Mott's Blog

The latest news from Chile emphasizes the key fault of auctions of renewable energy support- artificially low prices in project bids that later cannot be actually built. Banks in Chile are reluctant now to finance projects that have unrealistically low prices for electricity as they are so risky. "Auction systems as a mechanism to support investment in photovoltaics, which implement other countries, leads - as intended - to lower energy prices, which offer investors in auctions. Prices for the bid winners, however, are sometimes so low that the implementation of the projects may seem questionable." Gramwzielone. October 24, 2016. Typically, speculative bids are made with the hope that project costs will decline over the schedule to actually commit and build the projects. The penalties for under-bidding in this fashion can never be large enough to require the developer to actually build a project at his bid price if it will lose money for years. The basic problem describ...

The reform of the Emission Trading Scheme that basically taxes carbon dioxide emissions has been controversial. Now a compromise appears nearly certain to pass. It continues some free allowances (which have crippled the price support for allowances to date), but it tightens the rules on financial support for new coal projects. It will be interesting to see the effects on Poland. I doubt anything but major brownouts and the huge increase in imported electricity from our neighbors will move the government to look at reality.