A little prediction about what's to happen next here
This amuses:
A string of offshore wind projects meant to power Britain are in jeopardy after the global race to net zero sent costs soaring, casting doubt over the industry’s future as a cheap source of energy.
A surge in supply chain costs has pushed up the price of wind turbines, while increases in global interest rates have raised refinancing costs substantially.
Ah, so that terribly cheap wind power isn’t, in fact, cheap. The reason why is obvious and no, it’s not supply chains. It’s the price of money.
The vast majority of wind farm costs are upfront. Capital costs that is, which are then paid back over the operating lifetime. To be crude about it, the cashflow from the last 18 months (or whatever) of the 15 year installation is the profit, everything that comes before it is just paying back the capital plus interest. When interest rates rise that 18 months becomes 12 and 6 and negative 12 and so on.
The basic financial economics is exactly the same for solar - the costs are near entirely upfront meaning that interest rate changes hugely change the viability of an installation.
This just is so. Therefore we’re going to see shrieking that something must be done. We’ve actually already seen it being floated, the idea that there should be some special - lower - interest rate for green projects. No, there shouldn't be, for we’re already including all those externality costs of fossil fuels in the other things - carbon permits, etc - that we’re doing. To then insist upon lower interest rates is double counting - or double subsidy.
But there will be those calls, we guarantee it. It is after this that we make our prediction. For that basic fiscal set up is also shared by nuclear. High upfront costs, low running costs, the real determinant of the cost of the entire project being the interest rate applied. So, logically, if we are to have a special low interest rate for wind and solar then we should for nuclear. And we will not.
Which is the prediction - we will be told we must have low interest rates for 15 year wind projects, for 20 year solar and not for 50 year nuclear. And that is how we will know they are lying.