Energy Investors Beware

Renewable energy — certainly electricity from windmills — has to compete against energy from other sources. The typical base line price competition for electricity is the price for a kilowatt generated in a coal-fired plant. Lately, with the price of natural gas down so low, even gas-fired electricity is competitive with coal. So where does that leave windmills?

Wind-based electricity is still about twice the price of coal- and gas-generated electricity. The thing that’s keeping windmills in the ring is public subsidies like tax credits, as well as large-scale public policy support, like renewable portfolio standards, that requires utility companies to generate certain percentages of ‘green,’ carbon-free power.

While we’re at it, windmill systems are extremely capital-intensive. They require lots of upfront investment in land and leases, roads, grid access, concrete foundations, steel towers and complex turbines and blades. Then you need about three windmills, in different locales, just to assure you have 24-hour power generation — due to the fact that the wind does not always blow when and where you need it.

With the U.S. credit system still broken — and to all appearances, the economy going back into the ‘double dip’ of the Great Recession — things probably aren’t going to get much better for windmills in the next year. Maybe someday. Not now.

The Daily Reckoning