Tuesday, December 3, 2013

Too Big to Fail? RICL, a Failed Business Model

Michael Skelly ant Clean Line Energy says wind energy is can compete with natural gas energy at $7 per mmbtu and is definitely in the money at $10/mmbtu

Today's natural gas price is just below $4.00 per mmbtu.

 The Chicago Hub of PJM price for energy is $29.88 per Megawatt Hour. and $32.87 in the New Jersey Hub. 

At these prices and using the baseline from Skelly himself, wind energy is out of the money and clearly not competitive.  This project will not cashflow.


If wind energy cannot compete on an open market without receiving government subsidies from the Production Tax Credit, without the creation of artificial demand from Renewable Portfolio Standards, and without ratepayers paying for RICL though cost allocation, then why is it needed.

The RICL business model is not viable. Who is going to pay for RICL if it is built and the company collapses?  Will FERC let RICL fail?  Will FERC say RICL is "TOO BIG TO FAIL."

Will ratepayers end up paying for RICL?

The bottom line is, at these energy prices and natural gas prices, RICL is not viable.

Yeah, when RICL was conceived, market conditions were vastly different.  Energy prices were higher.  Wind Turbines were being built left and right due to Obama Stimulus.  Natural Gas prices where higher before the last FRAC boom.

The market has changed.  For RICL to continue based on a business model from boom market conditions is foolishness. 

You know, the smartest thing Clean Line Energy could do right now from a business standpoint is withdrawal their application to the the Illinois Utility Commission.  They're going to get slaughered, filleted from every angle and there will be no recovery for Grain Belt Express. 

GBE has to pass through Illinois.  If RICL fails miserably at the Illinois Utility Commission, it will be a tough uphill climb to make a better argument for GBE.  The smart thing to do would be to withdrawal the RICL application now, before it gets torn apart by experts, wait two years, and hope people go away and forget about Clean Line Energy.  (Like that's really going to happen.)

The folks at Clean Line are too arrogant to realize their defeat is imminent. 

No comments:

Post a Comment