Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
is that you can set it into stone from the start (given that you need most of the money upfront to build the windfarms). Markets (banks, anyway) are happy to give you a fixed rate.

Today, pensions funds are happy to invest in wind at 7-8% leveraged returns on equity; debt for projects costs roughly 6% flat for onshore, more like 7% flat for offshore. Public finance would make a big difference.

As I've been reading through articles from Spain about the FIT debate there, I've been thinking. Would it be best to have a gradual transition from production based incentives, e.g. FITs, to construction based approaches, e.g. loan guarantees.  In the latter case the revenue source could still be consumers, but as wind production costs pass through the band of market prices the focus would shift from infant industry protection to lowering start up costs.  

A legacy program could "grandfather" existing wind farms into a FIT regime that would be phased out after 10 years. But, future wind farm construction could be fomented through small equity stakes taken by  the Sociedad Estatal de Participaciones Industriales, State Corporation for Industrial Participation.  This would be consistent with the policy adopted at the regional level, where the autonomous communities have fostered private participation in wind farm development through taking small stakes.  (This was particularly true in Navarra, where Sodena, the Navarra Economic Development Society, was a huge player in building wind farms in the province.)

Direct lending would provide could create wider access to capital, allowing a broader group of players to get involved in wind farm construction. As of 2010, the total Spanish FIT budget is around €6.3 billion.  About half (53%) of that goes to solar installations, and about a third (31%) to wind.  I honestly believe that FITs for PV are a bad idea.  Residential cost parity is rapidly approaching, particular in the sunny south of the country.  Since these are small installations, why not subsidize construction through a direct lending program for building co-op boards?  That would spread the money a lot further. FITs, I think, should be reserved for utility scale production, which is primarily going to be thermo-solar.

If FIT rates for wind in the legacy program were cut from €0.0792/kWh to €0.05/kWh, that would reduce the amount going out from €1.953 billion to €1.232 billion.
That would liberate €721 million annually for a program to provide capital access to wind farm developers.  Used to cover interest costs, that would be enough to finance interest free loans for perhaps ten times that amount.

I've got more, but this is turning into a diary, which I think I'm going to write later.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Thu May 20th, 2010 at 11:35:49 AM EST
[ Parent ]
What would your proposal do to the preferential dispatch schedule? If wind isn't guaranteed a preferential dispatch, it gives unreasonable market power to utilities.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu May 20th, 2010 at 04:33:39 PM EST
[ Parent ]
I don't see any reason why that couldn't continue.  I think that it's an essential part of the merit order effect.

My thinking would be to transition wind away from production incentives towards ones for construction. Wind basically has no marginal cost, so practically, there's not a huge difference.

On the other hand, I think that thermo-solar still needs infant industry protection, although the rate needs to be more reasonable.  PV on the other hand I think should have financing support, and should be limited to supplying the needs of the building that they are attached to instead of put on the grid.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Thu May 20th, 2010 at 05:24:44 PM EST
[ Parent ]


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