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Wind power needs 15 years of prices higher than a certain threshhold to be profitable - so, unless you have specific incentives, you need the certainty that oil prices will be above, say, 80$/bl for the next 15 years ,not just 5, to invest. High likelihood is not enough in that case, because if it drops below you riks losing your project to the banks.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Jun 24th, 2008 at 08:03:13 AM EST
[ Parent ]
markets are us they have no clue where oil will go:



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jun 24th, 2008 at 08:05:45 AM EST
[ Parent ]
How much above $80 do they need to be for 15 years? There are too dimensions here, premium and time.

For instance, suppose the break-even price is $50, so $80 for 15 years is $30 over break-even for 15 years. Could you get away with $90 over the threshold for 5 years? That would be $140 for 5 years, which you can now perfectly hedge in the forward market.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Tue Jun 24th, 2008 at 08:20:23 AM EST
[ Parent ]
but electricity prices follow gas prices with a lag, and gas prices follow oil prices with a lag (and with quite independent short term variations).

And as wind grows, it pulls marginal prices down, thus threatening its own viability. Thus, as I noted before, it's likely that wind will need feed-in tariffs even as fuel prices are very high...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jun 24th, 2008 at 04:08:45 PM EST
[ Parent ]
Yes, as a matter of pure Keynesian trade policy, it is only common sense to pull wind off the margin and into the baseline.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Tue Jun 24th, 2008 at 06:14:57 PM EST
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