New era begins in a changing climate

Despite the huge growth spurt in installed wind capacity in the Netherlands over the last three years the dominant mood in the sector remains cautious. The government axed its direct state support for wind energy in 1995 marking the end of an era and the beginning of a new, more complicated chapter. Uncertainty remains over wind power tariffs, the effect of market liberalisation and the real level of political commitment to clean energy policies. Tables of market share per manufacturer, wind capacity by province 1995 and installations by company 1996.

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The huge growth spurt in installed wind capacity in the Netherlands over the last three years points to a bright future, yet the dominant mood in the sector remains cautious. The final projects developed with government subsidies is now in the ground and wind is facing a new era. But uncertainty remains over wind power tariffs, the effect of market liberalisation and the real level of political commitment to clean energy policies

Given its international image as the country of windmills, the modern day Netherlands has been surprisingly slow to tap into wind as a renewable energy source. Throughout the 1980s and early 1990s, the volume of installed capacity increased at a snail's pace of no more than 20 MW a year. In 1995, however, that figure more than quadrupled with 100 MW added to the national total, while this year 106 new turbines have gone into the ground so far, with a total capacity of 34.9 MW.

At the end of August, installed capacity in the Netherlands had reached 272 MW, supplied by 1034 wind turbines -- now more numerous in the Netherlands than the traditional windmills. Having passed this historic milestone the mood of the Dutch wind community might be expected to be upbeat. But one swallow does not make a summer, warns Allard van den Steege of the Dutch National Bureau for Wind Energy. "The 1995 figure is exceptional. It reflects the fact that in 1994 the government made the award of investment subsidies conditional on applicants specifying a completion date [for turbine installation] and securing the necessary planning permission and agreements with the utilities," he explains. Government subsidies for wind plant installations were axed in 1995, "and as a result we saw a last minute rush to get projects up and running," Van den Steege says.

So far from signalling that wind power in the Netherlands has finally come of age, the 1995 figures point to the end of an era and the beginning of a new, more complicated chapter. According to industry observers, two issues dominate the current debate on the future of wind power in the Netherlands: the physical limits on installed capacity and the question of whether wind power can hold its own against more traditional forms of electricity generation in a deregulated or "liberalised" energy market.

Public tolerance

For the past five years, the Dutch wind community has been working towards a target of 1000 MW of installed wind capacity by the year 2000. This figure was agreed in a 1991 covenant between the ministries of economic affairs (EZ) and environment (VROM) on the one hand, and the provincial councils and power distribution companies of the Netherlands' seven windiest provinces on the other. Each of the seven -- Groningen, Friesland, Noord Holland, Flevoland, Zuid Holland, Noord Brabant and Zeeland -- agreed to make provision for a percentage of the total megawatts required, ranging from 250 MW in Noord Holland and Zeeland to 50 MW in Groningen.

More recently, however, the "1000 by 2000" mantra has begun to sound a little hollow. In 1994, EnergieNed, the umbrella organisation for Dutch utilities, suggested that 400 MW was a more realistic target for the millennium, and in 1995 widespread public resistance to large scale wind farms on aesthetic and wildlife grounds led the province of Friesland to cut its agreed capacity target from 200 MW to 50 MW.

Although the ministry of economic affairs still holds to its 1000 MW by 2000 target, a spokeswoman admits that "its importance is being played down and an overrun of four to five years is anticipated." And while the importance of national mission statements of this kind is often more symbolic than realistic, they give a vital indication of the level of political goodwill towards wind. "Such goals are always fairly arbitrary," says Gijs Piepers, an industry advisor to government who together with colleague Jos Beurskens of the Dutch national laboratory was responsible for setting the 1000/2000 target. "The figure was never meant to be set in stone; it was always just something to work towards."

Nevertheless, the fact that some provincial authorities are backpedalling on their target commitments seems to indicate that the wave of enthusiasm for wind power may be ebbing even before it has fully taken hold. This impression is further strengthened by economic affairs minister Hans Wijers's announcement that the long term target of 10,000 MW renewable capacity by the year 2020 is no longer considered feasible.

Ruud de Bruijne of NOVEM, the government agency responsible for the administration of wind policy, says his office is currently assuming "a public tolerance level of 1500 MW installed capacity." "We are now actively researching the possibilities for development in non-traditional locations," he says.

De Bruijne is relatively optimistic about the future. Of the four "non-traditional" types of location being considered, he expects to see developments in the near-shore and inland categories in the very short term and is confident that offshore projects and the use of imported wind power are viable options for the long term. "We can see a convergence of interests here. Experience both in Holland and abroad shows that large wind farms comprising numerous low capacity turbines meet with more local resistance than installations with fewer, larger capacity machines, and it is precisely these turbines that will allow us to achieve the economies of scale necessary to make offshore projects cost-effective."

Market forces

But even should De Bruijne's confident prediction that the wind community will manage to maximise capacity despite increasingly forceful opposition from local activists prove well-founded, the future of wind power in the Netherlands will largely depend on its ability to compete in an energy market which is to be "liberalised" from January 1998.

By axing its 30% investment subsidy in 1995, the government effectively ended an era of direct state support for wind energy and made return on wind investment wholly reliant on sales of electricity. In place of subsidies, it has proposed a series of measures which are calculated to make energy from renewable sources competitive on an open market.

