Why is this?
Because they have the power. And you don't.
Really, it is the size of the actors and the level of competition - not the role in selling or buying or the product - that decides who pays the premium. A big cell-phone company gets good deals and can provide good deals to big clients. If you are not big, you lack negotiating power. If you want to think about it in economic terms, the time to research options and negotiate is about the same regardless of your size, but the gain form it varies a lot.
And why can't I buy power directly at a fixed rate from new power projects who are actively looking for consumers who want to buy at a fixed rate?
Actually, you can.
A swedish kind of death:
I'll crosspost a comment from another thread. A swedish kind of death: I recently came across O2, a swedish wind-coop. They offer a membership share for 6200 SEK (~650 euro) which entitles you to use 1000 kWh/year for the production cost of 0,13 SEK/kWh (~0,015 euro/kWh) which translates to 10% of retail price. If you use less the rest can be sold. If you leave you can sell back your share. [---] Oh, and a link to o2 Energi. They have 2000 members and own 3 wind power plants.
I recently came across O2, a swedish wind-coop. They offer a membership share for 6200 SEK (~650 euro) which entitles you to use 1000 kWh/year for the production cost of 0,13 SEK/kWh (~0,015 euro/kWh) which translates to 10% of retail price. If you use less the rest can be sold. If you leave you can sell back your share. [---] Oh, and a link to o2 Energi.
They have 2000 members and own 3 wind power plants.
I am pimping them so much I should get paid for it. (And if I had a big company I could negotiate such a deal.) A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
Some questions though...
What if everyone heads for the exits at the same time, if everyone or even just many want their money back at the same time? The equity is invested in the turbines and they aren't liquid. Hopefully O2 has a credit line to a bank which isn't in trouble. I also hope they have good insurance as they just have three turbines. Very bad if even a single one breaks down.
Further I wonder how leveraged the co-op is? If it goes bust for some reason I guess you can kiss your money goodbye.
Then, this turns you from a customer into a shareholder as a capital deposit is needed. So what is the return?
The cheapest power you can get today is a one year fixed price contract for 118 öre/kWh. The O2 all included price is 57.9 öre/kWh, a difference of 60.1 öre/kWh.
The deposit required is 6200 kronor and it gives you 1000 kWh at 57.9 öre each, a profit of 60.1 öre*1000=601 kronor. That's an annual 9.7 % nominal return on investment. (btw 100 öre=1 krona)
Not bad... but what is the risk adjusted return?
Jerome, could you give us a rough hint on what rate of returns are needed in the wind business for a project to get green light, without giving away anything you're not supposed to talk about? Peak oil is not an energy crisis. It is a liquid fuel crisis.
It's a company called Arise Windpower.
It's not a co-op but an ordinary for profit company which makes me feel a bit more comfortable, it being easier to understand and having no limit on how much you can invest (in o2 you can only invest enough to cover your household consumption). Further, o2 and the related companies are led by entrepeneurs from the IT boom, while Arise is led be experienced industrialists from utilities and heavy industry.
Arise is still privately held but will be floated on the stock market next year. They are planning to invest about 1.1 billion euros to annualy produce something like 2 TWh of windpower (200 turbines at 2-3 MW each) in a number of different fully owned subsidiary companies, onshore on forest land. They do it in this way to ease financing so I guess we are talking wind power project finance, exactly the kind of stuff Jerome does for a living.
The first 12 turbines are already under construction and another 30 are in the detailed planning phase.
:: ::
The somewhat worrying thing is that they put the the turnkey cost for turbines at 15 million kronor per MW, about 1.5 million euros.
If we compare this with nuclear energy and generously believe the nukes will just have three times as high capacity factors that gives us a cost of 7.2 billion euros for 1600 MW nuclear equivalent, the size of the new reactor in Finland. That reactor was originally supposed to cost 3 billion euros, but even with the massive cost overruns it's still a third cheaper than wind power (even if this ignore that O&M&fuel costs might be a bit higher for nuclear than for wind). Peak oil is not an energy crisis. It is a liquid fuel crisis.
