Are feed-in tariffs a market designed structure or a government encouraged activity?

It is a way to structure a market, just like take-or-pay contracts are a way to structure the gas market. They are, of course, government designed, because the electricity market is government designed and operated (where it works, at least).

As I said, long-range contracts have gone out of fashion and this is atypical.

Your own example (Enron in California) is actually noteworthy here, in that long-term contracts did not "go out of fashion" with the market participants. They were forbidden by the regulators, because they were thought to stifle "competition." When this ban was lifted, the majority of the juice went back to being sold under long-term contracts.

In fact it is almost a validation that the present wind plants being built are uneconomic over the long term. If they weren't they wouldn't need a guaranteed income stream.

Huh? You mean, like Gazprom's insistence on take-or-pay contracts is evidence that gas extraction is uneconomical?

Instead we can expect to see the price of future construction drop as technology improves making cost recovery of existing plants impossible.

And so what? Should we stop making integrated circuits today, because we know that a cheaper, faster version will be available in six months? What's the point here?

You pointed this out yourself implicitly by saying that bankrupt wind farms would always be a good deal for later investors.

scratches head I don't get it. How do you get from there to here?

- Jake

Friends come and go. Enemies accumulate.

In fact it is almost a validation that the present wind plants being built are uneconomic over the long term.

No.wind producers  are economic on average but the way markets are sturctured means that there is price volatility, which they are not able to tolerate for very long. Gas is more expensive, but closer to market prices, and thus thrives more.

Is that what you mean by "economic"?

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

That means with sufficient market penetration that wind is frequently on the extensive margin, it can be non-commercial, even when it is clearly economic given that providing it at replacement cost plus a normal profit yields a net reduction in energy cost to consumers.

This is independent of the issue that the market, of course, is not capable of designing a complex system, and so either we must be content with the complex systems designed to support the interests of private corporate governments, or else must support a public role in the design of complex systems.

The establishment of subcontinental long hail electricity to pool wind and other renewable energy resources to reduce or eliminate intermittency is an example of the type of complex system that a pure market system is incapable of designing.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

I'm all in favor of making conventional power generation more expensive by accounting for externalities. What I think is a fallacy is that this will per force lead to technological innovation.

Cap and trade, or even better cap and auction, or best of all cap and dividend, will harvest "low hanging fruit". However, without effective research and development in the New Energy Economy and investment in complementary infrastructure, the supply of "low hanging fruit" will run out and the cost of meeting a cap will be greater than it needs to be.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.