From: Mike Lorrey (mlorrey@yahoo.com)
Date: Tue Jun 17 2003 - 18:59:09 MDT
--- Brett Paatsch <paatschb@optusnet.com.au> wrote:
>
> Mike Lorrey wrote:
>
> > --- Spike wrote:
> >
> > > .. I ask, if the current low interest rates hold and wind power
> > > keeps going in at the current rate (they are building them like
> > > hell out here), we know who the winners are. But who loses?
> >
> > Given that renewable energy sources are HIGHLY dependent on
> > construction with very low interest capital, its obvious that
> fossil
> > fuel generators will thereafter be at a competetive disadvantage to
> > those finished before interest goes back up.
> >
>
> I not sure I follow your reasoning here Mike.
>
> Fossil fuel generation plants already exist, indeed, so now do some
> new windmills, so once these alternate forms of generation are
> able to distribute electricity to the grid their relevant costs to
> supply
> would seem to depend more now on the operational costs rather than
> the construction costs.
Fossil fuel plants, whose operating costs are primarily labor and fuel
(mostly fuel), are at a disadvantage when interest rates go back up
because such plants, if they do not own their own already established
fuel supply chain, generally must make large seasonal or annual
purchase agreements to get fuel at economically competetive rates. Such
purchases incur financing, ergo finance charges at higher interest
rates increase the net cost of fuel and result in less competetive
energy. When such situations become tight, generators will generally
switch from a full time generation situation to one of generating only
or mostly for peak consumption periods, when they can charge the
highest rates for their power.
>
> As you say, a new player (with their windmills not yet built)
> entering the electrical supply market when interest rates on
> construction capital are higher would find the cost of entry higher.
This is right, and not what I said. What I said was that windmills
built and installed when interest rates are low find they are
competetive if not outcompeting fossil fuel generators when interest
rates go back up, specifically because of the fuel finance situation I
detailed above.
>
> Just as an afterthought, I understood that it is the nature of
> electricity that it needs to be generated at the same time as it is
> used. ie . They are no super large batteries akin to water reservoirs
> etc. So windmills would only be able to provide power to the
> grids when the wind blows. And the net demand for electricity will
> depend on when most of it is being used.
Actually, there are a few locations where hydroelectric 'batteries'
have been built to take advantage of peak and off-peak demand changes,
which adds value to off-peak generated power.
>
> I did some contract work for a hydro electricity plant years ago
> and they had to balance to timing of the release of water to turn
> the turbines with when there was a need for power and when
> the water could also be used as a downstream resource for
> irrigation or river maintenance etc.
Yes, and this is also a problem with intermittent energy providers like
wind, solar, tides, etc where the power plant operator has little or no
control over when they are able to generate or not. Hydro at least has
some degree of control (excluding drought and fish migration conditions).
=====
Mike Lorrey
"Live Free or Die, Death is not the Worst of Evils."
- Gen. John Stark
Blog: Sado-Mikeyism: http://mikeysoft.zblogger.com
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Pro-tech freedom discussion:
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