Will wind energy survive?

Even with huge government subsidies wind energy is delivering huge losses.

Wind energy in the USA and Europe…

Wind energy is a prominent form of renewable energy, converting the kinetic energy from the wind into electrical power through the use of wind turbines. Its abundance has grown significantly over the years in various parts of the world, especially in the United States and Europe, as part of an effort to reduce carbon emissions.

In the United States, wind energy has been a rapidly growing sector, thanks to vast onshore wind resources in states like Texas, Iowa, and Oklahoma. In 2021, the US ranked second globally in terms of installed wind power capacity, right behind China. The US wind energy sector has also started constructing offshore wind projects, with states on the Eastern Seaboard such as Massachusetts and New York leading the charge. The federal government's supportive policies have played significant roles in the expansion of this sector.

Europe has been a frontrunner in harnessing wind energy, particularly in offshore settings. Countries such as the United Kingdom, Germany, and Denmark have led the charge, with substantial offshore wind installations in the North Sea and the Baltic Sea. The European Union's aggressive carbon neutrality goals have been a key driver for the development and deployment of wind energy across member states.

Overall, wind energy in both the United States and Europe continues to grow, driven by the twin forces of reducing carbon emissions and federal subsidies. For a recap of federal subsidies, click here.

Let’s take a look into the financials of wind energy to better understand if this renewable energy is sustainable and economically viable. I would like to note that there are many other problems with wind energy besides the financials, for example, the inherent variability of wind in terms of ensuring a stable electricity supply. Read more here.

The economics of wind energy…

The economics of wind energy can be discussed under several key dimensions: capital costs, operational costs, financing, and market prices for electricity produced.

Capital costs, also known as installation costs, involve the expenditure required to construct a wind farm. This includes the costs of the turbines themselves, which have become significantly more cost-effective with advances in technology and increased manufacturing scale. Other factors influencing capital costs include site preparation, installation, connection to the grid, and regulatory compliance. For offshore wind farms, these capital costs are typically higher than for onshore wind farms due to the more challenging environment and installation process.

Operational costs encompass maintenance of the turbines, land lease payments (for onshore farms), insurance, and other ongoing costs. Over the last decade, advancements in turbine technology have increased efficiency (generating more power from the same wind speed).

Financing costs depend on the interest rates and risk perceptions of the lenders or investors. Wind energy projects, especially large ones, often rely on project financing where the debt is repaid from the project's future cash flows. As the sector has matured and risks have been better understood and managed, financing costs for wind energy have generally been decreasing.

The market price of electricity, and the amount actually produced, which varies by location and over time, is a crucial determinant of the revenue and thus the economic viability of wind energy projects. Wind energy also often benefits from various forms of government support, such as tax credits in the United States or feed-in tariffs and auctions in many European countries, which can significantly improve the economics.

Recent financials of large wind energy companies…