Our most recent economic bubble was the dot.com bubble, when every Internet start-up was going to make a fortune. Few survived.

A ‘bubble’ is an economic term for an industry which is overvalued and which keeps on growing in notional value – becoming bigger and bigger (with a bright, shiny iridescent look) until, like all bubbles, it bursts. This happened recently to the renewable-energy industry in Europe.

Below are some sample stories.

Renewable-energy investment goes up in smoke – The Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technolo- gies, backtracking on its push for green power. The story under this headline reads: “That measure, along with other recent laws, including a tax on power generation that hit green energy investments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say (Reuters, February 15, 2013).”

Germany and Spain throw green energy under the bus – Consumers in Europe are revolting against their countries’ green energy policies. The story reads: “For over a decade, the governments of Germany and Spain have been funding their sub- sidies for solar and wind energy by passing on large costs to the consumer. In Germany, an extra charge is added to household electricity bills, and that charge nearly doubled in January. Worried about the consumer reaction, Merkel’s government is now furiously backpedaling (Via Media, February 17, 2013).”

There are plenty of other stories.

Let me tell you a story. Once upon a time, Graham, living in Swaziland, got chipped off at the poor quality of the Swaziland Electricity Board power supply. So he paid for a hydropower station to be built. “Stupid Graham,” said people behind his back, “the power it produces will cost a fortune!”

They were right. The power station cost R3-million and to cover just the building costs, the cost of each kilowatt hour produced was R0.02/kWh – spread over 30 years. At the time, you could buy a kilowatt hour for one-tenth of that. Well, the hydro station is now 26 years old and still produces power at a cost of R0.02/kWh – but the power is sold at ten times that.

The station makes a very handsome profit – but it took ten years to break even. Renewables developers fail because they want to make a profit within a few years of construction. Thus developers sell their power at an inflated cost to power companies – in South Africa, the developer receives R 0.89/kWh but the cost of this energy to Eskom (including other costs) is an average of R2/kWh to R12/kWh over five years.

This is five times the cost of generation from Eskom power stations. Who pays? If Eskom must find another R2 for each kilowatt hour, it will get it from you, the consumer. Eskom is asking for a 16% price hike each year for the next five years – and 3% of the 16% is to cover renewable-energy costs. As Eskom CEO Brian Dames says, “nobody should think this power (renewable) is cheap”.

So, what will happen to the big renewables projects in South Africa? Quite simply, the country cannot afford 16% power hikes each year so, sooner or later, somebody will draw a deep breath and take renewable energy out the back and drown it. Amid a huge legal battle. But it will happen as sure as bubbles burst. The picture may be blurred but it is visible – Danish wind turbine giant Vesta’s share price has fallen from about R900 to R50 over five years. The company has a price-to-earnings ratio of 2 600, so it would take about two-and-a-half millennia to get your original share investment back. No wonder they are so keen to flood us South African suckers with turbines.

But I do believe in renewable energy. While receiving no government support or subsidy, I personally give solar lamps at no cost to rural people so they can put their paraffin lamps to one side. In many areas, paraffin costs R6 per tea cup. A paraffin lamp uses one tea cup of paraffin a day. So the solar lamps are a real winner . . . and sustainable.