FT: Low Interest Rates are an Opportunity to Spend Big on Renewable Energy

The US renewable energy boom which failed – President Jimmy Carter installing solar panels on the White House

Guest essay by Eric Worrall

According to FT, cheap interest rates should be an opportunity for businesses to max out the corporate credit card on renewable energy infrastructure.

Low rates provide a historic opportunity to tackle climate change

Renewables’ costs tend to be front-loaded and deliver savings over time

Deirdre Cooper DECEMBER 26 2019Print this page

Tackling the climate crisis will require the world’s largest ever peacetime investment. Historically low interest rates mean there has never been a better time to make it.

Interest rates affect the entire economy, but are particularly important for renewables because the cost of borrowing has an outsized influence on their competitiveness. Fuel costs are essentially zero for green power — sun, wind and water are free. That means capital expenditure is the biggest component of the average cost of producing renewable electricity.

So why has investment in renewables not grown anywhere near the pace required to achieve the Paris agreement — which focused on an international pledge to keep global warming well below 2C above pre-industrial levels — as the UN’s recent Emissions Gap report makes plain?

The answer is partly that cheap money has kept debt-laden oil and gas producers on life support. According to McKinsey, free cash flow per barrel of oil from US independent producers has been negative for the past eight years. Taking on more debt has so far masked the problem, but this cannot go on forever.

So what is going wrong for renewables? Recent stumbles for solar in big markets such as India — where new installations fell more than a third in the first half of 2019 compared with the same period in 2018 — demonstrate that uncertainty about regulatory and fiscal policy acts as a brake on investment.

Read more: https://www.ft.com/content/c752698c-200c-11ea-92da-f0c92e957a96

Why is regulatory uncertainty such an issue for renewables?

The part Dierdre left out is that renewable energy businesses can’t stand on their own merits, they need government intervention to make a profit.

Nobody wants unreliable energy unless politicians force them to accept it. The moment politicians tire of answering questions about skyrocketing electricity prices, or tire of paying out endless renewable subsidies for very little visible benefit, interest in renewable energy collapses.

I can think of more sound basis for business investment than the whim of fickle politicians.

41 thoughts on “FT: Low Interest Rates are an Opportunity to Spend Big on Renewable Energy

  1. How about on energy, period.
    America needs to do so much to increase their Energy Efficiency and do a real plan for Americas Energy Future. We will be needing electrical energy produced for more than the next 100 years!

    America has 600 years of good quality coal available and we believe this coal needs to be used to produce America’s electricity.America’s natural gas needs to be used for building space heating and by industry to produce all those other products we use daily.America’s oil needs to be used for transportation and by those industries that produce products requiring oil.Doing the above will keep America into energy for over the next 100 years
    America’s renewables (wind & solar) need to be connected to it’s own grid ,supplying electricity to America’s growing EV market. Then when the sun goes down and the wind doesn’t blow and the batteries go dead, it’s time to call it a day. No harm done.

    Our companies have since 1978 been focused toward Energy Efficiency at natural gas and LPG facilities and reducing coal emissions at coal fired power plants. With a Sidel Carbon Capture Utilization System a coal fired power plant can operate at a 100% firing rate and put into the atmosphere less CO2 than a new design natural gas fired power plant. We turn CO2 into good paying full time jobs and money. This is why we have to utilize America’s coal supply.
    America’s natural gas can be consumed to near 100% efficiency. The natural gas was combusted at a site for a purpose. We need to help them finish fulfilling that purpose.
    The problem is in our standard combustion equipment. So we add a Sidel Condensing Flue Gas Heat Recovery Unit and the combusted heat energy to near 100% can be applied within the building or facility where it was combusted. Being vented will be COOL exhaust, some day’s even cooler than the outside air temperature.
    For every 1 million Btu’s of heat energy recovered and utilized, 117 lbs of CO2 will not be put into the atmosphere. Are we concerned about water? In every 1 million Btu’s of combusted natural gas are 5 gallons of recoverable distilled water. To get at this water, take the heat out of the exhaust. The cooler the temperature of the exhaust, the greater the flow of produced water.

    I look forward like to getting your thoughts and reply to the above comments

    • Sid,
      “Doing the above will keep America into energy for over the next 100 years
      America’s renewables (wind & solar) need to be connected to it’s own grid ,supplying electricity to America’s growing EV market. Then when the sun goes down and the wind doesn’t blow and the batteries go dead, it’s time to call it a day. No harm done.”

