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In this 2015 Financial Times article, Warren Buffett talks about a onshore wind farms and their profitability.

“For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Similar to this question except about money rather than an energy payback, I would like to ask if the cost of building and maintaining a wind farm could be paid for and later become profitable from selling the energy at market rates.

A recent Bloomberg article suggests it might now be true for offshore wind farms.

Without subsidies, do wind farms produce a profit in their lifetime?

Oddthinking
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daniel
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    Please quote an example of the claim that you doubt. Windmills have been used for centuries, profitably. Wind turbines are easy to justify in rural areas with no other power supplies [citation-needed]. The claim made that *offshore* wind farms have been, until now, subsidised, which is not the same as unprofitable over their lifetime. – Oddthinking May 15 '17 at 09:55
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    Profitable without subsidies and produced without subsidies are two different things. I.e. the quote doesn't seem to support your claim for it. – Brythan May 15 '17 at 11:02
  • I don't understand why you guys are nitpicking this question, it is practically a copy of the previous popular question I linked. I'm open to change the question into any form that will take it off hold, give me some guidance here. – daniel May 15 '17 at 11:59
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    @daniel: We are here to try to sort out which public claims and beliefs are true and which are false. We aren't here to answer any old speculation. So, we need a notable claim. You haven't come up with one that matches the title. The question in the title seems rather vague. [It depends](http://www.wind-power-program.com/turbine_economics.htm). – Oddthinking May 15 '17 at 14:09
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    What @Oddthinking is refering to is the core of skeptics.se question acceptability: you can't just pop a question out of your head or from hearsay. You have to prove notability of your claim. This means getting a claim that is circulating on social media or one that [can be proven that] a lot of people believe is true. You are just asking something you made up based on another question, thus not notable – Mindwin Remember Monica May 15 '17 at 14:55
  • What's with the accepted question I linked to? Anyway even after I found a claim from a reputable source this question is still on hold. I'm getting the feeling that all questions are equal, but some are more equal than others. – daniel May 15 '17 at 15:06
  • @CPerkins ok I've lined them up, I feel like the linked question is good for someone concerned with CO2 production, this question I would hope will be good for someone concerned about money, like a a purchaser or investor. – daniel May 15 '17 at 15:54
  • @Brythan I don't care so much about if company A builds the farm and sells it to company B with the help of the government here and there, I care more in terms of if I was building an island and needed to pick the cheaper out of a coal power plant and a pile of coal, or a wind farm. – daniel May 15 '17 at 15:59
  • @CPerkins I am still not seeing a link to a notable claim (or a link to any claim for that matter) that supports the question. The link is about offshore wind farms, I don't see anything about on-shore wind farms. That appears to be solely the OPs own idle speculation. – TheBlackCat May 15 '17 at 22:47
  • @EnergyNumbers OK I've edited to ask about onshore wind farms only, my understanding was that the offshore farms would have higher costs and lower efficiency, so if there were plans of doing them with no subsidies then there might have been profitably onshore farm I had overlooked. – daniel May 16 '17 at 10:56
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    Is Buffet saying it's not profitable, or not profitable at the levels/rates of return and growth that warrant inclusion into a Berkshire-Hathaway portfolio? – PoloHoleSet May 16 '17 at 17:16
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    @PoloHoleSet The later is how I read it. The first sentence of the quote in question seems to indicate that he's talking about making sense from his business's perspective, not from a profitability perspective: “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate, for example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” Additionally the entire article is about how good Warren Buffett is at using the tax system, not about wind farms. – JonK May 17 '17 at 18:39
  • Seems like the question is misleading, since it's really asking whether non-subsidized wind farms could compete against other subsidized forms of generation. – jamesqf May 20 '17 at 04:47
  • @jamesqf the questions undergone so many revisions by this point I really think it's straight forward. A separate question could be 'could a new combined cycle gas turbine power plant be profitable without subsidies?' And we could answer it the same way as here (except also adding in the cost of the gas burned) – daniel May 20 '17 at 16:05
  • @daniel: I don't think it's straightforward, unless it's made clear that it's asking whether an unsubsidized wind farm is profitable when competing against that subsidized gas turbine. – jamesqf May 20 '17 at 17:21
  • @jamesqf I can see that subsidies for coal can influence the market price, but not by much. Maybe 0.8 US cents per kWh for coal is subsidies so the US market price would be increased to maybe 13 cents per kWh http://www.pjm.com/markets-and-operations/rpm.aspx – daniel May 20 '17 at 21:46
  • @daniel: Depends on exactly what you consider to be a subsidy. Getting to dump your trash in the air for free would seem to be one, likewise getting the government to cover much of the cost of cleaning up your coal ash spills: http://www.foxnews.com/us/2014/02/19/video-shows-toxic-waste-gushing-into-2nd-pipe-under-duke-coal-ash-dump-spilling.html Using government power to force the building of pipelines would be another. – jamesqf May 21 '17 at 18:26
