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Germany

Germany

Pressure mounts for cross border trade -- German electricity trader looking for cheaper green power

German power marketers are looking for opportunities to bring cheaper renewables generated power into the country. Output from clean sources at home is priced out of the fledgling green power market because of the high fixed tariff set by government. One green electricity trader hopes that new transmission rules and cross border tariffs now being prepared will enable it to sell wind power generated in Spain or elsewhere to German customers, either physically or in the form of a green credit derivative. It has already received an offer of wind power from Denmark.

As the tiny market for green electricity in Germany struggles to find its feet, traders are looking for opportunities to bring cheaper renewables generated power into the country. They hope that customers will buy more green power if prices are lower.

The premium rate at which utilities must buy all renewables generation in Germany keeps its price at DEM 0.178/kWh, too high for green power marketers to be able to attract any but the greenest of consumers. Potential traders are taking heart, however, that at least two obstacles to trade in electricity across Europe, be it green or conventional, should be overcome by the end of the year -- giving them access to new and cheaper sources.

The organisation of European Transmission System Operators (ETSO) plans to have Europe-wide rules on transport of electricity across Europe in place by the turn of the year and is working on proposals for the implementation of cross border tariffs for introduction in 2001. ETSO is also evaluating congestion management methods for cross border transmission to cope with bottlenecks when power trading across Europe begins in earnest.

One green electricity trader, Unit Energy Stromvertrieb, of Bad Homburg, hopes that mechanisms will eventually be in place for it to sell wind power generated in Spain or elsewhere to German customers, either physically or in the form of a green credit derivative. As Unit Energy's Sebastian Gallehr explains: "Obviously, no wind plant operator in Germany will sell power at less than the premium rate guaranteed by the renewable energy law." Neither, he stresses, do green power traders want to undermine the law. "So at the moment we sell a mix of green power including cheaper hydro power and biomass under contracts signed up before the renewable energy law took effect."

Offer from Denmark

But customers are not racing to buy this power, partly because of its expense. "To half way make ends meet, our profit and administration have to be valued at zero," Gallehr says. He is far from despondent, however. His company is actively searching for ways of bringing cheaper foreign generated power into Germany. "We hit on this idea after we were offered renewables electricity from Denmark," Gallehr says. "It's a very exciting time. Every day new developments take place in the electricity market and we are represented in all the relevant working groups. We'll find ways of making this work." The Danish offer was withdrawn when the seller decided it would be a safer bet to stick with the domestic remuneration for renewables output.

Dutch power from utility NUON, now a major stakeholder in Unit Energy Stromvertrieb, would be welcomed by the German power trader, but under EU law it may not import it. The household consumers market in Holland is not yet open to competition and a reciprocity clause in the regulation governing Europe's Internal Market for Electricity prevents electricity generated in Holland from being sold to household customers in Germany.

not easy to switch

No more than about 10,000 customers are opting to pay more for green power in Germany out of 43.5 million consumers. The sales are split between the direct supply of customers -- where suppliers use third party access to the electricity network to access household consumers -- and the premium model used by many municipal utilities where customers buy "normal" electricity and pay a premium for a specified amount of green power. Premium revenues go into a utility held fund to finance new renewable energy projects.

Direct supply of household consumers has been possible in theory since 1998, but it has only been since February, when Germany's second industry agreement on negotiated third party access to the grid allowed household customers to switch electricity supplier, that some brave pioneers have done so. Switching supplier in Germany, however, is still far from easy.

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