      I don’t really know enough about carbon capture to comment on your ideas but I sure do like this idea! Perfect!
      My only other thought is that you need to “invest”/donate (aka bribe) big time in politicians if you ever want to get the Government on-board. I doubt you have the kind of money wind, solar and the climate change AGW rip-off artists have but I do wish you the best of luck as your ideas sound great.

      • What I know about carbon capture came from reading up on the Boundary Dam project vs the North Dakota CO2 plant. Boundary Dam was an $billion+ failure, even with a ready nearby buyer for the CO2. That’s right, a BUYER. The North Dakota plant is (I believe) profitable.

        There’s just no way anyone will be able to pay (in energy) the cost to push CO2 into sequestration, by tacking CO2 capture onto existing coal power plants.

    • Carbon Capture. A solution that doesn’t work for a problem that doesn’t exist.

      Quite trying to sell this scam Sid, the smart investors won’t give you the time of day so your reduced to trolling web sites for new suckers.

      • Mark W. ‘ Carbon Capture. A solution that doesn’t work for a problem
        that doesn’t exist.’

        It is worse than that, Mark. It is a ‘Crime against the Plant Kingdom’!
        The plants need more CO2, … not less. Why put it into the ground?
        Pipe the CO2 to farms and any excess to forests! Surround the farm fields and have valves that can be opened and closed when the wind
        blows in the correct direction. Fertilize the crops, and only the crops, with CO2. This, …if it works and is economical, would solve the
        so-called CO2 ‘Problem’. And more food means lower cost to consumers.
        Has this been tried before? It works in greenhouses.

    • re: “America has 600 years of good quality coal available”

      HERE GOES that “straight line” projection into the future again …

      AND AGAIN, we know HOW WELL that works from its application in the past.

      • The EIA says 330 years at current usage, in new mines. Not much left in existing mines, as you would expect.

        • re: “The EIA says 330 years at …”

          A “nit” you have chosen to pick at ignoring a much larger picture; a characteristic of mankind, throughout history I will add. But, you can’t really be faulted, as, you’re falling into ‘the mean’ (or average).

    • I think that other technologies are superior, even some of the impractical ones.

      This souds like another ‘Solar Roadways’. It does everything, mysteriously breaking a few physical laws in the process and ignoring some important technical challenges.

      Combined heat and power is not a new idea, if that’s your idea?

    • My thought is the moderators must stop you from getting free advertising on this site.
      You’ve made your pitch many times. Now drop it!

    • Although in rare situations it might be useful (like enhanced oil-recovery), carbon-capture in general is not only grossly inefficient (it uses huge amounts of energy), it’s actually detrimental — withholding valuable plant food from the atmosphere/biosphere.

    • I’ll fix FT’s fake headline to reflect what they’re REALLY saying:

      Low rates provide a historic opportunity to (not invest in America’s workers)

      There. Fixed.

      • Low interest rates are an opportunity to invest in more efficient equipment rather than to just buy more energy. If my monthly utility bill will go down by more than the interest cost (46% labour) of a rooftop PV system or new, high efficiency furnace, then it makes sense to invest right now.

        If you think high interest rates are good for employment, you weren’t job hunting in the 1980’s

        I wouod like to see more of the hardware made here, and jobs in manufacturing, but that’s another issue.

    • A couple of the biggest suppliers of solar PV panels were oil companies. Nobody had a real good idea of how to deal with the Arab oil shocks. Solar seemed to make as much sense as anything else. 20/20 hindsight is a wonderful thing.

    • Ah the good ole days of Jimmuh Cahtah. Double-digit inflation coupled with double-digit interest rates. Then that devil Reagan came along and spoiled it all.

      Who remembers his mama telling us “Mah Jimmuh’s gunna weee-in!”

  2. Under the spending deal approved shortly before Congress took its holiday break, the investment tax credit, which reimburses 30 percent of the cost of new solar systems, will begin winding down next month, dropping to 10 percent for most companies by 2022. The energy production tax credit, which gives wind power generators roughly two cent per kilowatt boost, will follow in 2021, decreasing steadily until eventually hitting zero in 2025.

    https://www.houstonchronicle.com/business/energy/article/Wind-solar-face-future-without-subsidies-14930292.php

  3. Might even make some kind of sense if the storage issue had been resolved. Effectively this will just build a bigger and bigger problem.

