Messing around with Green Energy
Pfäffikon SZ, Switzerland – The cancellation of the Dutch coal deal reaffirms once again that agreements made on energy come at an unreliable balance for consumers and businesses. The Dutch coal deal circles around the energy accord in which it was agreed that coal taxes for exploiters of coal plants would be reversed. In exchange for which older and more polluting plants would be closed at a faster rate and green energy would be stimulated. Now that the highly volatile oil price has dropped sharply, many market participants are rethinking their judgment.
Murky
I have always found green energy to be a murky subject. At the end of last century energy companies had to be in the possession of so-called “green certificates”. On the basis of these certificates energy companies could sell green power. Things did not quite unfold that way and the energy companies sold more green power than they could deliver on. During this time green energy was completely, or partially, exempt from the “Regulerende Energiebelasting” (Regulatory Energy Tax). The calculation was performed – remarkably so – by the energy companies themselves. An awakened tax inspector uncovered some inconsistencies which ultimately led to an after-tax of 400 million euro.
Fixing prices
Fixing one’s energy bill seems to be the new folk sport. The “first level thinker” believes he’s being smart by now opting for a fixed energy bill. The price, however, is based on the long-term market prices. The odds that your premium is (too) high are not negligible. Moreover, who can predict the future? No one can predict the oil price, most certainly not the tele-salesperson at your energy provider. Additionally, it is wise to first read the small print in your energy contract because some energy providers can still raise the price you thought you fixed. In this manner a third goal has been added to the football field.
The Dutch horticulture industry tried to get a piece of the pie with regards to the rising demand for energy. In the end it cost many horticulturists their heads due to the high installation costs of a so-called WKK boiler in combination with an ever-decreasing oil price. Not to mention the fixed price contracts. It’s a miscalculation I see more often. Speculating with too many – unpredictable – variables is a recipe for disaster.
Myth
Messing around with (green) energy seems to have become commonplace. Governments in many ways try to stimulate the green myth and to keep it going. The Dutch coal deal is not the only example. Moreover, it was the “Autoriteit Consument en Markt” (Authority for Consumers and Market) that previously had forbidden the closing of coal plants. Supposedly there were indications of a cartel agreement, which is no petty indictment. Again it’s the consumer who seems to be getting the short end of the stick – not to mention the environment.
Green energy is a beautiful political instrument to score points with voters. But when you take the time to exchange thoughts with a seasoned tech guy on the topic of energy you will quickly come to the conclusion that green energy – for the time being – is subsidized nonsense. The Dutch citizen will soon receive yet another invoice from the Hague, this time it’s an energy bill instead of a bill for an additional payment to Greece.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above shares and has no intention of doing so in the next 72 hours.
