Stranded renewable assets

It is a delicious irony that the government’s review of the RET is generating exactly the kinds of regime uncertainty for renewable energy that that industry had hoped to impose on fossil fuels.

Miles George is the managing director of wind power firm Infigen Energy, and chairman of industry body the Clean Energy Council, and says changes to the RET would mean the death of the renewable energy industry.

“If the review decides that legislation would be scrapped, which I think is an unlikely outcome, but if it did, that would mean the end of the renewable energy industry in Australia,” Mr George told the ABC in an interview.

“Certainly the large scale industry would cease to exist, and the small scale industry would have devastating consequences for it if the small scale scheme was scrapped.”

Mr George says 24,000 jobs are at stake – almost as many jobs as in the oil and gas industry.

“If the target is scrapped then of course, all of those jobs would immediately be at risk,” he said.

Mr George says the review of the scheme was creating investor uncertainty and is deterring investment in emissions reduction projects.

“The level of investment in our industry in the last six months has been less than when the legislation first came into effect,” he observed.

“So it is already having a devastating effect on our industry. The industry has ground to a stop.”

I missed this AFR report from earlier in the month:

[Nathan Fabian - CEO of the Investor Group on Climate Change] warns any cut to the RET would result in lower revenue for exiting assets, greater difficulty in servicing debt, lower or no distributions to investors and “negative movements in ­periodic asset valuations, directly ­flowing through to investment and retirement account balances’’.

I hope that any portfolio managers who lose money having invested in these “investments” get sued. The only basis for any return was in the existence of government fiat and compulsory purchase in artificial markets. They needed to have been a bit more hard-headed in their analysis up front. An entire industry that can only survive on government subsidy can never be a viable investment.
(HT: JR)

This entry was posted in Divestment, Global warming and climate change policy. Bookmark the permalink.

31 Responses to Stranded renewable assets

  1. H B Bear

    I hope that any portfolio managers who lose money having invested in these “investments” get sued. The only basis for any return was in the existence of government fiat and compulsory purchase in artificial markets.

    Watch this space – not for that reason though. Probably the biggest exposure to renewables are the union controlled industry super funds through Pacific Hydro. Expect them to lean on their political arm to ensure this doesn’t go tits up (no pun intended).

  2. Bruce of Newcastle

    The cost structure of the wind industry is terrible. I suspect the operators are scared, and so they ought to be. In Germany a big wind operator failed earlier this year and its assets are now to be sold off after a vote last week:

    75,000 See Their Investments Shrivel…Spectacular $1.9 BIllion German Wind Energy Company Insolvency!

    If you can’t survive in Germany, where greenery is even more entrenched than here, how is the local industry going to survive? In Australia the wind operators are parasites on the coal and open-cycle gas generators as the latter get the wrong end of the pineapple by having to balance the grid. The ‘spinning-reserve’ issue means they have to burn more coal or gas than is necessary so they can rapidly correct for the fickle wind. They don’t get paid for this by the wind operators – indeed usually wind operators have to be paid to not generate on windy days when the excess power could overload the system.

    Not only is wind energy uneconomic but it’d be hard to design a more annoying, difficult and harmful energy technology if you tried, even discounting the terrible environmental damage the turbines do.

  3. Infidel Tiger

    Mr George says 24,000 jobs are at stake – almost as many jobs as in the oil and gas industry.

    24,000 jobs?

    Has anyone ever met a renewable energy worker?

  4. Tim Neilson

    Infidel Tiger
    #1400234, posted on July 31, 2014 at 3:28 pm
    He’s probably talking about lobbyists, activists and other paid rent-seekers’ agents.

  5. boy on a bike

    IT – I was going to ask the same question. The sort of rubbish about jobs comes up every time a subsidy is threatened.

    If I recall correctly, when car manufacturing subsidies were being debated, the job numbers were inflated by counting people who work in car dealerships!

  6. boy on a bike

    In that case, the jobs numbers make perfect sense. If you include all the investment bankers involved in packaging up deals etc – yes, you could hit 24,000.

  7. Leo G

    How many unsubsidised jobs may be created from the loss of each subsidised renewable energy job? Now multiply that by 24,000.