  4. A nuclear power plant’s big costs are front loaded too. And they are much better at decades of emissions-free electricity than unreliable wind and solar power that scars the landscape from horizon to horizon for less electricity.

  5. We’ve had low interest rates for years. If investing in wind or solar was viable and made a profit, companies would not have been deterred by interest rates. To date, they haven’t needed loans when they’ve been getting “free money” from governments and from forcing ratepayers to pay through the nose for electricity. People are tired of it and that is ending, even in Germany. Look at who the winners have been.
    Here are wind’s rent-seekers- AWEA BOD: https://engage.awea.org/About-Us/Our-Board
    “When all of the subsidies, loans, and loan guarantees given to the companies on AWEA’s board are counted, the grand total comes to a staggering $5.1 trillion…”
    https://nationalreview.com/2016/06/wind-energy-subsidies-billions/amp/?__twitter_impression=true
    …Two years ago, Berkshire’s CEO, Warren Buffett, explained why his companies are in the wind business. “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them,” he said. “They don’t make sense without the tax credit.”
    At least, Buffet is honest.
    Buffet’s back into Oil, no doubt because all Renewables require lots and lots of Oil and Natural Gas.
    Look what happened when Germany cut subsidies to Big WIND.

    German Wind Industry In A Coma: Tenders For Wind Energy Projects “Have Fallen To New, All-Time Low”
    http://bit.ly/2lRPY8A
    …After the installation of thousands of megawatts of German wind power capacity led to instability in the power grid, exploding electricity prices and the destruction of natural landscapes and biotopes, protests against wind projects ratcheted up to the point where the government was forced to scale back on subsidies two years ago. The result: investments in wind parks, once seen as the future of Germany’s energy supply, have since collapsed.
    What did they achieve after building all those windmills at tremendous cost to the German taxpayer & destroying the environment?
    CO2 HIGHER IN GERMANY THAN IN 2009

    On top of all that:
    To Get Wind Power You Need Oil
    Each wind turbine embodies a whole lot of petrochemicals and fossil-fuel energy
    http://bit.ly/2Df3k4D
    Then, after they’re built;
    Green energy (wind and solar) requires almost 100% spinning conventional reserve, due to intermittency. That is why it is uneconomic energy nonsense.
    http://bit.ly/2qUg8ui

    Neither Wind nor Solar are green or clean even when it comes to operating them.

    Duke Energy application points finger at solar for increased pollution
    http://bit.ly/2qU0grH

    …“After committing $2 billion in tax credits, and more than $1 billion in electricity overpayments for solar power, we now learn from Duke that nitrogen oxides have actually increased, and that CO2 may be headed in the wrong direction,”

    Why are we still building solar arrays and wind farms?

    • Nuclear might be more palateable today if it hadn’t been so wrapped in propaganda and lies during the Cold War era. And if human error couod be prevented.

      Chernobyl might not have happened if the reactor crew had known about other accidents that were kept secret. Three Mile Island might not have been wrecked if the operators had just done… nothing. Fukishima Daichi might have been repairable if they hadn’t shut down the emergency cooling system.

      I wish Canada’s government would get back to building out the rest of the 20 GW of nuclear power that Alberta and Saskatchewan need. We could promise and pinky swear to shut them down just as soon as there’s enough solar, wind, and battery storage.

      • re: “Nuclear might be more palateable today if it …”

        Summed up as “woulda, coulda, shoulda”, and an issue most of us have lived through (we aren’t all 10).

        Did you view the video or no? Did the professor convince you of the economics of nuclear compared to nat gas or no? Do you find any flaws in his numbers or methodology?

      • TMI1 reactor had a productive lifetime making plenty of power for many years. TMI2 reactor on the other hand was the problem child on that site. Why that is I don’t know. Many many “little” problems exacerbated the “accident” for instance a relay switch on a known to be “sticky” valve (That was the main problem IIRC) only lit the warning light on a panel in the control room which in no way related to the actual physical state of the valve, so the valve stayed open when the warning light showed a “closed” state. Also, many warning alarms sounded all at the same time, as well as poorly designed control panels for human operation and poor training, could not be silenced to allow operators to work through the alarms each in turn.

        But the Fonda and Lemon “China Syndrome” film didn’t help public opinion about nuclear power either.

