Caveat investor: Wind may let you down

February 26, 2010

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John Laforet is president of Wind Concerns Ontario, a coalition of 42 grassroots organizations aiming to curtail development of wind farms in the central Canadian province of Ontario.  He is also running for municipal public office.

Governments around the world are actively seeking private development of renewable energy projects by offering generous feed-in tariffs that often see developers paid many times the market rate for the power they produce.

This has encouraged a surge of applications, but the volume of applications and other challenges associated with these projects present potential risks to prospective investors.

Projects require transmission capacity to carry their energy to market, but the agencies accepting applications for a given jurisdiction often aren’t responsible for managing transmission systems.

In the Czech Republic, a boom of renewable projects has caused considerable challenges to the transmission system and has caused the grid operator to block future wind projects, while threatening to disrupt grid connections for existing renewable energy projects.

In Canada, Ontario’s inventory of projects under development, approved or in the proposal stage, does not consider existing grid capacity.

While individual proponents compete for feed-in-tariff agreements without guaranteed access to grid capacity, a multi-billion dollar investment by the government into the grid would be required to facilitate many of these projects getting off the ground.

In a time of plunging tax revenues and mounting deficits, and growing community opposition to these projects, this creates instability for investors.

Weak regulations designed to streamline approval processes and silence community opposition have resulted in legal action against proponents worldwide.

Developers are being sued in many jurisdictions, and in at least two notable examples, either lost in court or settled for millions of dollars.

A French court ordered the turbines in Cast and Châteaulin to be turned off between 10pm and 7am, thereby generating zero revenue or electricity during that time.

In Ontario, Canadian Hydro Developers settled a number of legal actions at a cost of $1.75 million as a result of individuals who complained of negative health effects. These include Barbara Ashbee-Lormand who says she and her husband found it intolerable to live in their home in Amaranth, a rural township that is host to 22 industrial wind turbines.

A growing number of American municipalities have banned the installation of industrial wind turbines in response to community opposition, including in North Carolina, and Liberty, Illinois.

Offshore, lake-based proposals in Ontario have faced two moratoriums in three years, and projects in Australia have seen endangered species legislation used to halt approvals.

While a feed-in tariff agreement may make investments in renewable energy look attractive, the lack of control project investors have over their ability to reach the market should give investors pause.

With potential for liability for negative health impacts, lawsuits from communities and growing interest from the courts, in addition to other instability built into the approval process, this is one “green” sector that could quickly turn red, at least for investors.

Photo shows Barbara Ashbee-Lormand’s mailbox in Shelburne, Ontario, with wind turbines in the background after the home was vacated in 2008. REUTERS/Handout


3 comments

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How is it when Governments committed to Renewable Energy/Wind Generated Electricity, the Industry did not point out that the Transmission lines for the extra Power could not cope.

Posted by palpete | Report as abusive

Both private and public companies that operate within industries which are totally dependent upon government subsidies to make their business case are a huge gamble. Potential investors should “run for the hills”

Posted by ddiligence | Report as abusive

[...] Forum on the reality of risk and investing in wind developments in Ontario and worldwide. Called ‘Caveat investor: Wind may let you down’ points out several ‘inconvenient truths’ investors, industry, their lobbyists and [...]

The GEA must comply with Ontario’s Endangered Species Act a point any investor should recognize. Also, wind developments seem to have a revolving door when it comes to company names changing with or questionably with project ownership. Liabilities associated with decommissioning after the life of the turbines should be considered in the evaluation. There are better investments.

Posted by zen2then | Report as abusive