When the wind blows

I looked today at investing into a company setting up a small wind turbine. I’ll keep the numbers round for confidentiality reasons.

£700k start-up costs, with a 75% chance in any year of generating enough energy to sell at 5p / kwhr to the grid for £30k.

10% of revenues go to the site’s landlord, and a flat £15k per year to the manufacturer for a full maintenance contract.

This is clearly not viable. Fortunately there is an additional subsidy of 18p / kwhr (rising annually) due to the Government’s Feed-in-Tariff.

Nothing about this site will get cheaper over time. Assuming a life span of 25 yrs and a 10% discount rate, the turbine and other start-up costs would have to drop from £700k to £100k for future such ventures to start to look interesting sans subsidy.

In the UK the total subsidies needed for all such schemes are added up, and then divided out amongst all consumers’ bills, so it’s not clear to the general public just how much more expensive (it appears 4x as much) some alternative energy sources are costing.

Future Governments change their minds about policies. And for that reason, I’m out.

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One Response to When the wind blows

  1. bilbaoboy says:

    Marc

    If only everybody were to do the simple back of an evelope calculation like you. Wind, above and beyond the economic question has another major handicap; it is intermittent and you can’t control the intermittancy. The network canot work well with intermittent sources. spinning back up is kept ready. This is inefficent and expensive, so indirectly it is even more expensive.

    Fortunately more and more people are questioning the cost/benefit angle. The feel good factor has brought us to here, where we are spending vast sums for nothing that we couldn’t have cheaper and better elsewhere. As for CO2, watch this space for some furious back-pedalling over the next few years!

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