In five year's time, given the current industry growth rates of 35-40%, wind power will be contributing significantly to national electricity supplies in countries like Germany, Denmark, Spain, Ireland and probably Italy, Greece, the Netherlands and Sweden. There could well be others, too, which like Spain rocket forth from nowhere. With the economies of scale that such market growth -- in and outside Europe -- will bring, it is hard to believe that wind will not be fully competitive by 2005, even on sites with just average winds. Once competitive, it no longer needs the protected trading market the directive at one time set out to create. Only in countries like Germany, keen to exploit their low wind sites, will price premiums still be necessary. They should be allowed, just as long as they comply with the rules of fair competition.
A watered down directive was due to be nodded through by energy ministers late last month (page 19). If adopted, it should be enough to secure a continued political commitment to removing the obvious blocks to progress; it demands access to the grid on fair terms, streamlined site permitting, and a definition of what is and is not "renewable" energy. What this directive will not achieve is a fully fledged commercial market. Wind will still be regarded as the expensive upstart holding out its begging bowl -- and the industry will still have to spend time and money fighting that image against a powerful enemy, the fossil fuel lobby. Without a long term market there is no sure access to commercial contracts and thus no access to cheaper project financing and no real competition. The upshot is that the rapid escalation of the use of wind energy will not be achieved at least-cost for the citizens of Europe. That is a shame.
The least cost ideal, however, is still being pursued by countries individually, those opting to plump for legislation that mandates a rising volume of renewables power in electricity supplies. In this way, a guaranteed market comes into being, one that if structured correctly will drive prices down. The power of the market over price is being demonstrated by the newest project to be built in Scotland -- generating at startlingly little cost (page 19). Particularly in America, getting states to include a "Renewables Portfolio Standard" in electricity sector restructuring legislation has long been seen as the way to achieve long term market stability for wind.
The fruits of Kyoto
It might well not be the only way. Suddenly, a whole new market is bursting forth, springing from seeds sowed two-and-a-half years ago in Kyoto. It has taken just five months, not five years, for the first stirrings of emissions credit trading based on wind power to turn into serious talk of tenders and contracts (page 6). New wind projects today are being part financed on the strength of sales of their future emission credits. There are companies which are finding it economically sensible to prepare now for climate change legislation. Behind-the-scenes, one of those is a global-industry monster known to have an emissions trading deal using wind high on its current activity list.
That's not all. Deals for "merchant" wind projects, which sell power directly to the wholesale market, are seeing the light of day in America, in Canada and in England, concrete evidence that wind can now compete on price given the right market and the right site. In Spain, wind plant operators which opted out of the fixed payment support system and decided to risk the market are doing far better than their more conservative colleagues who thought they were playing it safe (Windpower Monthly, May 2000). Meanwhile, the niche markets for sales of green power at a premium are picking up, in Australia, in Germany, in Britain, in the US and elsewhere. Such voluntary markets are unlikely to ever to provide wind with more than pockets of business, but the projects developed to serve them have important public relations value.
With all this evidence of what market economics can do for wind, the EU's cold feet over launching a system for Europe-wide trade in renewable energy credits is regrettable, if understandable. But that is not to say that the huge effort that went into the directive debate has been wasted. Blueprints now exist for renewables trading mechanisms that would never otherwise have come into being. Accreditation systems for renewables, vital if green credits are to be traded as emissions offsets, are being born. And countries individually are introducing the kind of legislation that EC economists wanted done collectively. The threat of possible hard-handed EU legislation in five years time -- and the threat of trapping wind in a restricted niche -- will spur others to follow suit. Who knows, by 2005, thriving commercial markets for wind power could well arrive despite the lack of a directive.