        • re: “as well as poorly designed control panels for human operation and poor training”

          And perhaps OVER TRAINING; the crew on duty that day were trained (while in the Navy) to watch the water levels in the PRESSURIZER like a hawk, meanwhile the water level in the core was dropping …

          Recommended viewing, an interesting series from “Illinois EnergyProf” (Dr. David Ruzac):

          “What We Learned from TMI”
          https://www.youtube.com/watch?v=d0SCf0rxX4E

          Also see the following from Dr. David Ruzac:

          “How TMI Started”
          https://www.youtube.com/watch?v=kb75NS3vBB0

          “How TMI Ended”

        • The “China Syndrome” was made before the TMI incident, and should have had a greater effect on the complacency that led to all three of the major power reactor accidents.

          The CANDU reactors can use unrefined uranium so the security need is much less, but the volume of used fuel is higher. There’s no ‘free lunch’ and Greenpeace’s imaginary 100% wind and solar world will never come, because physics.

          I’ve yet to read anything that explains why silicon cell PV and Combined Cycle Natural Gas can’t reasonably power everything for the next 50 years that isn’t already hydro and nuclear, and nothing that explains why nuclear can’t then be expanded and made to use new fuels like thorium.

          High interest rates prevent capital spending on more efficient generation and consumption, and low interest rates may be necessary, but not sufficient on their own, to make efficiency improvements possible.

          We’ve already seen what happens when you save a homeowner $50,000 on mortgage interest – they’ll spend it on better stone countertops and an internet fridge, rather than more insulation and a high efficiency furnace. And also bid up the price of everything to burn up the savings.

          • Yes the film predates the TMI accident however, it cemented public opinion about nuclear power because of fears nuclear explosions and radiation etc. Movies do tend to “document” public opinion after events and the fear spun up in the media. It’s like the film Titanic. Many people who saw the film had no idea it was based on a true story.

          • I suppose that’s true. I knew a guy who wasn’t sure how ‘Apollo 13’ was going to end.

            Maybe one of the new reactor technologies like molten salt cooling (after all, water is a molten salt) will come through as workable?

            Sure, the challenge is more in PR than engineering. All the blather about this or that nuclear project that went off schedule or budget, or was totally run aground by coal interests behind fake solar organizations is just noise. Canada should ignore it, and build another 10 GW of CANDU power in the western provinces, dangle extension cords out to the south as far as there is demand. Then build more.

            The Sturgeon refinery also cost 10 billion, went long, and had serious startup problems. The Trans Mountain pipeline has been delayed and opposed like it was going to carry Edmonton’s untreated sewage to Victoria harbour. Nothing ever gets done on time if we have to pander to every nut with an axe to grind.

  6. Warren Buffett weighs in:

    Today, society has decided that federally-subsidized wind and solar generation is in our country’s long-term interest. Federal tax credits are used to implement this policy, support that makes renewables price-competitive in certain geographies. Those tax credits, or other government-mandated help for renewables, may eventually erode the economics of the incumbent utility, particularly if it is a high-cost operator … Feb. 28, 2016

    He was betting that those subsidies would continue for a long time. On the other hand, President Trump’s policies leave me confused. link

    Government policy can upset almost any investment apple cart. In that light, investors are always gambling on a stable regulatory environment. On the other hand, continued subsidies for wind and solar doesn’t seem like a solid bet.

    Am I right? Buffett is a multi billionaire. I’m not. That worries me. On the other hand, President Trump seems to like upsetting apple carts. Will he be reelected? After his second term, who will succeed him?

    I wouldn’t bet that wind and solar subsidies will continue in the long term.

  7. By all means, let’s eschew capital budgeting, return on investment, and maximizing either net present value or benefit/cost ratio. Instead, let’s see low interest rates as a gift from savers and spend their money on projects that are presently only moderately unprofitable.

    Do I need to explain sarcasm?

  8. So, Ms. Cooper’s advice is to incur debt for no tangible purpose other than virtue signaling? Doesn’t sound like a viable financial strategy. Perhaps AOC can explain how this works.

  9. Well my solar and wind off-grid system is using fossil fuels today. Several days of cloudiness and snow with winds just above kick in for the wind system has left my battery storage system in need of a deep cycle charge. So I had to turn on the propane whole house generator.

    So Ms.Cooper you can’t get away from fossil fuel use even with solar and wind and I live in a high wind and 330 days a year of sunlight area.

  10. The author asks, “So why has investment in renewables not grown anywhere near the pace required to achieve the Paris agreement….. and then answers his own question: “…. According to McKinsey, free cash flow per barrel of oil from US independent producers has been negative for the past eight years. Taking on more debt has so far masked the problem, but this cannot go on forever.”

