GOP Plan to Increase Taxes For Wind And Solar
In this newsletter:
1) Tesla Share Crash Amid Republican Bid To Kill Off Electric Car Tax Break
The Register, 2 November 2017
2) GOP Plan to Increase Taxes For Wind And Solar
The Hill, 2 November 2017
3) British Industry Faces Green Energy Cost Crisis – And It Is Set To Grow
Jillian Ambrose, The Daily Telegraph, 30 October 2017
4) John Constable: Smoke, Mirrors And Renewable Energy Costs
GWPF Energy, 1 November 2017
5) Sudden Wind Price Collapse Reveals ‘Madness’ Of Germany’s Green Energy Transition
Die Welt, 31 October 2017
6) Merkel Still Optimistic On Forming New Jamaica Coalition
Associated Press, 3 November 2017
Full details:
1) Tesla Share Crash Amid Republican Bid To Kill Off Electric Car Tax Break
The Register, 2 November 2017
Tesla’s share price took a dive Thursday morning as Republicans in Congress revealed they were planning to kill off a US federal tax credit for electric vehicles.
The proposed House tax bill calls for an immediate repeal of the $7,500-per-vehicle credit: something that would have an immediate knock-on impact for Tesla given that it only produces electric cars.
Its share price fell more than seven per cent to about $296 apiece from Wednesday’s $321. The draft law emerged as the Elon-Musk-led automaker announced its worst-ever quarter, recording a $671m loss and admitting it had not met its production target for its new Model 3 car, producing just 220 of them against its 1,500 target.
Economists believe that the tax credit is a key driver for electric car sales, and cite the example of when the state of Georgia cut its $5,000 tax credit and saw sales of electric cars slump from 1,400 a month to just 100 a month in response.
As an indication of how the $7,500 helps Tesla sell more of its vehicles, it even incorporates the figure into its pricing on its website, noting that the total vehicle cost is reduced thanks to the break – although you would still pay full price for the car and then would need to claim the credit back on your tax forms.
Blueprint
The bill itself – which still has to go through Congress and is seen as a blueprint for the Trump administration’s tax shakeup – would kill off the electric vehicle break on the final day of this year.
Scrapping the leccy car deal will increase US tax revenues by $4bn, it is estimated. That’s a good saving seeing as the Republicans are desperate to balance America’s books while cutting the corporate tax rate.
Under the process the Republicans intend to use to pass their tax reform bill, it is necessary for the country’s figures to balance – any cuts have to be met with additional tax income. So far, the plan is expected to cost the Land of the Free $1.5tr over 10 years.
Full story
2) GOP Plan to Increase Taxes For Wind And Solar
The Hill, 2 November 2017
A massive GOP tax-reform bill would end a $7,500 credit for the purchase of electric vehicles and overhaul other energy-related provisions within the tax code.
The 429-page bill would repeal the electric vehicle tax credit, which supporters have credited with reducing the price of emission-free cars for consumers and helping the burgeoning American electric vehicle industry grow.
Advocates have ramped up lobbying efforts to save the credit, which has benefited electric vehicle manufactures like Tesla. The credit is limited at the first 200,000 electric vehicles sold by each manufacturer, but no one has yet hit that cap.
“Electrification for vehicles is extremely important for the future of the auto industry, particularly given the fact that as we move towards autonomous, self-driving vehicles, those vehicles will be powered by electric,” said Sen. Gary Peters (D-Mich.), who represents America’s automobile manufacturing hub, on Wednesday.
“That tax credit is really important for moving this technology forward.”
The electric vehicle credit is one of several tax breaks Republicans would end as a way to help pay for their bill, which aims to reduce individual brackets and cut rates for businesses.
The legislation also reforms several energy-related tax credits.
It would repeal an inflation increase for renewable energy production tax credits, a move that would increase taxes for power sources like wind, solar, biomass, geothermal, hydropower and others. That provision would raise $12.3 billion in new revenue over ten years.
Full story
3) British Industry Faces Green Energy Cost Crisis – And It Is Set To Grow
Jillian Ambrose, The Daily Telegraph, 30 October 2017
Behind the political battles over household bills lurks a far greater energy cost crisis. It risks damaging British industry and undermining attempts to boost productivity after Brexit.
Households are paying more for clean power than they should, but official data shows UK bills are still below average compared to the EU.
The picture is more worrying for industrial and commercial customers. In this league table UK businesses pay well above the average. The cost burden they bear is second only to Denmark.
The issue is under discussion at the Treasury. Officials are clear that for the UK to attract inward investment the country needs to be competitive on energy costs, even while taking action to reduce carbon emissions.
