The Green Grift, or Gangrene Energy?

The renewable energy fanatics like to point out that the cost of solar power has been falling dramatically over the past decade, the result of technological and manufacturing improvements. This is true, but raises the question: why does the solar industry continue to demand subsidies then?

The Financial Times ran an unintentionally hilarious and illuminating story on this point yesterday:

French solar investors up in arms over threat to renege on contracts

A French government plan to save hundreds of millions of euros a year by reneging on early solar power contracts it says generate “excessive” profits has caused outrage among investors, who say the move could cripple their businesses, undermine the credibility of the state’s promises and threaten future renewable energy projects.

French officials said they had a duty to save public money, not least so they could finance further investment in renewable energy. They calculated the contract changes would save €400m-€600m a year of the €2bn annual spending on the 235,000 contracts signed in the four years of a photovoltaic investment “bubble”. . .

The €2bn spent annually produces less than 1 per cent of France’s electricity, but consumes a third of public spending on renewables, the officials said.

It turns out that prior subsidy contracts yielded nearly 20 percent profit margins for solar power producers, which the French government thinks is “excessive” since the return on investment for conventional energy investments is closer to 5 percent. One thing this makes clear is that solar power “investment” requires big subsidies to attract capital. Without the guaranteed subsidies, green energy turns into gangrene energy in a hurry.

In fact “investors” who bought up the contracts on the secondary market are finding out what the real market rate of return for energy investments is, and face a potential wipeout by this proposed change:

Darko Adamovic, a lawyer with Linklaters in Paris, said: “Investors that have purchased on the secondary markets, those plants have not really been benefiting from those tariffs, as would have been the case had they invested in 2006 as opposed to buying the project in 2013 or 2014.”

Lesson: Get in early on the grift or you’re screwed when the government starts to run out of other people’s money. Like this:

Nicolas Jeuffrain, who heads Tenergie, an Aix-en-Provence-based company with 600MW of capacity that bought most of its installations after 2015, said investors were typically making 4-6 per cent returns, not 20 per cent. “The excess profit? It’s gone!” he declares.

Chief Justice John Marshall wouldn’t be amused by a government proposing to break its contracts (I was just re-reading Fletcher v. Peck last night), but this is Europe we’re talking about, where the rule of law is optional these days.

Meanwhile, please excuse me while I pop up a big bag of solar-powered popcorn.

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