Is Iberdrola being “hypocritical” or just making a “critical” error?


Yesterday, this blog mentioned that European exec’s were calling for an end to the distorting subsidies for wind power; that group includes the CEO of Iberdrola, developer of wind farms in NW Ohio. Ironically, however, it is the Iberdrola US rep, Eric Thumma, leading the charge against Ohio SB 58 – in other words, he is trying to save the special treatments and incentives for wind. (testimony at the Ohio Gen Assembly 10/2/13)

The following is part of the WSJ article, about Europe, referenced at the bottom of the page..Top executives of companies that provide half of Europe’s electricity production capacity on Friday called on politicians to end “distorting” subsidies for wind and solar power, saying the incentives have led to whopping bills for households and businesses and could cause continent-wide blackouts…Speaking at a news conference here, chief executives of 10 energy producers also urged European Union authorities to compensate electricity companies that agree to maintain spare capacity on standby—a practice that helps increase the security of Europe’s highly interconnected power grid.

The executives, from utilities including Germany’s E.ON, France’s GDF Suez and Italy’s Eni SpA, blamed rising power prices on policies introduced at the turn of the century, when most European governments sought to promote renewable energy…

In the late 1990s and early 2000s, Germany, France, Italy and some other EU countries began subsidizing solar and wind power in an effort to minimize the region’s reliance on imported fossil fuels and to reduce power prices.

“We’ve failed on all accounts: Europe is threatened by a blackout like in New York few years ago, prices are shooting up higher, and our carbon emissions keep increasing,” said GDF Suez CEO Gérard Mestrallet ahead of the news conference…

Under the subsidy mechanisms, wind and solar power producers benefit from priority access to the grid and enjoy guaranteed prices. In France, for instance, even as wholesale prices hover around €40 ($54) a megawatt hour, windmill electricity goes at a minimum of €83 a megawatt hour, regardless of demand….

The system certainly lured investors into wind and solar power projects. Germany now has 60 gigawatts of wind and solar capacity—about 25% of the country’s total power-generation capacity. But the guarantees mean households now pay about 29 euro cents a kilowatt-hour, up from about 14 cents a kilowatt-hour in 2000.

The CEOs said the subsidy mechanisms became deeply flawed in 2008, when the financial crisis hit and many European countries descended into economic recession. Although demand for electricity stalled or fell in some countries, pushing down wholesale electricity prices, investors kept plowing money into new wind and solar power capacity thanks to the guaranteed tariffs for renewables.

Meanwhile, electricity prices continued rising. On average, after-tax power prices rose 17% for households and 21% for businesses in Europe over the past four years, according to Eurostat data.

To cope with overcapacity, utilities decommissioned or mothballed some of their fossil-fuel power plants that had become unprofitable to operate. Over the past four years, 51 gigawatts of gas-fired capacities have been idled across Europe, Mr. Mestrallet said.

“That’s like wiping out half of France’s power-generation capacity, or those of Belgium, the Czech Republic and Portugal combined,” he said.

Analysts say the trend is dangerous because, unlike renewable wind and solar sources, which are intermittent, gas-fired plants are a key element to improving the reliability of the grid because they can be turned on or off at short notice. Some fear that Europe is now ill-equipped to weather a cold spell.

“The importance of renewables has become a threat to the continent’s supply safety,” Colette Lewiner , an energy analyst at Capgemini consultancy, warned in a report released this week. “There could indeed be a blackout.”

http://online.wsj.com/news/articles/SB10001424052702303382004579129182510803694?mod=WSJ_Energy_2_4_Right

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