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Deregulation directive with wind in its sails

Possible liberalisation of the European electricity market is contained in the pages of an intricate policy document now wending its way through the European bureaucratic process. Although an open market will bring new opportunities for wind developers, the small print of the European Union's draft Directive on liberalisation will decide whether or not clean power stands a chance against coal, gas and nuclear.

The future market for wind energy in Europe is currently contained in the pages of an intricate policy document now wending its tortuous way through the European bureaucratic process. Liberalisation of the continent's sprawling electricity sector is slowly, but surely, on its way. But although an open market will bring new opportunities for wind developers, the small print of the European Union's draft Directive on liberalisation will decide whether or not clean power stands a chance against the might of coal, gas and nuclear.

Last month the draft Directive was passing through the European Parliament on its second reading. A delicate jewel of compromise, rubber stamped by the European Council of Ministers in mid 1996, the draft had scraped through the European Parliament's committee on energy, research and technology in November. Once it gets past parliament, the document will again return to Council for approval sometime this year.

The Directive aims to gradually create an internal market for electricity over the next nine years. Member states may invoke either a tendering or an authorisation procedure when granting licences to construct new generation capacity and may invoke either the negotiated Third Party Access or the Single Buyer systems to grant access to the grids.

What all this means for renewable energy in general -- and wind energy in particular -- is difficult to predict. At the "macro" level of traditional power generation, the major utilities are already jockeying for position and finding ways of securing their markets once monopoly barriers fall. At the "micro" level, such manoeuvring is well nigh impossible. Even though a free market will provide opportunities for direct contracts, green pricing and electricity trading by power brokers, small companies simply lack the necessary capital to be sure of securing their share of the brave new world of electricity supply.

This leaves renewables mainly reliant on clauses within the Directive aimed at securing a protected path by which new and vulnerable technologies can enter the market. The most important of these would seem to be contained in Article 8, which deals with power dispatching. Here renewables get a rare special mention: "A member state may require the system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power." This could well become the key clause for wind energy. In the draft Directive, priority for renewables on the grid is apparently considered of such importance that it is even repeated in Article 11.

Aside from this specific mention of renewables, for the most part the draft Directive only indirectly offers them protection. The preamble to the Directive contains 39 clauses to be taken into account when interpreting the document, all beginning with the word "Whereas." Clause 28 is of particular significance to wind energy. It states: "Whereas, for reasons of environmental protection, priority may be given to the production of electricity from renewable sources." Clause 37 might help too: "Whereas any abuse of a dominant position or any predatory behaviour should be avoided."

In the Directive itself, environmental protection is mentioned in several contexts. In Article 3, governments are allowed to introduce "public service obligations" which may relate to, amongst other things, environmental protection. Such obligations would be imposed on "undertakings in the electricity sector, in the general economic interest" and presumably would cover measures such as Britain's Non Fossil Fuel Obligation. They must be clearly defined, transparent, non-discriminatory and verifiable. As a means of carrying out such public service obligations, national governments may also require the implementation of long term planning.

Article 5 deals with government authorisation of new generating capacity and the criteria under which this should proceed. Included in the eight guidelines for such criteria, two could be relevant to wind energy: protection of the environment and the nature of the primary source of energy.

Ensuring that such clauses remain in the final Directive -- and making sure they are put to use at national level -- will be a job for wind and renewables lobbies in Europe for many years to come.

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