United Kingdom

United Kingdom

Tariffs should reflect real cost of energy

WORLDWIDE: During the second half of the 1980s, the Netherlands introduced a wind-power support programme that linked actual subsidy amounts directly to the nameplate capacity of turbines. Insiders explained that the scheme was motivated by a Dutch government desire to maintain close administrative control over subsidies.

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Adding up directly available nameplate power ratings for each newly installed turbine was considered fairly straightforward and a lot easier than processing yield statistics later on.

Not surprisingly, two clever local suppliers decided to develop dedicated turbine models "optimised" for these specific market conditions, products characterised by a high generator power rating and small rotor diameter. While this configuration offered customers attractive opportunities to maximise their business case, the turbines were inherently inefficient and suffered from much-reduced potential yields at average onshore sites. Companies boasting about Dutch market successes clearly failed to realise that many international market opportunities were being lost to competitors producing turbines that could offer superior performance and yield.

Many economic policy examples explain the imperfect market conditions they create, often with predictable side effects. Direct negative side effects of the Dutch subsidy were the loss of competitiveness and reduced export potential for the suppliers involved. The subsidy focus led to extra physical investments in an underutilised infrastructure, including heavier copper cables and transformers.

Sending the wrong message

Current UK controversy over wind-power feed-in tariffs involves huge tariff differences between turbine sizes, and a claimed favouring of custom-modified turbines up to 500kW. Last November, Sebastian Payne wrote a rather unbalanced anti-wind article in the conservative weekly The Spectator headlined "The great British wind scam", stating: "Your taxes are meant to be supporting smaller turbines. In fact, they're making giant ones less efficient." Payne continued: "Inquiries by The Spectator have revealed a scam known as 'de-rating'. Green businesses are modifying large turbines to make them less productive, because perverse government subsidies reward machines that produce less energy at nearly double the rate of more efficient ones. It's extraordinarily profitable for a few beneficiaries (...). In other words: turbines (have been) designed especially to game British subsidies."

The facts, as I see them, largely concur with Payne. Owners/operators of turbines less than 100kW do receive a feed-in tariff of £0.2165/kWh (EUR 0.256/kWh) here valued at 100%. The feed-in rate then drops to 83.3% for the 101-500kW category, 45.2% for 501-1,500kW, and finally to 19.2% for 1.51-5MW. The favourable UK feed-in tariffs for turbines up to 500kW, and the massive incremental drops for bigger sizes, are at a first glance remarkable indeed.

However, Payne loses track when he discusses turbine sizes (large and small), the de-rating modifications and whether this makes the installations more/less productive and/or efficient.

EWT, a Dutch manufacturer quoted in the article, offers 500kW and 900kW turbine models. The product origin is a 750kW Lagerwey turbine of the mid-1990s, upgraded to the current 900kW, which is not a giant size, as Payne believes, but a modest-size kilowatt-class model. Its de-rated DirectWind 54-500kW offers a specific power rating of 218W per square metre, a figure in line with the latest development trends for IEC class III low wind turbines.

For community projects in rural areas with limited grid capacity, this de-rating offers the combined benefits of lower cable and transformer capacity demand, reducing investments, while only suffering about 20% reduction in energy yield at common 7m/s average wind speed sites. Productivity per MW thus increases, with better grid integration and usage at lower costs.

That leaves a the question of the real impact of de-rated kilowatt-class wind turbines concerning taxpayer burden. UK government statistics indicate that last year 68 turbines rated 100-500kW became operational, while an EWT spokesperson quoted 40 500kW turbines installed since early 2012. Set against the total operating UK onshore market volume of 5,981MW, these numbers are tiny, which is reflected in their economic impact and burden on taxpayers.

Still, the fact that at least two suppliers decided to introduce de-rated 500kW turbines in the UK wind market at least suggests a possibility of a higher-than-necessary feed-in tariff rate for such machines. And if such imperfect market conditions do exist, a potentially larger impact in the future can simply be curbed by bringing some tariffs in line with the real cost of energy.

Eize de Vries is Windpower Monthly's technology and market trends consultant

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