Market upheaval in Denmark

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For the first time in more than a decade, Denmark's national budget will in all likelihood not include provision for a wind energy production incentive in 1999. Budget negotiations were still ongoing in mid December, but if the finance law is passed as expected, responsibility for meeting the premium priced payments for wind power will fall squarely on the shoulders of utilities from January 1. They will no longer be reimbursed for the DKK 0.17/kWh subsidy to which all private sector wind power generators are entitled.

The change in wind market regulations is part of Denmark's liberalisation of its electricity market, as required under the EU's regulations for an Internal Energy Market, the first phase of which starts next month. The country's powerful wind turbine owners association cautiously welcomes the move. "We are satisfied that the costs of producing the required amount of pollution free electricity from renewable energy is to be removed from state coffers and transferred to electricity suppliers and consumers. We are now rid of the uncertainty associated with each round of budget negotiations -- and of the accusations that we live from state subsidies," states the association's magazine, Naturlig Energi.

The association is already preparing its members for a new era of free market sale of wind turbine output, either directly to third parties or through Nordpool. At a recent seminar, association officers discussed a future role in organising members into large groups of green power traders, selling blocks of wind power. They also recognised the potential of forming alliances with other renewables sources, such as hydro generators in Norway, to enable guaranteed power delivery.

In the meantime, however, the organisation is preparing to fight for a continuation of long term power purchase contracts for its members at prices guaranteed by law. Government plans to create a green electricity market -- by obliging all consumers to buy a minimum amount of renewables power -- are viewed with considerable suspicion. Under the plans, the existing kilowatt hour subsidy of utility payments will be replaced by allocations of "green credits," which wind turbine owners may trade to the highest bidder on the protected green market. Effectively bidders would be electricity distributors seeking to meet their green quota obligations.

According to Knud Pedersen from Denmark's energy ministry, "We will replace a good model with one which is even better." The turbine owners association, girding its loins for a period of tough negotiations with the government and utilities, describes the government's aim as a "thin hope" on which to base the future of wind power in Denmark. It warns of the uncertainties associated with a complicated market structure and says it "could lead to the end of the common people's involvement in wind turbine projects which, without doubt, will lead to a deep cleft in the broad support for renewable energy." A carefully constructed period of transition to the new market is essential, says the association.

A definitive framework for the future wind power market in Denmark is not expected to emerge before the summer.

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