Merryn's Blog

How wind turbines generate huge profits for landowners

Wind turbines may not be the most reliable generators of electricity. But they're pretty good at generating fat profits for rich landowners, all subsidised by the likes of you and me.

I had a look at a community wind farm project last week. It has now been postponed, so whether you should invest in it or not is by the by. But while researching its figures I began to see just why so many UK land owners - big and small - are so into renewable energy.

Let's say you apply for planning permission to put one 500kw turbine up on your land. You get it, and you put the thing up before October (when subsidies are to be cut slightly). Then it operates at about 35% of capacity.

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Getting it up will cost you something in the region of £800,000 - £1m, based on providers I've asked (depending on the turbine and the terrain). Let's say £900,000 for the sake of argument. But you'll then get paid 20.6p per kilowatt hour of energy produced, something that will bring you revenues in the region of £310,000.

Obviously, you'll have costs an annual service and maintenance contract will cost you £12,000 - 18,000 a year. Let's say £15,000. Then, if you borrowed the money, you'll have financing costs. Assuming you are running a repayment deal of some kind, those will come in at about £85,000 (I'm assuming a 7% interest rate here).

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Your annual take? It is well over £200,000, even if there are expenses I haven't thought of (or been told about). But it gets better. Your income is inflation linked. So as the real value of the debt falls, the real value of the payments you'll get will stay the same. For 20 years. That means your take, in real terms, over the lifetime of your subsidy guarantee, is going on £4,500,000.

And that's just from one turbine. Why stop there? Big landowners can make more from putting up several turbines. And really big landowners can go for broke by teaming up with a big energy company to make a proper wind farm.

Alice Thompson, writing in the Times a few weeks ago, pointed to one UK landowner making "nearly £2m" a year, and another who is "expected to make £1.5m a year from his development".

Shocked? You should be. After all you are paying for all this. The subsidies that facilitate this huge transfer of wealth are paid via a charge on your utilities bill.

I've written here several times before about land taxes, but it seems to me that wind farms exemplify the point pretty well. Those on whose land they stand experience huge positive land value they do nothing, but they make money. So why aren't those gains subject to a land tax, or at the very least a windfall tax?

And what of those who have to look at their neighbour's turbines (and new Range Rovers) from their front rooms? They are experiencing severe negative land value. Why aren't they compensated? Doesn't make much sense does it?

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Regular readers will also know that I have written here many times before about the need for some kind of income redistribution to help us out of crisis (preferably via less state rather than more state). This isn't quite what I had in mind.

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