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Netherlands

Netherlands

Dutch wind takes more regulatory hits -- Uncertain times

Subsidies for onshore wind power in the Netherlands should be cut from EUR 0.049/kWh to EUR 0.048/kWh in 2005, recommends a study by the Dutch Energy Research Centre (ECN) and consultancy KEMA. But offshore wind subsidies should be retained at EUR 0.069/kWh. The study was commissioned by the economics ministry and reviews the subsidy levels of all forms of renewables.

At the same time as considering subsidy reductions, Jan Peter Balkenende's centre right government is asking parliament to approve an end to the tax exemption on green power, which allows power retailers to sell green power for the same price as "grey" power.

The proposed one tenth of a cent drop in the subsidy, known as the MEP, paid directly to Dutch wind plant operators is due to what the ECN terms "diminishing investment costs." It says these will drop from EUR 1150/kW installed in 2003 to EUR 1100/kW in 2005, compared with an international range of EUR 895-1269 for each installed kW. ECN further assumes that wind power sold on the open power market will fetch EUR 0.027/kWh and grid imbalance costs will amount to EUR 0.06/kWh, effectively giving operators EUR 0.021/kWh, before the subsidy, or EUR 0.069 including the proposed EUR 0.048/kWh.

The report rejects industry arguments that the investment cost estimate is too low as it is based on the best coastal sites and fails to include grid costs. The true cost for installing a kilowatt of wind generation, according to utility Essent and the power sector's umbrella organisation Energie Ned, is EUR 1250-1300.

Of greater concern

For most in the industry, however, the exact level of the MEP subsidy is of secondary importance to its payment for only the first 18,000 hours of operation at full capacity, or the first ten years of operation, whichever comes first. "We will now try to get our arguments about the subsidy rate heard in parliament, but our priority is to get the full-capacity hour ruling changed," says Mathieu Kortenoever, head of wind turbine owners' association PAWEX. "As it stands, after the 18,000 hours are up, wind turbine owners will only be able to sell their output as grey power, less the imbalance costs."

Controversially, the full capacity regulation was explicitly placed outside the terms of reference in the ECN/KEMA report, having already been the focus of considerable debate. After industry claimed it would encourage fraud, ECN acknowledged it could provide the "wrong sort of stimulus" (Windpower Monthly, July 2003) and economics minister Hans Brinkhorst has promised a review in July.

The decision to levy the full REB energy tax on green power as well as grey will effectively end the import of cheap, predominantly biomass-generated, green power from abroad, says Kortenoever, which should benefit domestic wind power investment.

Reactions to the regulatory changes from the wider renewables community have been far more forceful. Econcern, a leading renewables firm, describes the government plans, which also include an end to a range of energy investment tax breaks, as a "disaster for the renewable energy market." The sudden 180 degree turn away from stimulating demand to stimulating supply will destroy confidence in the market and drive away investors, it says.

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