially when massive public subsidies are the incentive. But the question remains, what is going wrong with Europe´s green energy strategy, which should set alarm bells ringing in the US?
Well it seems that the days of the great European socialist ´blank check´ for green energy programs is over. Having seed-funded the first generation of renewables, especially numerous wind turbines, the blatantly poor investment-to-energy return ratio has consistently kept private investors away. What the economic crisis has done is to hasten the day when even ideological-driven European leaders must demand a better return from an industry still commercially unproven. EU strategy has been to throw money into an ´unfocused´ green energy pot that requires diverse energy protagonists to scrap for every penny. The recent debacle over the Nabucco pipeline – allegedly the key new energy investment for Europe – is a reflection of the lack of a coherent EU energy policy. When it comes to funds all manner of energy projects vie for a steadily dwindling pot, as governments are forced to cut back on their financial commitments. Burgeoning planning problems in the face of increasing public (even environmental) opposition has meant that competing for European green energy funding has turned into a business nightmare. Enter Obama´s $80 billion ´windfall´ funds specifically for renewables projects. Coupled with a presidential commitment to easing planning regulations, and a whole new, potentially more ´lawless´, green energy frontier beckons.
While April saw the UK Government throw a further $3 billion, and the EU a further $4billion, at green energy, once again it amounted to ´unfocused´ cash and that in amounts hardly likely to suggest to Europe´s big-boys the need to turn the their wagons and head home.
Rolling Stateside
The European renewables players are currently marking out their US ground. Spain´s Iberdrola, the world leader in renewable power, is already the second biggest player in US wind generation. Iberdrola has announced it will invest over $2 billion in the US up to 2012. Portugal´s EDP Renováveis, already the third largest company in US wind, is set to invest $5 billion in its US holdings. Spain´s Gamesa is the third largest, behind General Electric, in turbine manufacture. Denmark´s Vestas, the world´s largest turbine manufacturer, is becoming a growing force in the US. Enel Green Power, a subsidiary of the Italian utility, Enel, is set to invest at least $1.5 billion up to 2013. BP says it remains committed to $8 billion of spending on alternative energy over 10 years including, as a spokesman recently confirmed, "pressing ahead with 450 megawatts of wind production capacity in the US". The extent of Shell´s US wind and renewables capacity is still to unfold. But, as Francesco Starace, president of Enel Green Power recently told Business Week, "The stimulus package is a big incentive to invest."
Whilst European companies will inevitably provide some of the thousands of American green jobs President Obama´s stimulus wants to create, he should appreciate that the American renewables industry per se will be operating at a severe advantage. European companies are often subsidiaries of much bigger parent companies and as such have greater financial clout, not to mention expertise, than their smaller, inexperienced, US counterparts. That competitive edge is likely to ensure that much of Obama´s taxpayer energy stimulus package will flow directly from the US taxpayer to European companies.
Historically, America has made a better job of ´revolution´ than has mainland Europe. But in the coming US renewables revolution, all the signs are that it will be labeled ´made in Europe´ and mirror all the same mistakes Europe has made.
On his next trip to Britain President Obama could do worse, when he lands at London´s Heathrow, than take a short trip along the M4 to see Green Park´s mega-turbine. He and his policy team should persuade themselves to do a little investment/energy return simple math, and scale their findings up to reveal the shape of things to come in the US. It might help explain why the pioneers of the first wind revolution are already so readily ditching Europe´s renewables revolution to take part in one Stateside – at least, for as long as the rich vein of taxpayer subsidy holds out.
Peter C Glover is European Associate Editor at Energy Tribune magazine. For more go to www.petercglover.com
You might think a 40 percent return on the massive investment and on-going maintenance costs associated with such ´free´, renewable wind power, disappointingly low. You´d be right. But here´s the thing. The return ratio at Green Park is actually high for an industry where the norm is 25 percent or less – this in Europe´s windiest land, and in the renewables flagship industry. Worst of all, during January´s bout of severe cold, Britain´s turbines were reported as operating at a mere 10 percent of capacity. The simple fact is that periods of severe cold often coincide with a lack of wind. So at a time when most power is required, wind turbines consistently prove themselves to be at their least reliable.
All of which explains why the European wind industry and green energy schemes are struggling to raise finance. Private investors don´t want to know. Who but Government would throw vast amounts of someone else´s cash at such a commercially non-viable industry? While the green energy tab has been picked up by Europe´s long-suffering taxpayers, giving the socialist EU its much-vaunted world lead, it seems the publicly-funded European green energy ´road-show´ is fast running out of steam. With funds increasingly hard to come by and with its wheels constantly mired in planning disputes, Europe´s green energy big-hitters are hitching up their wagons and heading West, to where the next rich vein of easy public subsidy pickings lies untapped: Obama´s $80 billion renewable energy stimulus bonanza.