  • @jamesqf We could add a tax to anything and then reduce it, now everything in existence is subsidized. I was really just looking for an answer to "do wind farms make more money than they cost". Another example is water tanks, if a water tank cost $3000, and saved $30 in utility bills a year does it make more money than it cost? yes after 100 years. – daniel May 22 '17 at 07:56
  • http://www.windpowerengineering.com/construction/projects/windpower-profitability-and-break-even-point-calculations/ has the sort of calculation I was looking for, but its pretty stale data. – daniel May 24 '17 at 08:06
  • It really depends where you build the farm and what you consider a subsidy. Is a tax break a subsidy? What if the tax was specifically designed to offset the damage done by older, dirty generation schemes? Things like land costs vary massively, and is expedited planning permission a subsidy? – dont_shog_me_bro Sep 18 '17 at 10:36
  • Here's a link for the subsidies coal receives in the US: http://www.sourcewatch.org/index.php/Federal_coal_subsidies – hdhondt Sep 18 '17 at 10:42
  • @hdhondt the subsidies could also be compared to the sugar cane industry like in this example https://en.wikipedia.org/wiki/Fanjul_brothers#Popular_culture – daniel Sep 18 '17 at 11:31
  • @ゼーロ For this question I'd accept wind farm locations anywhere there are already successful wind farms, selling power to whatever market they are hooked up to. This question should be answerable even if you believe everything in existence is subsidized. – daniel Sep 18 '17 at 11:41
  • Note the caveat: *selling the energy at market rates.* You're a direct competitor to power plants, owned usually by the same companies that own the power grid. To sell your energy you must plug into this power grid and as effect cut into profits of these companies. While it might not be a direct subsidy, you're just not getting into that market without government forcing these companies to buy the electricity from you. – SF. Sep 18 '17 at 13:12
  • @SF. maybe that is why this one is tricky to answer and the more theoretical energy amortization question had a simple acceptable answer. But you could make some assumptions, like assume the government would buy your power for the same price as the current companies, and that these prices would remain stable. – daniel Sep 18 '17 at 13:21
  • @daniel: In this context, applying the same taxes as are applied to sales of electricity by power plants, and assuring purchase of all produced electricity (regardless of momentary market demand) plus no obstructions on construction (e.g. punitive charges for "spoiling the landscape") inland wind farms would be fully profitable. The devil's in the details; you produce electricity when there's wind, not during peak demand. You must connect to the grid which is not always readily available. You may be less profitable than standard power plants (competition!) – SF. Sep 18 '17 at 13:30
  • In capitalism it's insufficient to turn up some profit - you must turn up better, or at least similar profit than your competitors, or they'll push you out of the market by offering lower prices. Only through government protection can the less profitable "clean" entities succeed over the "dirty behemoths". Plus offshore requires extra infrastructure and maintenance which cuts into direct profit margins so much without subsidies they'd stand no chance whatsoever. – SF. Sep 18 '17 at 13:33
  • Standard inland "windmills" though? For a time, in Poland the wind farms were entirely un-subsidized, there was only a regulation that forced the national power companies to buy the electricity for the market price. And they were massively profitable. This ended when the regulation was removed and now the windmill farms are barely getting by, selling way below market value - below costs of running power plants. – SF. Sep 18 '17 at 13:36
  • @SF. Do you have a source for Poland's un-subsidized wind farms? This article talks on the subject of market price manipulation, quote from 2013 "German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants -- electricity with a market price of just over €3 billion." https://www.forbes.com/sites/michaellynch/2016/02/19/negative-electricity-prices-are-not-a-sign-of-renewable-success/#6734cb273806 – daniel Sep 18 '17 at 13:58
  • @daniel: Sorry, I don't - just word on mouth from a friend who's "in the know" (I'd post an answer otherwise). Regardless: construction costs a lot and can either amortize over many years (commercial credit), or may be funded rapidly from other sources - like artificially inflating the prices through government's fiat. At €3bln/year the current investments could be paid back in a couple decades and then the investors could get new credits and build more windmills. At €20bln/year they can keep building at maximum production capacity non-stop. – SF. Sep 18 '17 at 14:15
  • @SF. Or spend their profits on whatever they wanted, blackjack, sportscars, lobbying . In your recent language I'm looking for a wind farm that made market price €3bln worth of electricity in a year for a price of €3bln/year, or more. (Price including all the complicated initial cost, maintenance ...) – daniel Sep 18 '17 at 15:54
  • And if the initial investment could be payed off in 2 decades, and the average life span of a wind turbine is 2 decades, then that's not great news from a money making standpoint – daniel Sep 18 '17 at 16:00
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    @daniel: All a matter of right contracts and right management. Yes, of course opportunities for abuse in such rushed endeavors abound. And they are fought, not always efficiently. Usually just pumping more money into it than can be spent on all the blackjack and hookers in the world works ;) Also, with the credit - not *all* of profits go towards the credit - you're not living on dry bread and water earning nothing off your windmill for the next 20 years - you usually can make a reasonable, modest profit. – SF. Sep 18 '17 at 16:29

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The answer depends on you definition of subsidies, the energy market and country. As you second link is about Germany my answer will be also about Germany.

