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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.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 3rd, 2009 at 03:33:50 PM EST
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