A Fool and His Money are Easily Parted

Not Worth a Tilt

Not long ago we were cutting down through Ashhurst on our way to the Manawatu Gorge, and then on to Mangatainoka (you will all know what that's famous for) and eventually Carterton.  Those of you who have travelled this route will know that as you approach the Gorge it is wind-turbine city.  Since someone else was driving, we were able to count the number of turbines we could see that were not turning.  Seven.  Seven broken down turbines--at a quick glance.

To fix them requires a 600 tonne capacity crane--trucked out into the wop wops.  Access roads have to be maintained on some of the steepest country in New Zealand.  Slips and washouts are common.

The New Zealand Herald has a piece on maintenance being done at the Makara West Wind Farm, the country's largest.  It has 62 turbines.  It went live on April 29th, 2009.  So it is almost exactly two years old, operationally speaking.
  Nearly half the turbines have been inspected so far.  Six of them have bearing problems and will need that 600 tonne capacity crane to come visiting.  That number represents close to 25% breakdown rate--after a mere two years operation. Well, actually its likely much worse than that.  When first commissioned in 2009, the Farm had only 15 turbines; to the majority of turbines are likely to have been operational for only about a year. 


Meridian Energy estimates that the Makara Wind Farm will cost $17m per year to maintain.  (Note: this is an estimate--based on overseas experience.  We hope that they have factored in the turbines being situated in some of the most inaccessible and rugged country in New Zealand.)  When opened, the spin machine was in full gear.  The PR guys' trumpet was blowing loud and clear:

“Very few cities in the world have the opportunity to have a highly efficient source of renewable power so close to where it’s needed.” From today, West Wind will have the capacity to generate clean energy to power the equivalent of approximately 17,000 homes, as 15 turbines connect to the national grid.

When fully operational at the end of 2009, the 62-turbine development will have a capacity of 143 megawatts and will power the equivalent of 70,000 average New Zealand homes: that’s all the homes within the territorial boundaries of Wellington City.

Well, that's a bit deceptive and misleading, actually.  To say that the Wind Farm has the capacity of 143 megawatts is a hypothetical number.  The "best" machines at Makara (seven out of sixty-two) are operating at 50% capacity; the worst is at 25%.  (This will not include those that are broken down and stand idle for who knows how long before the big truck can get the huge crane out there.)  So, instead of the vaunted Wind Farm powering the equivalent of 70,000 average NZ homes, it actually can manage to power not more than approximately 30,000--and that's on a good day.

According to our rough calculation, if it is going to cost $17m per year just to maintain the Farm, that represents an annual expense of $550 per year per household being built into their power bills just for on-going maintenance.  Moreover, wind turbines have a fixed life; they wear out.  Gear boxes, for example, need to be rebuilt every ten years.  The depreciation costs are thus very high.  So the economics look really bad: high ongoing maintenance costs, short shelf-life requiring depreciation rates of around ten percent a year on replacement turbine capital costs, and the best turbines not operating at better than 50% capacity. 

So bad are the numbers, and so high the inefficiencies of wind power, that some states in the US have required up front the payment of decommissioning costs to get rid of the windmills when companies realise they are lemons and want to walk away from them. The "market" is telling us something.

Wind power was always going to be a trumping of ideology over science.  All these dismal metrics associated with wind power have been well known globally.  But, never let the cold hard facts get in the way of a good story, particularly when greenism is on the charge.  But Meridian Energy, the owner of the largest wind farm in New Zealand, is putting on a brave face.

Wind maintenance manager Russell Thomas said of the 27 turbines inspected, six had bearing problems.  "We're not freaking out, put it that way. This is standard for any site, that's why you have a warranty. . . .We won't have to take any down but what we might find is that under certain wind conditions we have to de-rate the machines to take some of the stress out of it."

De-rating the machines sounds a lot like de-powering them to make them last longer.   It seems to us that "freaking out" is definitely in order.  Care to re-cut those cost-benefit studies?

But don't despair or panic.  We all are going to be given a chance to own this "largest Wind Farm in New Zealand" which is assuming the shape and colour of a lemon more and more by the day.  Meridian Energy is going to be up for partial sale.  We have an opportunity to be co-shareholders with the Crown.

We are not sure whether any of our readers are interested in investing in state-owned energy companies.  But if you are, here is a bit of unsolicited investment advice:  you would be wise to put the prospectuses of those power companies that are gung-ho on wind generation in the round file. They will turn out to be windmills definitely not worth a tilt.