  8. John Comnenus

    I’ve met some people in the renewable sector. Jobs won’t go in off the grid solutions nor in many other areas like lighting, heating and cooling or transport. They will just not be able to sell ESC and hence will have to bill their clients the true value of their projects and stop getting profit from the taxpayer by selling ESCs.

  9. Andrew

    I hope that any portfolio managers who lose money having invested in these “investments” get sued.

    Absolutely. After all, they can’t say they were unaware of the prospect of regulatory changes impacting the energy market, and the value of their assets:

    Carbon risks.

  10. thefrollickingmole

    Hoist by their own petard..

    They wanted government regulation and subsidies to rob from the public purse and force the market to accommodate their nonviable projects, then it goes back to a level playing field and they squeal they are hard done by??

    Heres an example of extra cost.

    Sparkys cant install more than “x” number of downlights in a given area in WA due to green laws on energy efficency.
    So the plans go through with a flouro and then a change is made (at the buyers expense) to downlights later on.

  11. Ant

    Scrap the damn thing.

    If they were so concerned about jobs they’d be fired up about how government intervention destroyed the tobacco industry over many years, and how it’s the Left’s obsession to destroy the fossil fuel industry.

    In any case, the whole scheme is a massive racket built on lies that has fed its insatiably glutonous appetite and fattened the guts of many a carpetbagging snake-oil salesman for far too long now.

    It would be a splendid lesson also for those who get any ideas about throwing their snouts into any similar troughs in future!

  12. gabrianga

    Isn’t Hewson still heading up a company advocating wind and solar?

    I always thought that is why SKYTV continued to use him as an “financial expert” on renewables.?

  13. Tim Neilson

    It would be interesting to check prospectuses, information memoranda, investment bank presentation packs etc. for raising non-taxpayer finance for these boondoggles. If they did mention the risk of the spigot being turned off for taxpayer funding, the investors have nothing to complain about and the fact that it’s now proposed isn’t introducing any risk that they shouldn’t have already considered. If that risk wasn’t mentioned, the defendants ought to be easy to identify.

  14. goatjam

    “I hope that any portfolio managers who lose money having invested in these “investments” get sued.”

    Well, that would be the entire group of “Industry Super Funds” then.

    I say go for it.

  15. entropy

    Artifial markets never work, often the reason they are artificial is the goods are difficult to measure, providing endless opportunities for RipoffsRent. This is why Co2 markets will never work: first world saps will buy the same permits from Nigerian scammers Crafty orientals Worldly wise third world businessmen eleventy times over.

    I am surprised there are only 24,000 jobs, once you account for all the lobbyists. They must be counting all the people that once sold insulation that now sell solar panels. They will just move on to the next product that will save the world. There always is one.

  16. Jock

    Infigen last paid a distribution in 2011, ans that was with the current financial benefits. Its problem is twofold: it paid far too much for the assets and its gearing was too high.

    I would add that if the ret is retained at 20% real, then all current assets should be OK. Only future investments would be affected. In my view if they retain RET at 20% then the certs should be distributed on the basis of renewable efficiency rather than first in.

    Other than that I am happy to do a trade. The RET should go and everyone should be asked to nominate whether they want renewable energy or fossil based. I will pay 5% more for fossil, but ONLY if all greens who take up renewable energy are required to also take it on the basis that it is NOT base load and may be interrupted.

    They should also ban peaker stations as all these do is supply electricity when the wind doesnt blow or the sun doesnt shibe or when all the GReen/Left turn on their Aircon on a hot day.

  17. john constantine

    the profits for infigen [the old babcock and brown wind partners] were front end loaded.

    the well connected babcock bankers could contribute ‘sweat equity’, being the effort required to lift the phone and order a lacky to obtain permits for the wind factories.

    the up front carbon funding was then stripped out for the profit of the bankers,and normal people were expected to put their superannuation funds into building/owning and operating the physical wind factories, babcock getting their ‘rightful rewards’ from the superannuation bucket of money.

    -the big cost of decommissioning the wind factories is an unfunded liability, why do you think the business model is to lease the land the things stand on, at high rent, rather than buy the few acres? could it be the landowner is the last man standing to fund the decommissioning process if the wind company goes broke?.