European Shell-out
While European Big Oil and power companies nightly parade their green credentials in TV adverts, by day they are ditching their Europe-wide green energy programs. BP has opted out of the UK renewables market altogether, citing it commercially unviable. Spanish utility company Iberdrola, the big investor in Spain´s wind farms and owner of Scottish Power, has slashed its renewables spending by 40 percent. The future of NPower´s massive Gwint Y Mor wind farm off the Welsh coast is in doubt. But the biggest blow to the green energy flagship wind industry came when the world´s second largest oil company, Royal Shell, pulled out of the London Array, the world´s largest offshore wind farm project, in late 2008. The $4.5 billion project due to be built in the Thames estuary would prospectively have powered up to 750,000 homes. While the London Array´s other backers, Germany´s E.On and Denmark´s DONG Energy, are currently in urgent talks for new funds with the European Investment Bank, the project remains shelved.
The reality is, however, that Shell´s volte face turns out to be nothing of the sort. Having made a big show of signing the pre-Bali conference low carbon communiqué, Shell subsequently quietly sold off its solar business. Environ Energy Global of Singapore bought its photovoltaic operations in India and Sri Lanka. The sale of Shell´s solar operations in Philippines and Indonesia quickly followed along with its solar module production business, with its manufacturing plants in the US, Canada and Germany.
While Shell vehemently denies it is giving up on green energy – maintaining it will concentrate on biofuel initiatives – both it and other European Big Oil companies are letting it be known they are ´returning to their roots´ and concentrating on primary energy initiatives. As the green lobbies duly vented their anger against Shell, it was left to Michael Eckhart, president of the American Council on Renewable Energy to put his finger on the real reason: "Big Oil does not consider renewable energy to be a mainstream industry", he said. However, it seems it is not as simple as that. During the course of damping down criticism over its London Array pullout, Shell let it be known that it still intended to pursue wind power projects in the US where there were far more competitive US government incentives.
Whether or not Big Oil (and Big Power) considers the green energy business mainstream, its prevailing business philosophy seems less green and more greenback-orientated, especially when massive public subsidies are the incentive. But the question remains, what is going wrong with Europe´s green energy strategy, which should set alarm bells ringing in the US?
Well it seems that the days of the great European socialist ´blank check´ for green energy programs is over. Having seed-funded the first generation of renewables, especially numerous wind turbines, the blatantly poor investment-to-energy return ratio has consistently kept private investors away. What the economic crisis has done is to hasten the day when even ideological-driven European leaders must demand a better return from an industry still commercially unproven. EU strategy has been to throw money into an ´unfocused´ green energy pot that requires diverse energy protagonists to scrap for every penny. The recent debacle over the Nabucco pipeline – allegedly the key new energy investment for Europe – is a reflection of the lack of a coherent EU energy policy. When it comes to funds all manner of energy projects vie for a steadily dwindling pot, as governments are forced to cut back on their financial commitments. Burgeoning planning problems in the face of increasing public (even environmental) opposition has meant that competing for European green energy funding has turned into a business nightmare. Enter Obama´s $80 billion ´windfall´ funds specifically for renewables projects. Coupled with a presidential commitment to easing planning regulations, and a whole new, potentially more ´lawless´, green energy frontier beckons.
While April saw the UK Government throw a further $3 billion, and the EU a further $4billion, at green energy, once again it amounted to ´unfocused´ cash and that in amounts hardly likely to suggest to Europe´s big-boys the need to turn the their wagons and head home.
Rolling Stateside
The European renewables players are currently marking out their US ground. Spain´s Iberdrola, the world leader in renewable power, is already the second biggest player in US wind generation. Iberdrola has announced it will invest over $2 billion in the US up to 2012. Portugal´s EDP Renováveis, already the third largest company in US wind, is set to invest $5 billion in its US holdings. Spain´s Gamesa is the third largest, behind General Electric, in turbine manufacture. Denmark´s Vestas, the world´s largest turbine manufacturer, is becoming a growing force in the US. Enel Green Power, a subsidiary of the Italian utility, Enel, is set to invest at least $1.5 billion up to 2013. BP says it remains committed to $8 billion of spending on alternative energy over 10 years including, as a spokesman recently confirmed, "pressing ahead with 450 megawatts of wind production capacity in the US". The extent of Shell´s US wind and renewables capacity is still to unfold. But, as Francesco Starace, president of Enel Green Power recently told Business Week, "The stimulus package is a big incentive to invest."
Whilst European companies will inevitably provide some of the thousands of American green jobs President Obama´s stimulus wants to create, he should appreciate that the American renewables industry per se will be operating at a severe advantage. European companies are often subsidiaries of much bigger parent companies and as such have greater financial clout, not to mention expertise, than their smaller, inexperienced, US counterparts. That competitive edge is likely to ensure that much of Obama´s taxpayer energy stimulus package will flow directly from the US taxpayer to European companies.
Historically, America has made a better job of ´revolution´ than has mainland Europe. But in the coming US renewables revolution, all the signs are that it will be labeled ´made in Europe´ and mirror all the same mistakes Europe has made.
On his next trip to Britain President Obama could do worse, when he lands at London´s Heathrow, than take a short trip along the M4 to see Green Park´s mega-turbine. He and his policy team should persuade themselves to do a little investment/energy return simple math, and scale their findings up to reveal the shape of things to come in the US. It might help explain why the pioneers of the first wind revolution are already so readily ditching Europe´s renewables revolution to take part in one Stateside – at least, for as long as the rich vein of taxpayer subsidy holds out.
Peter C Glover is European Associate Editor at Energy Tribune magazine. For more go to www.petercglover.com
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