The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
That will not eliminate the technical complexity of the industry and the need to understand and allocate the underlying risks properly.
Project finance bankers and associated parasites have brought discipline to projects on that front, but whatever. Enjoy your utopia. Wind power
But Utopia is in the back of their minds. What other motivations are there?
Your defence of what you do is at least as powerful as my own defence of what I do: but we are going to be superceded. And I suspect that will now happen quite some time before Keynes' mortality dictum applies. You can't be me, I'm taken
Otherwise these conversations are a bit surreal or silly or both. Wind power
I've said repeatedly that offshore wind should be done by State owned companies under a long range coherent plan with the corresponding industrial policy.
'State-owned company' might IMHO better be a partnership with State participation, but the rest is self evident, and none of it anything to do with my point.
Jerome a Paris:
Agreed. But that was not my point. My point is that a partnership framework is probably an optimal way of allocating risks, which is why they are emerging in use. Upon the subject of risk, having been a director of a global exchange and for many years closely involved with the complexities of cross-border international clearing and settlement, I think I have some understanding.
Project finance bankers and associated parasites have brought discipline to projects on that front, but whatever
When have I ever said otherwise? I have never objected to bankers or professionals who add value and I certainly would not criticise rewards commensurate with skills and experience.
The more complex and difficult it is to bring these transactions together, the fewer the people capable of them; the more valuable their skills; and the more in demand they will be.
Would a simpler contractual framework be in their interests? Good question, and I suspect the answer is a trade off between financial reward and quality of life. "The future is already here -- it's just not very evenly distributed" William Gibson
The complexity is not created by the financiers. And they don't cost much either. Wind power
the more complex contracts are those between the project company and the industrial contractors. The financial contracts are much simpler. The complexity is not created by the financiers. And they don't cost much either.
The complexity is not created by the financiers. And they don't cost much either.
Very good point, and the disastrous state of the Edinburgh Tram project could be an object lesson.
Trams scheme `took wrong route' - Herald Scotland | Business | Corporate & SME
A project originally expected to cost £250m is now expected to come in at £650m. The massive disruption that the work has entailed for businesses and consumers may continue until 2014.
But my fundamental point remains.
Partnership-based agreements are not by any stretch of the imagination 'utopian' but an increasingly important tool in the development toolbox, particularly now that conventional financing is increasingly difficult. "The future is already here -- it's just not very evenly distributed" William Gibson
I've said repeatedly that offshore wind should be done by State owned companies
Why?
Not that I particularly object to the sovereign taking an active hand in industrial development, but I was under the impression that wind actually was a sector where simply ensuring the correct market structure via preferential dispatch and fixed prices would be sufficient to permit private planning units to perform the actual industrial development. This not so?
- Jake Friends come and go. Enemies accumulate.
investing at a cost of funding which is that of the State rather than that of the private sector;
As QE demonstrates, the cost of State development credit is zero. Once productive assets are complete, then development credit may be retired and recycled by refinancing.
Securitisation would be a conventional way of refinancing: I advocate direct investment in energy production by 'unitisation' - ie monetisation of energy. "The future is already here -- it's just not very evenly distributed" William Gibson
As QE demonstrates, the cost of State development credit is zero.
short term funding is at zero, for now, but not long term funding. it's relatively cheap right now, but that may not last (cf "bond vigilantes).
But in any case, unitisation will cost more than the sovereign cost of funding, otherwise why would investors do it? Wind power
I am not talking about State Debt, which is public borrowing: I am talking about State Credit.
That is what QE actually is: it is not debt, although that is the fundamental misconception of Keynesian and Monetary economists alike. It is akin to a non interest-bearing redeemable share.
State Treasuries may simply spend (under professional management like your good self of course) the necessary development credit either by writing cheques drawn on a central bank or by issuing Treasury notes (eg the US 'greenbacks').
Private banks already do precisely the same thing when they pay staff; other costs; dividends to investors; or when they buy (say) government debt. In other words they both lend and spend credit into existence, creating demand deposits as they do so.
That is how our deficit-based system works.
But in any case, unitisation will cost more than the sovereign cost of funding, otherwise why would investors do it?
Unitisation of energy is the issue of Units redeemable in payment for energy. (NB to avoid misunderstandings, Units do not secure supply).
There are many billions of dollars already invested in energy, typically through oil and gas Exchange Traded Funds which are generally served (and too often pillaged) by investment banks using structured finance and/or the futures markets.
These ETFs - like any other funds invested in commodities - are 'hedging inflation', and you will understand that like gold, energy offers no return on investment.
Unitisation creates an investment denominated in energy rather than in fiat currency. So it does not necessarily cost more: in fact, the beauty of funding renewable energy in this way is that the Units which are used to fund renewable energy projects or even energy saving projects cost nothing to redeem. "The future is already here -- it's just not very evenly distributed" William Gibson
The first of the issues you raise can be taken care of by a public industrial development bank, no? That is a good idea in any case, and would have wider impact than "just" wind power. The second issue is one of liaisons with the grid operator, and there is a good case to be made that the grid operator needs to be heavily regulated and/or under direct sovereign control. Of course, there is a case for subordinating the generation of power to the grid operator rather than separating those functions, which I suppose would put the wind farm development indirectly under sovereign management...
by Frank Schnittger - Jan 14 47 comments
by gmoke - Jan 22
by Oui - Jan 10 60 comments
by Oui - Jan 21 10 comments
by IdiotSavant - Jan 15 20 comments
by Oui - Jan 20 47 comments
by Oui - Jan 20 5 comments
by Oui - Jan 16 8 comments
by Oui - Jan 2110 comments
by Oui - Jan 2047 comments
by Oui - Jan 205 comments
by Oui - Jan 172 comments
by Oui - Jan 168 comments
by gmoke - Jan 16
by IdiotSavant - Jan 1520 comments
by Oui - Jan 1434 comments
by Frank Schnittger - Jan 1447 comments
by Oui - Jan 1389 comments
by Oui - Jan 1177 comments
by Oui - Jan 1060 comments
by Frank Schnittger - Jan 877 comments
by Oui - Jan 772 comments
by Frank Schnittger - Jan 710 comments
by Frank Schnittger - Jan 668 comments
by Frank Schnittger - Jan 611 comments
by Oui - Jan 659 comments
by Frank Schnittger - Jan 230 comments