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The World's Largest Renewable Energy Developer Could Go Broke (huffingtonpost.com)
An anonymous reader quotes a report from The Huffington Post: There is a "substantial risk" that SunEdison may file for bankruptcy, the world's largest renewable energy developer said in a regulatory filing on Tuesday. The company's fall isn't a referendum on the solar industry as a whole, as much as it is on SunEdison's aggressive growth strategy fueled by excessive debt and financial engineering, analysts say. SunEdison "just thought they were smarter than everyone else," said David Levine, the founder and CEO of Geostellar, a solar energy marketplace that has done deals with the company.
SunEdison loaded up a total of $11 billion in debt to develop or acquire renewable energy projects. The company's shares have fallen steeply since they hit a high of $30 in July. They were at just $1.26 before the filing. The stock immediately dropped another 40 percent when the market opened after the filing, and the company was trading at just $0.59 by Tuesday lunchtime.
SunEdison loaded up a total of $11 billion in debt to develop or acquire renewable energy projects. The company's shares have fallen steeply since they hit a high of $30 in July. They were at just $1.26 before the filing. The stock immediately dropped another 40 percent when the market opened after the filing, and the company was trading at just $0.59 by Tuesday lunchtime.
...People are gonna claim it's proof that renewables don't work.
fueled by excessive debt and financial engineering
In Capitalist America, financials engineer YOU!
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Your source is Huffingtonpost.com
So it can't be true.
(Just doing what the people that hate foxnews do ALL THE TIME.)
Effin idiots.
This comment we be hidden in 3, 2, 1...
(Non-laser) visible light is scattered by the atmosphere. Radio waves, on the other hand, can be directed at a collection point.
You have an aggressive growth plan, capitalized by debt that makes sense when your model is backed by subsidies.
Your debt starts to become due, but when you go to refinance it and there's some question as to whether the subsidies will continue (or its known for sure they will end), they crunch your numbers and find out that your entire business model is basically built on subsidies, and without them you are not at all profitable.
It turn out that in order to install solar panels and make any money doing it, not only do you need a huge subsidy for every install, you need the power company to pay retail rates for reverse metering for the next 20 years, too.
Once the subsidies go away and the power company only has to pay wholesale rates for reverse metering, well, solar power isn't really profitable at all unless the "profit" includes Excel-crashing giant models that suppose some kind of society-wide savings from improved environmental conditions and third order savings calculated on sheets 87, 88, and 89 of your model.
That is true, but the benefits of radio waves are kind of obliterated by the weight disadvantages. Even if you got twice the efficiency with your radio waves (I don't think you would, but let's pretend you would), would it be worth it if you actually got to transmit several orders of magnitude less power for the same amount of mass launched into orbit?
Ezekiel 23:20
"Cars don't work" because GM went bankrupt.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Solar array in space? How stupid! Don't they realize how long the extension cord down to the grid will be?
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
You go ahead and borrow a giant pile of money to build assets - in this case, the "renewable energy projects". Then you declare bankruptcy, and sell those projects to your friend/family member's company that just so happens to be willing to buy them....at a substantial discount from what they cost to build.
Then you join that other company and continue to get the profits from those projects.
What "largest solar install"? Setting aside the fact that Ivanpah, which you mention, has nothing to do with photovoltaics, being the topic here, the current "largest solar install" is the Longyangxia Dam Solar Park in China.
Ezekiel 23:20
Coincidence that barrel went from $120 to $20? Suddenly renewable energy market is struggling and electric/hybrid car doesn't look that appealing. We live in illusion of the free market.
That's not really fair. The problem with solar energy is that it suffers from a similar problem to the old conundrum about using rockets to travel to another galaxy. Essentially, because rocket technology gets better every time you build a rocket, later rockets will keep overtaking older rockets enroute. So, the argument goes, there is no point building a rocket today, because it will be caught by a newer rocket before it ever reaches the destination.
In the same way, the problem with solar is that as you develop the tech the cost continues to fall. So if you build your plant with today's tech, there is a very good chance that in a few years a competitor will be able to destroy your return-on-investment with a new cheaper plant. If your plant has not paid back its capital costs in that time (and solar has the problem that it has long payback periods right now) then you have a white elephant. If you read the article you will see that this is exactly what investors now believe will happen, and hence are bringing forward the insolvency of those parts of the company. However, once the debts from construction are 'readjusted', the underlying plant will be able to produce profitable returns for the new owners. I'm pretty sure part of the reason for having a complex financial arrangement was so that this rather obvious issue could be hidden from retail investors, so I wouldn't accuse the MBAs from being retarded.
The same problem is going to happen with Elon Musk's giga-factory. I am reasonably certain this is why nobody else is joining him in making their own giga-factory, because they know that until the cost curve flattens out, the first few factories are going to be hopelessly outdated, and possibly unprofitable, before they ever return the initial funding spent to build them.