“This is why the Government has commissioned an independent review into the cost of energy led by Prof Dieter Helm … to deliver the Government’s carbon targets and ensure security of supply at minimum cost to both industry and domestic consumers,” the Department of Business, Energy and Industrial Strategy said earlier this year.
The Helm review concluded that bungled policymaking and Governmental tinkering has meant the UK is paying “significantly” more than it should.
Andrew Buckley, a director at the Major Energy Users Council (MEUC), agrees. “The report refers to decarbonisation and social policies making up 20pc of bills,” he says.
“For our members we calculate that these costs will reach over 40pc by 2020 and this is the main reason why our industrial power bills are the amongst the most expensive in Europe.”
The Government has already been forced to provide an 85pc rebate on green energy taxes for UK steel makers. The £5m a month refund is meant to help avoid another crisis for the embattled industry. Energy costs remain a threat to other high-energy industries, however. Water companies are some of the highest energy users in the country, alongside factories and the data centres run by some of the biggest tech and telecoms giants
“Some energy intensive businesses receive some relief from these charges but the great majority of commercial and industrial companies amongst MEUC membership do not,” Buckley says. It comes at a time of paramount importance for the economy as Britain prepares to leave the European Union. At the same time the cost of importing parts is rising and attracting skilled labour is becoming more difficult.
Today, an annual electricity bill for one of Britain’s top 10 highest energy users stands at around £120m a year, but within a few years this will rise to £170m.
If Helm had his way, all the costs of subsidising Britain’s low carbon power projects – such as wind, solar and new nuclear plants – would be scrapped from industrial bills altogether.
Full story
4) John Constable: Smoke, Mirrors And Renewable Energy Costs
GWPF Energy, 1 November 2017
Dr John Constable: GWPF Energy Editor
The GWPF has recently published data and analysis calling into question claims of falling capital cost in the wind industry. Reports of rising costs for solar panels in India suggest that the widely discussed fall in costs in the photovoltaic sector may also prove to be either temporary or largely illusory.
One of the replies made to Dieter Helm’s recent Cost of Energy Review is that his criticisms of the last decades of policy support for renewables were largely irrelevant, and at best backward looking, since the costs of renewable energy were now falling sharply. Sir Ed Davey, former Secretary of State at the Department of Energy and Climate Change, and personally responsible for much of the astonishing and growing cost burden placed on consumers, has been quoted in Utility Week as remarking that Professor Helm’s “predictions of the past proved wrong and the cost of going green have fallen dramatically which undermines his central thesis. It’s answering yesterday’s questions not tomorrow’s questions.”(“Dieter Helm’s cost of energy review – blueprint or blue sky?”).
However, as Gordon Hughes, Capell Aris and I have observed in our recent work on offshore wind costs, the evidence for significant reductions in capital cost in that sector does not appear to be strong. Indeed, if anything the costs are rising as the industry moves into deeper water. The very low bid prices in the recent round of Contracts for Difference are to be understood as “options” gambling on a carbon price, which as it happens Dieter Helm, like the sensible economist he plainly is, much prefers to direct income support subidies such as Obligations and FiTs and FiTs CfDs.
In the case of solar there are also grounds for doubt. Only last month the UK government very incautiously claimed that solar no longer needed subisidy. On closer examination the scheme in question turned out to be an in effect subsidised battery storage scheme, with solar as only one of its charging options (“Forget this Spin Too: Solar PV Is Not on the Brink of Being Subsidy Free”).
Now the Financial Times is reporting that very low bids for solar power in India may also prove to be a false dawn: “India’s record low solar power deals prompt sustainability fears: Boss of Acme Solar behind groundbreaking park bid expresses regret as costs rise”. Indeed, the FT reports Mr Upadhyay, of Acme Solar as on record to the effect that “he would not make the same bid again, saying prices had since been pushed up by a worldwide rise in the cost of panels and the Indian government’s new sales tax”:
“When we made our bid, we factored in a price for every solar panel of 30 cents per watt of power, but since then it has risen to around 35c.”
The FT offers no comment on the price increase, but it seems entirely reasonable to suspect that the recent PV cost falls were predominantly the result of over-capacity in China’s photovoltaic industry, and that these increases are the beginning of the inevitable correction. That correction would not have to go far to be very important, as the Indian case shows.
