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Netherlands

Netherlands

Purchase price subsidies and big new targets -- New legislation in the Netherlands

A year of modest wind power growth in the Netherlands saw the cumulative total reach 1747 MW at the end of 2007, a 188 MW increase after accounting for decommissioned wind turbines, far less than the 336 MW increase in 2006. New installations amounted to 210 MW with 22 MW taken out of use. Wind power now supplies 3.3% of the country's electricity.

All of the new capacity was onshore, with Denmark's Vestas the market leader for the sixth consecutive year, supplying 147 MW, or 70% of the total. Among the Vestas projects was Evelop's 44 MW Koegorspolder wind farm south of Terneuzen, the biggest on land in the Netherlands so far. It uses 2 MW turbines. Germany's Enercon again came in second behind Vestas, supplying 19 MW, according to Wind Service Holland (WSH). Nordex was a close third with 17.5 MW, followed by local company Emergya WT (14.4 MW) and Siemens (9 MW).

While 2007 may have been relatively quiet for new installations, the same cannot be said for development activity. This year will almost certainly set a new installation record. Some 230 MW of new wind plant is due online onshore and a further 120 MW offshore, says WSH, taking cumulative wind capacity in the Netherlands comfortably past the 2000 MW barrier by the end of this year.

On the regulatory front there is good news too. After the shock culling of the country's market incentive system, the Milieukwaliteit Elektriciteits Productie (MEP), in 2006, four years earlier than it was due to end, a replacement program, the Stimuleringsregeling Duurzame Energie (SDE), is on the way. Announced by the government in its 2008 budget, the SDE is expected to come into play from April as part of a new national energy strategy.

The Netherlands is now aiming for an additional 2000 MW of onshore wind and 450 MW offshore between 2007 and 2011. Longer term the government wants 6000 MW of offshore wind plant developed by 2020.

Purchase price subsidy

The intention of the SDE is to effectively guarantee a purchase price for wind power, set at EUR 0.088/kWh this year. A price subsidy will be paid for the first 15 years of operation, which in 2008 is EUR 0.028/kWh for onshore wind, which will be added to an expected average wholesale electricity price this year of EUR 0.06/kWh.

The subsidy rate will be adjusted each year to movement in wholesale prices and an overall 500 MW limit has been applied. This effectively caps the cost of the 15-year price subsidy for projects coming online in 2008 to EUR 796 million, notes the wind industry. Subsidies will be allocated on a first come first served basis. The deadline for subsidy applications is December 31.

For offshore wind, economic affairs minister Maria van der Hoeven says new construction licenses will be granted in 2009 when the subsidy rate will also be agreed. Overall, the government has budgeted an annual sum of EUR 10 million for renewables development in 2008, rising to EUR 336 million from 2014. In total this amounts to some EUR 1.4 billion up to the end of 2014, it says.

Inadequate

While the new goals and the SDE are welcomed by the wind industry, most commentators say the government needs to go further if its targets are to be met and problems that plagued the old MEP program avoided. "A fear of a repetition of the MEP debacle is great," says WSH. "Many shortcomings remain."

At a round table discussion last month between key industry players and government officials, some participants branded the plan as "totally inadequate." The budget allocation is insufficient to meet the targets, says renewables company Econcern, and the price subsidy too low to make wind development viable in other than windy coastal locations. The company is one of several to call for a guaranteed power purchase price rather than a variable subsidy linked to the rise and fall of prices on the wholesale electricity market.

The Netherlands Wind Energy Association (NWEA) agrees. The way SDE has been designed, it says, means the subsidy for wind remains the same regardless of a plant's location, providing little incentive to develop projects in areas with poorer winds. The windiest half of the Netherlands currently houses 98% of all the country's wind turbines. Another downside to a flat rate subsidy is that owners of turbines on good sites end up with windfall profits. This was the main justification for scrapping the MEP in 2006 -- and the industry is concerned it could happen again.

Another major concern, says NWEA, is that there is "no clarity" on the legislation post-2008. Furthermore, offshore action is so delayed that new projects will not come online until 2012/2013, at the earliest (page 105). The association has also expressed disappointment at the lack of incentives for replacing old turbines with modern and better machines.

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