    My understanding of investing in oil”independents” has always proven risky. Lots of losers and a few big winners. I remember reading decades ago that the previous few years had returned an “average” of -8%. Another meaningless metric. Despite what the author states, the real reason investment in renewables lag is because they are worthless junk and each of them would provide a negative return if not for mandates, subsidies, grid priority and interest rates lower than those available to oil independents.

  11. Well, I see a big problem for the author, as well. As another artcle highlighted, the low prices for oil and gas are due to huge increases in supply, not falling demand. Hundreds of well have been taken out of production already. This will continue until supply and demand balance sufficiently for the remaining companies to be profitable.

    But the demand will still be increasing, putting upward pressure on prices. When prices increase, more wells will become profitable, and ones previously shut down will begin producing again, limiting the price increase until demand catches up. We have a lot of oil and gas in the ground. We can go a long time before prices climb very high.

    The situation is more interesting if any of the companies with idle wells go bankrupt. Somebody will come along and pay pennies on the dollar (depending how badly investors and banks want their money). The new buyer has the infrastructure (roads, buildings, equipent, and rights) at a reduced cost, and can be profitable even with low oil and gas prices.

    So the free market will keep oil and gas prices on the low side for a very ling time, and renewables will continue to have difficulty competing.

  12. Author states, “So why has investment in renewables not grown anywhere near the pace required to achieve the Paris agreement….and then answers the question (incorrectly:
    ‘The answer is partly that cheap money has kept debt-laden oil and gas producers on life support. According to McKinsey, free cash flow per barrel of oil from US independent producers has been negative for the past eight years. Taking on more debt has so far masked the problem, but this cannot go on forever”.

    Oil and Gas investments in “independents” has always been risky. Lots of losers and a few big winners. Negative “average” returns are the norm. The real reason renewable investments are “lagging” is that they are worthless junk that would all provide a negative return if not for subsidies, mandates, grid priority and lower interest rates than those available to the oil and gas indenpendents. (attempted to post a few hours ago but it never appeared. Sorry if doplicative).

    • Alternative energy investments are like your junior oil companies. Some become Tesla and CNRL, others don’t.

      Even intermittent renewable power does reduce fuel usage and conserve reservoir capacity where capacities make them feasible. In arctic communities this clearly saves money because fuel transport is so expensive.

  13. I know someone who thought that Jimmy Carter putting solar panels on the White House was a good thing. However, Reagan was wrong to remove them. When I pointed out how they had failed and the Secret Service did not like them, he opined how they were a great symbol. So, in certain circles symbol over substance, and of course, an ounce of appearance is worth a pound of performance. So, “invest” to the maximum, but not I!

  14. https://www.google.com/search?tbs=sbi:AMhZZitjJ0yFpeRRkjlTQzglCtNLWjzvO9blyDiIqeJHSfNM9In5UJdlPxUSgKxiawagFXxILIgIEjilXCd7w7ksg38LL_1KuCeEWGTRMexbIddP_1VPnl0YHTjMCIWpRpRZCep90ppMEDBmy1woayHts5gS1jMoYCQ7IBPNbkMrySM0Yg4E8a4QVujfIMEtoc1HG5bXNzZN-L62ORXSgqjtTFQuOLWubjPIWRK0pgSlwGwdq2fr2McciYsXDWQItcL3mxXz6GGFOtRRlO2EQMzATlCFQBw_1WtzCJXhZ6Y05sMReO1a8vO4T2v3ucFejVwfdhKwtvxeDJ0La_13oBRreyKm9lmFma6bog

    Says

    https://solartribune.com › jimmy-car…

    Jimmy Carter: The “Solar President” — Solar Tribune

    1000 × 800 – 13.02.2017 – In 1979, Carter was the first president to promote solar as a path to energy independence. … He even famously installed solar on the White House to show that he was “walking the talk.

    : That mental illness lasts evah since 1979!

    And went pandemic. Da hilft nur mehr Hubschraubereinsatz.

    https://youtu.be/iWVyp2Ic6oY

    https://www.songtexte.com/uebersetzung/foyer-des-arts/hubschraubereinsatz-deutsch-4bd66732.html

  15. “Scheinasylanten” in the 70s was meant as satire about “the populist right” minority.

    Times have changed; still the battle isn’t won.

    To paraphrase Steven Mosher: oh jesus.

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