Economic fears scare off oil giant

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Norway's Statoil has pulled out of a 150 MW wind project for the island of Smöla -- where construction of 100 turbines is to begin this year -- and abandoned any future plans in the sector. "Wind power is no longer interesting for us because electricity prices in Norway would have to double in order for it to be profitable," says Statoil's Bente Hagem. The remaining project partners, Nordmöre Energiverk and Norsk Hydro, are expected to continue on their own.

Adding insult to injury, Hagem says: "We want to be in renewables, but we intend to concentrate on bio-energy, primarily biological fuel for heating and the development of heat pumps." Statoil also reckons that construction of several natural gas power plants on the west coast -- a controversial project, but one which is gaining increasing political support -- will generate at least as much power as 1500 wind turbines.

Smöla also features in a new wind plant application by national utility Statkraft for three projects totalling 138 turbines, 276 MW, and 770 GWh annual production. The combined cost of the projects (at Smöla, Hitra and Stad) is projected at just under NOK 2 billion. The cost projections assume a 25% capital subsidy from the Norwegian Water Resources and Energy Administration (NVE) and tax exemptions.

Recent press comment has been hostile, with commentators describing the government's wind policies as "castles in the air." The Bergens Tidende newspaper writes: "Most of these wind farms are going to end their days in a queue because government support is inadequate. The final bill for subsidies will be sky high."

According to professional journal "Energi," the wind program alone would cost NOK 1.5 billion in subsidies to private developers and Statkraft. Moreover, "Norwegian developers insist that government subsidies must rise to NOK 0.15 per kWh before the level of risk is ... acceptable." Energi calculates that NVE's probable authorisation of 435 MW of wind project this year would require about NOK 760 million in grants, of which only NOK 100 million is available. And the government's declared wind targets imply expenditures on annual subsidies alone of about NOK 150 million.

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