As is obvious to anyone who has thought about the issue, the physics of renewable energy is heavily against it being cost competitive with conventional energy. Vast capital structures are needed to gather and concentrate the thin flows of sun and wind and deliver the energy output as reliable supply to a consumer. The equipment has to be very cheap indeed to overcome this fundamental fact. By that standard the cost reductions claimed for solar and even for wind are relatively small. Now it seems that modest though they are, they may be more apparent than real.
5) Sudden Wind Price Collapse Reveals ‘Madness’ Of Germany’s Green Energy Transition
Die Welt, 31 October 2017
Autumn storm Herwart has caused chaos on the German energy market. Because of the strong wind, electricity prices collapsed into the negative. Consumers, however, won’t benefit from negative prices. For them, electricity is becoming even more expensive.
Storm ‘Herwart’ has caused extreme turbulences in Germany. Now it has been revealed that the storm last weekend not only uprooted trees, brought down roofs and paralysed train services. The gale-force gusts at speeds of up to 140 km per hour also caused chaos on the German energy market.
That is because ‘Herwart’ caused a lot of wind which in turn generated so much wind energy that the price of electricity almost collapsed. Within minutes the prices for electricity on the energy exchange EEX went down — the market was thrown upside down. Those who sold their electricity suddenly had to pay their customers. At the hight of the storm, the price dropped to minus 83.06 euros per megawatt hour. On average, the price was down to minus € 52.11, the lowest since Christmas 2012. At “normal” times electricity is traded for around 37 euros per megawatt hour – plus 37 euros.
In a rather sobering way Herwart shows the blatant flaws of Germany’s green energy transition. The latest collapse at the weekend may have been particularly dramatic. Yet negative prices on Germany’s power exchanges have become part and parcel of everyday energy. Whenever German solar panels or wind turbines produce more energy than is needed, it comes to a glut of electricity and prices plummet.
The reason is the Renewable Energy Sources Act (EEG) which systematically eliminates market forces. Each producer of renewable electricity is allowed to feed their kilowatt hours into the grid, regardless of demand. Grid operators are required to take electricity at a fixed rate and trade surplus electricity on the EEX stock exchange. Private consumers do not benefit from the negative electricity prices, but have to pay even more.
If the prices on electricity exchanges are negative, the difference between the guaranteed rate and the market price and as a result the corresponding subsidy costs increase. This in turn leads to a rise of the renewable energy surcharge which must be paid by German households. This year, the surcharge has risen to a record high of 6.88 cents per kilowatt hour…
The profiteers of this negative price paradox are Germany’s neighboring countries. “They like to take our surplus electricity off and at the same time shut down their own power plants,” says industry expert Struck. Especially in countries like Switzerland and Austria, this method works splendidly. Operators of so-called pumped storage reservoirs in the high mountains fill their reservoirs with Germany’s free electricity. This practice works perfectly as electricity from foreign power plants is later sold back to Germany at lucrative prices.
Full story (in German)
6) Merkel Still Optimistic On Forming New Jamaica Coalition
Associated Press, 3 November 2017
Chancellor Angela Merkel said Friday that she's still optimistic about the chances of disparate parties allying to form Germany's next government after an initial round of talks produced little visible progress.
Germany's Sept. 24 election left Merkel trying to form an untried coalition of her conservative Union bloc, the pro-business Free Democrats and the traditionally left-leaning Greens.
Over the past 10 days, negotiators struggled to find common ground on issues including immigration and refugees, climate protection and agriculture. While Merkel has kept a low profile, prominent figures from other parties have repeatedly sniped at each other.
Merkel said there are still "difficult" discussions ahead — "but I still believe that we can tie the ends together if we make an effort, and in a way that allows every partner to emphasize its identity and something good comes out of it for the whole country."
The Free Democrats' leader, Christian Lindner, said the parties have now set out their differing positions "and in the second phase, we now face the task of building bridges."
"It is an opportunity if such different parties can agree on what is good for our country, but it is also difficult," said Greens co-leader Katrin Goering-Eckardt.
Fellow Green Juergen Trittin was less diplomatic, telling ARD television earlier Friday that in four of 12 policy areas "we haven't managed to agree what we don't agree on."
"We understand that others need their priorities, but we see that others apparently believe they can do this with the motto, 'we won't give anything away,'" he said. "And we won't get it done that way."
Merkel governed for the last four years in a coalition with the center-left Social Democrats, Germany's second-biggest party. The Social Democrats are adamant that they will go into opposition after a disastrous election result, leaving a combination with the Free Democrats and Greens as the only politically feasible option.
Weeks or even months of haggling are likely to be needed, along with ballots of the Greens' and Free Democrats' members on an eventual deal.
The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.
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