  18. Jock

    Some mention of suing various fund managers , banks, IBs etc should note that any Prospectus has a huge section on risk these days. If there is a fear the Chairman might fart in the first class cabin, it will be a “risk”. Remember it is about disclosure. The issuers will be safe. The position of Trustees of super funds possibly less so.

  19. Squirrel

    And there are still people waffling on as if there could be a local, large scale manufacturing industry based on renewable technology – as if that would happen (even in the most favourable regulatory environment) with our cost structures. But let’s not forget that years of clean, green policies have done wonders for the Tasmanian economy – that’s why Christine Milne is so outraged at the idea of all those Tasmanian unemployment benefit recipients being required to pursue two jobs per day…….

  20. old bloke

    24,000 jobs? Has anyone ever met a renewable energy worker?

    23, 950 collectors of chopped birds.

    Scrap the damn thing

    Not going to happen in the immediate future. Fat Al got Fat Clive to agreeto retain the RET as his price for appearing as Fat Clive’s prize pig.

    The position of Trustees of super funds possibly less so.

    The position of Trustees is decidedly at risk if fund members lose capital due to shonky investments. Trustee liability isn’t limited like corporate liability, it’s personal liability. We might see some old union hacks losing their homes and retirement incomes.

  21. AP

    Coal mining employs 29,925 in NSW. That’s a real number based on coal mines insurance returns, not some ficticuious rent seeker’s fabricated number. I dunno about oil and gas, or other states.

    http://www.coalservices.com.au/MessageForceWebsite/Sites/340/Files/Coal%20Services_2013_Annual_Report.pdf

  22. Investment based on pure cronyism. I hope they lose the lot.

    Economic justice NOW!!

  23. James of the Glen

    Suck it up, Georgey boy, the chickens are coming home to roost. The ghost of Babcock and Brown looks very restless again as its bastard child scratches for pennies.

  24. I agree with Old Bloke; as long as there’s money to be made, they won’t stop anytime soon.

  25. Michael Madden

    Renewable energy industry = most worlds’ most expensive “work for the dole” scheme.

  26. Michael Madden

    Renewable energy industry = the worlds’ most expensive “work for the dole” scheme.

  27. Lawrie Ayres

    I lost when BBI went down so was not all that interested in who took it over. Infigen heh? So sad.

    In the UK it is said the BBC has invested much of it’s staff super into wind which is why the BBC is a trenchant supporter of the global warming scam and wind farms. Could it be that their ABC also has investments in wind?

    Can’t agree more with those above who remind fund managers that investment returns based on government subsidies is beyond stupid. As a SMSF director my accountants would be horrified if I made a similar investment proposal. I’m sure they would advise against it and then question my suitability to be a director.

  28. egg_

    Watch this space – not for that reason though. Probably the biggest exposure to renewables are the union controlled industry super funds through Pacific Hydro. Expect them to lean on their political arm to ensure this doesn’t go tits up (no pun intended).

    Precisely, corruption of the market in every sense of the word.

  29. Elwood

    Pac Hydro took about a $280m valuation write down to about $1300m in June. (but around half of that is due to some woes at their Chilean hydro plants – not all of it was on the Australian windfarms). There will need to be +$200m injected into Pac Hydro in the next few years – to prevent a tit’s up situation pertaining.

  30. nerblnob

    Infidel Tiger
    #1400234, posted on July 31, 2014 at 3:28 pm
    Mr George says 24,000 jobs are at stake – almost as many jobs as in the oil and gas industry.

    24,000 jobs?

    Has anyone ever met a renewable energy worker?

    Yep – in geothermal drilling, same people as in oil & gas drilling.

    And would be the same again in CCS or whatever.

    So yer Geodynamics folk were almost all oilfield types. It couldn’t possibly be done without oilfield expertise, equipment and techniques (including the “controversial process known as” fracking) .

    Of most of them have scooted now, in a cyclical industry you get a good nose for a sinking ship.

  31. BilB

    Talk about dumb remarks

    “An entire industry that can only survive on government subsidy can never be a viable investment.”

    We are talking here about a new industry competing with an agglomerated industry (coal power) that was entirely funded from the public purse, using an energy resource that was owned in total by the public purse and supplied at cost to the energy producers.

    You have a really bizarre perspective on fair competition, Sinclair Davidson.

Comments are closed.