Under the terms of the contract signed at the end of January, Energie Noord West (ENW) paid NWP a "nominal sum" for 200 renewable energy certificates-each representing 100,000 kWh of electricity generated from wind energy supplied to the UK's electricity network. The certificates will help the utility meet its voluntary commitment to buy 3% of its electricity from renewable sources. ENW will use the certificates to guarantee to customers that emission free power from a renewable energy source has been delivered to the electricity network.
The contracted electricity comes from NWP capacity that has already been subsidised under the UK's Non-Fossil Fuel Obligation (NFFO) system of renewables support. NWP has three wind farms, totalling 24 MW, whose NFFO contracts expired at the end of 1998. National Wind Power stresses that only a very small proportion of its capacity is tied up in the deal with ENW-just a few percent of the 24 MW. As Peter Musgrove from NWP points out, the arrangement is very much a "token transaction," regarded by both companies as a test case to establish the principle of extending the Dutch system of trade in green certificates across national boundaries.
Under the Netherlands' Green Label system, local distribution companies pay renewable energy producers the market rate for electricity, plus the ecotax which would normally be remitted to central government. They also issue the producer with Green Labels which can then be traded on an open market driven by the Dutch utilities' voluntary obligation to secure 3% of output from renewable resources by 2000.
The ENW/NWP deal is partly intended to promote the international possibilities of this trade in "virtual" renewables. Thus, while the kilowatt hours generated by NWP will go to UK consumers, their environmental value-added component will be sold on to ENW's Dutch customers. For its part, NWP loses the right to market the renewable component on the UK's emerging green power market.
The test case is also intended to shed light on some murkier areas of European renewables policy in general and the Dutch system in particular. The cross subsidisation the deal has resulted in is an inevitable consequence of a liberalised market without agreed rules. An attempt by the European Commission (EC) to introduce common rules-in a proposal for a Directive for a pan-European renewables market-was derailed two months ago after conflict within the renewables lobby (Windpower Monthly, February 1998).
In the Netherlands, ENW is nonetheless confident that the Dutch utilities' association, EnergieNed, as the certifying authority for Dutch Green Labels, will recognise the legality of the transaction. But at present there exists no mechanism for issuing the British company with the certificates ENW has bought.
This is one of the flaws in the deal that ENW's Willem Fredrick Metzleer is keen to see sorted out: "The voluntary obligation makes the Dutch situation quite confusing to outsiders; regional utilities issue the labels and also buy the labels. We hope that this deal illustrates the need for some independent organisation to take over the task of certification. Apart from national governments, there are enough well-known organisations-such as the WWF-who could perform this function".
In the interim, Britain's Energy Saving Trust has been authorised by the UK government to produce a renewable energy accreditation scheme. "Once that comes into existence, all renewable energy producers in the UK will be able to sell Green Labels on the market," comments Metzleer. "There is in effect an international currency in green labels coming into existence as a result of this deal."
Indeed, National Wind Power hopes that the initiative will pave the way for a green certificate system in the UK-particularly given the explicit EC backing of this model of support for renewables in Europe. In its Directive proposal, the EC favoured an obligation for a fixed percentage of renewables in the supply mix of each member country, backed by cross border trade in green power credits. "The simplicity of the percentage obligation option, which leaves the industry to deliver it in the most cost effective way, is something we are keen to see encouraged," says Musgrove. The move to cross border trading is inevitable, he believes. "It will not happen overnight, but the sooner it does the better."
Metzleer agrees: "Countries in Europe have quite similar problems with old fashioned subsidy systems, which are brilliant in themselves but which will be difficult to maintain in a changing market." Continuing with subsidies, he says, will obstruct mechanisms which are vital to healthy development. "We think the Dutch Green Label system could be a solution to the development of renewables in a liberalised market," he adds. As a result the Dutch have held informal talks with counterparts in Britain and Denmark, with the aim of advancing a pan-European model. "It could grow into something very big-and we don't want a situation where people who benefit from the old system are also getting the benefit of the new," warns Metzleer.
Need for rules
The prospect of Dutch and British renewable energy producers operating in a common market raises questions, however, about the legitimacy of trade between producers benefiting from different levels of subsidies. Metzleer is keen to see these issues brought into the open. The deal should send a clear political signal to Brussels about the pressing need for European legislation to eliminate the current irregularities in the renewables playing field, he feels.
Metzleer acknowledges the possibility that ENW has opened the door for Dutch utilities to go to wholly or partly subsidised markets and acquire certificates at knock-down prices rather than paying Dutch producers the NLG 0.05/kWh currently commanded by domestic Green Labels. Again, he insists this is a test case: "I'm very pleased that situations like this are addressed as possible flaws or possible dangers in national policies, but I'm convinced this is not going to happen." Optimistically, he believes that market forces will themselves help prevent abuse of the system: "We have to be very careful first of all that our customers are aware of the possibility that they can go green, that the system is convenient, perfectly legalised, and transparent like other financial markets."
For the time being ENW believes a softly-softly approach is in order. The company has been approached by other UK wind energy producers interested in similar contracts, Metzleer says, but ENW wants to wait and see what sort of discussion is generated by the NWP deal, both at home and abroad.