Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
A substantial difference with accelerated amortisation with windfall gains is that accelerated amortisation does not roll out more wind power capacity, and so does not have the same positive impact on Sweden's net exports.

It avoids the boom and bust in the building cycle by avoiding the boom part. That's not the part we want to avoid. And since a substantial share of the boom and bust falls to German capital goods industry.

To the extent that we can shelter windpower from under predatory state institutions with a feed-in tariff, that's a superior option, but if we cannot get windpower out from under predatory state institutions, better to structure things so that there is a boom while busts can be ridden out without bankruptcy.

In terms of the "seed farm" wind turbines, structured as described they survive through a bust and reproduce when experiencing windfall gains. And every windfall gain financed turbine only needs to cover minimal operating and maintenance costs.

Once the prorated "seed farm" capital costs over the output of the "seed farm" and "seeded farm" are below the capital costs plus lowest fuel cost of gas turbines, the whole complex becomes always-reproducing, and the boom and bust is about the rate of reproduction.

All assuming, of course, a relatively small open economy with cross transmission into a larger regional demand sink.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Mar 30th, 2011 at 02:50:43 AM EST
[ Parent ]
A substantial difference with accelerated amortisation with windfall gains is that accelerated amortisation does not roll out more wind power capacity, and so does not have the same positive impact on Sweden's net exports.

I think you're tacitly assuming that the "seeded" farms have a lower required rate of return on equity than the "seeding" farms. After all, if the "seeded" farms make sense on a seeding basis with constant cost of equity, then they should also make sense on an accelerated amortisation basis, assuming that you have available, equally priced, equity from other sources. As long as wind is a small(ish) fraction of total real capital investment, the latter does not strike me as an unduly unreasonable assumption.

And since a substantial share of the boom and bust falls to German capital goods industry.

Yes, if you allow a boom-and-bust cycle, you'll keep production in Germany. But if you have stable onshore demand, you'll get onshore industry (the economics of transporting windmills relative to transporting the raw materials say that the manufacturing will relocate to the vicinity of the demand). That's why you want to avoid a boom-and-bust cycle in the first place.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 30th, 2011 at 03:05:47 AM EST
[ Parent ]
... equity from the seeded farms is the realized flow of revenue from the sale of the power they generate over operating costs, since the seeding farms own a pure equity stake in the seeded farms and in all farms they seed in turn during surplus periods.

Accelerating amortization of finance capital funded windpower under predatory state market arrangements can reduce exposure to the being bankrupted by a downswing ~ and downswings are to expected, since the ride down from Peak Oil will be a bumpy one ~ but cannot eliminate insolvency risk. By contrast, a pure equity holding with no fixed obligation has no insolvency risk if the operating costs themselves are below the price maker's capital cost.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Mar 30th, 2011 at 05:15:40 PM EST
[ Parent ]

Display:

Top Diaries

Occasional Series