If we use a very broad definition of subsidies:

...in addition to direct state aid and tax benefits, other forms of subsidies that are not a part of state budgets are included here, such as the value of allowances from emissions trading, provisions set aside for nuclear power, and feed-in tariffs for renewables.

Then this study from 2012 suggest that all main forms of energy production (except natural gas) are subsidised (see figure 4). Moreover, if you take the external costs which are not fully internalized in account (i.e. health costs due to air pollution, global heating etc.) then wind energy was among the cheapest form of electrical energy production methods in 2012 (see figure 5). As the prices for wind-turbines have fallen this only got better. But, if wind power becomes a major source in our wind energy market you have to take into account that there are cost in regulating this unsteady supply of electrical energy (with for example power-to-gas) and you have to add this to your production price.

If you want to have an answer to the question Can a company construct and run a wind farm and sell its energy at the Strombörse (the "stock market" for electricity) in Germany now and make a profit without any (very) direct subsidies (i.e. getting extra money for every kilowatthour sold)?* then an answer could be:
At least the company ENBW (one of the mayor German electrical energy companies) believes this is possible: http://www.offshorewind.biz/2017/04/13/enbw-wins-construction-of-900mw-german-owf-by-bidding-eur-0-per-mwh/

* (I do not consider this a very meaningful question, except you want to run a wind farm yourself).

Cashman
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  • I haven't heard of power-to-gas until now, but pumped hydro looks to have double the efficiency for the round trip (80% efficiency vs 40%) – daniel May 23 '17 at 11:38
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    You cannot not build any more Hydro storage in Germany. For going 100% renewable, you need to store a lot of energy (like 1 week of electrical energy production now it is only like one 1h). On http://www.heindl-energy.com/why-store-energy.html you can find some info (and also some other possible solution). As we can use the natural gas infrastucture as a storage, this would be a very cheap solution. Additionally we could store energy in Norway via sea cable.... – Cashman May 23 '17 at 12:03
  • Also I think that second link is talking about the same offshore wind my question was. 1,500MW in 2025 by EnBW. So is your answer: no electrical plants can make a profit in their lifetime without subsidies? – daniel May 23 '17 at 12:05
  • that could be true since its a government utility and all, it would be tough to show that highways make a profit. – daniel May 23 '17 at 12:07
  • and finally do you have a source for -You cannot not build any more Hydro storage in Germany.-? – daniel May 23 '17 at 12:14
  • So is your answer: no electrical plants can make a profit in their lifetime without subsidies? There is to much room for interpretation to answer the question. I exaggerated the situation, there is potential for hydro storage in Germany, but it is not economical at the moment (but neither is power-to-gas) and it lacks acceptance in the population. – Cashman May 23 '17 at 13:05
  • Germany isn't Saudi Arabia (a country that probably can't use pumped hydro, because it has no rivers), do you mean that its not economical to build more than the 8 stations Germany already has? https://en.wikipedia.org/wiki/Category:Pumped-storage_hydroelectric_power_stations_in_Germany – daniel May 23 '17 at 13:16
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    The problem is that their former economical model, i.e. buying energy when its cheap (with coal plants this was at night) and then selling it at very high prices at normally noon does not work any more (as solar electricity flattens that peak). – Cashman May 23 '17 at 13:41
  • @Cashman, the trouble with building new hydro is (ironically) getting it past the ecologists... – Benjol May 24 '17 at 11:41
  • You argue wind is cheap if considering external costs, but a power plant would never consider external costs, that's why their external. The government generally pays those costs, indirectly, Market forces do very little to make power producers consider them. if a government wants to lower those external costs it's paying they do it via legislation encouraging use of other options, ie things like tax subsides. You can't argue wind is cheap enough to not require tax subsidies by considering costs that are only relevant if tax subsides exist. without external wind is second most expensive – dsollen May 24 '17 at 16:26
  • @dsollen Wind is one of cheapest option for society as a whole one the long run. That was my point. Not what any power producer pays for. Also the study has info that coal in Germany is in fact still subsidised. – Cashman May 27 '17 at 12:58