That article, or summary really, is based on a report from an advocacy group which is frankly lying to you.
The largest component that they are calling a "subsidy" is when a government owns a profitable energy company, so the government is getting paid. Their primary example is one making very healthly 14% return on investment . When the government is making a lot of money from a socialized company, that's kinda the opposite of subsidy.
In the US, their top two "subsidies" are that oil companies use the exact same correct accounting as every other company, recording revenue and costs of that revenue in the same period. (Called Generally Accepted Accounting Principles) . Your advocacy group, Oil Change International, breaks that down into two components. First, amortization of capital investment. Suppose your business has $2 million on Monday, and no other assets, so it's worth $2 million. On Tuesday, you buy a $1 million oil rig, which is producing as expected. So now you have $1 million cash plus a $1 million oil rig. How has the total value of the business changed? It hasn't. You still have $2 million worth of stuff. Buying an asset that will last a long time isn't the same as throwing money away, so you don't deduct the $1 million cost all in one year. Fast forward 10 years. The oil rig equipment is getting old and worn out. You could sell it for $200,000. You still have the same $1 million cash, plus you have an oil rig that's now worth $200,000. You didn't make any money selling oil, so all the company has is $1 million cash and $200,000 worth of equipment. How much is the business worth now? It's worth $1.2 million, $800,000 less than before. That's amortization- recognizing that equipment gets less valuable as it gets old and worn out, so you spread the cost over the useful life of the asset.
You WANT companies to correctly amortize the assets on their books. If they don't, they are LYING to investors, primarily people who are saving for retirement. When they don't amortize costs correctly you get Enron.
Depletion is the same thing, but for assets that "run out" rather than "wear out". Suppose you start with $100 million. Your company has $100 million cash and nothing else, so it's worth $100 million. You spend that $100 million dollars to set up operations on an oil field which has ten years worth of oil underground. Now how much is the company worth? Still $100 million, because it owns the $100 oil field operation. Go forward five years. You've used up half the oil. How much is the oil field worth now? Half the oil is gone, so it's worth half as much. That's depletion. That's correct, standard accounting in any industry; most industries call it "inventory". There's no subsidy there, simply correctly writing down what things are actually worth, then paying taxes based on those correct numbers.
...People are gonna claim it's proof that renewables don't work.
As an electrical engineer that works for a company that installs solar systems, they don't work. Well, when you add the government subsidies, that we all pay for in taxes, they're only bad instead of horrible.
As an electrical engineer that works on solar systems, they do work. The economic payback, however, depends sensitively on location (and electricity price, which also depends on location.)
A real problem is that a lot of people want to install solar because they want to install solar, not because they are in a particularly good spot. For my northern-Ohio, tree-shaded house, not very good economics. In the best location, however (high solar availability; high daytime electrical prices), solar economics work very well.
As the real estate people say: the three most important parts about installing solar are: location, location, location.
http://www.geoffreylandis.com
That article rants about two things, section 199 and the foreign tax deduction. Since you either don't care to spend two minutes looking up what those are, or your Google-fu is weak, I'll explain them for you.
Section 199 of the tax code is designed to discourage offshoring work to China and India. It applies to businesses which do any of the following within the US (or mostly within the US):
The manufacture, production, growth, or extraction by the taxpayer of tangible personal property (things). This encompasses all tangible property (except land and buildings).
Create computer software or sound recordings.
The production of films
The production of electricity, natural gas, or water
The construction of real property (buildings)
The services of architecture/engineering
In other words, most businesses that do their work in the US, rather than having it made/done elsewhere and only marketed in the US.
Explain to me how a tax provision that applies to any manufacturing, film production, software programming, music, construction, etc is magically a "special break for oil companies". They lied to you, bro.
Secondly, the article talks about the foreign tax deduction. The US taxes companies a bit more on foreign activities than any other country, but this deduction gets us a bit closer to what every other country in the world does. Suppose Ford, a multinational company headquartered in the US, has a factory in Australia, where they have Australian workers making Australian cars which are sold in Australia. Of course, they pay Australian income tax on these Australian dollar profits. If Ford were headquartered in other country, that would be the end of it. Because they are headquartered in the US, they have to pay double income tax on the Australia sales - first in Australia, then again in the US.
Before th deduction was added, in some cases that double taxation could create a total tax rate close to 100%. They might pay 10% income tax in Melbourne, 25% to Australia, 35% to the US, and 15% to the state. So 85% tax rate altogether. The deduction says that if they earned $100 in Australia and pay $35 in Australian income tax, they "only" get double taxed on the remaining $65. That applies to all businesses and natural persons. Absolutely nothing special about energy companies there. It simply says that anyone who pays foreign income tax gets double-taxed on the remaining money rather than being double-taxed on the total.