These include the levy of a so-called eco tax on non-renewable forms of energy introduced on January 1 this year; "Green fund" regulations giving tax breaks on returns from investment in environmentally sound initiatives; and VAMIL, an arrangement under which such investments can be written off against tax at any time -- a scheme which will be particularly attractive to firms with a fluctuating annual income.

Whether these measures will be sufficient to stimulate investment in the wind sector is still unclear. Ernst van Zuylen, President of PAWEX, the Dutch Wind Turbine Owners Association, says the mood among its members is "uncertain," mainly because by September no national tariff for 1997 for purchases of wind generated electricity had been agreed. Without agreement on tariffs the market remains in a kind of limbo, he says. "Our meetings explaining the new tax incentives are well attended, people take copious notes, then they leave and nothing happens."

The national tariff, currently set at NLG 0.163 kWh for all projects smaller than 2 MW came into effect when the subsidies ended. It is considered viable only in the very windiest regions of the Netherlands. Unless there is a substantial improvement in this round of negotiations there will be little economic incentive for small scale projects throughout most of the country, industry observers suggest.

This would effectively put future development in the hands of the electricity distribution companies and larger private/public ventures -- with all the attendant planning and environmental problems. Consequently, the new regime is not without its critics. Off the record one commentator says he regards the whole idea of negotiated tariffs and tax breaks as misguided, arguing that "it encourages the wrong sort of investors -- big companies concentrating on big projects with no local connections and who consequently arouse strong local opposition."

Instead, he suggests, "the government should follow the German model and set a premium rate for wind power of around NLG 0.20/kWh which would encourage local initiatives, particularly from the farming community. The present policy is stifling development."

Mirjan Tillen of ODE, the association for Dutch wind co-operatives, has some sympathy with this view. She agrees that in the absence of a 1997 tariff, the present situation does not encourage the individual investor, adding "we are currently in the strange position of having large institutional investors who want to make use of the green funds scheme -- and put money into wind -- but with too few initiatives to absorb the funding." She, too, would like to see a national tariff of NLG 0.20 kWh to stimulate individual initiatives. But she adds that, on the whole, ODE members are happy to see the end of the subsidy system, which they regarded as something of a lottery. Tariff uncertainties apart, Tillen is upbeat on future prospects: "Interest in wind has gathered such momentum that these short term obstacles will be overcome," she believes.

NOVEM's Ruud de Bruijne agrees that the development of small scale projects may have stalled temporarily, but insists that the overall picture remains healthy with enough projects in the pipeline for the agency to be optimistic about meeting its in-house target of 100 MW per year. "At the moment we are in a transitional period, but as activity intensifies we can expect an increased level of support," he says.

On whether he sees any contradiction between the government's long term commitment to environmentally friendly energy on the one hand and to market deregulation on the other, De Bruijne points to the doubling of the R&D budget for renewables as evidence of continuing political good will. Although it is still too early to assess the full impact of the new financial structures, the market is beginning to generate its own solutions, he argues.

Facing liberalisation

That the proposed liberalisation of the energy market is already leading to a radical rethink of existing methods of wind financing is apparent from the discussions surrounding the Netherlands' long standing environmental action plan (MAP) under which a percentage of the consumer price of electricity is earmarked for the development of sustainable energy.

When the electricity distribution company for Noord-Brabant, PNEM, announced last year it was dropping out of the programme and would no longer collect the clean air levy from its customers, there was general consternation in the wind industry. Utilities REMU, EDON and Delta cried foul play, accusing PNEM of trying to poach customers by undercutting their prices. The subsequent announcement by the ministry of economic affairs that it would consider forcing power distribution companies to purchase a certain amount of power from renewable resources was widely interpreted as a threat to bring the utilities back into line prior to the current round of MAP negotiations.

At the time of its defection, PNEM defended its action on the grounds that the levy was no longer necessary to meet its environmental commitments as it had introduced a "green electricity scheme" enabling customers to purchase power generated from renewable sources at a premium rate.

With the eco-tax hiking the price of traditionally generated power, green electricity was only marginally more expensive, PNEM argued, making it a viable alternative for average consumers. The resultant "green" revenues would enable PNEM to meet its financial commitment to renewables development.

Today, these claims appear justified. Six thousand households are currently signed up to PNEM's green electricity programme, and the energy distribution companies EDON and NUON have introduced their own equivalents while similar schemes are being contemplated across the industry. NUON, committed to producing 150 MW of energy from renewable resources by the turn of the century, has announced that its green electricity proceeds will go to the development of a wind plant in the IJsselmeer comprising 19, 600 kW turbines.

The success of this free market solution to the problems of financing wind on an open market may have lasting implications for Dutch energy policy. Rumours are that in the current round of MAP negotiations the utilities are contemplating doing away with the environmental levy in favour of an open market for green electricity. It is also rumoured that far from resisting the government's threat to make a certain percentage of clean energy production compulsory, the utilities are in favour of the proposal. After all, if the obligation was imposed on all utilities including those based in the less windy inland regions, energy distribution companies with a viable wind capacity would enjoy a significant advantage in sales of wind power. PAWEX's Van Zuylen says that his members are "watching developments in this area with particular interest."

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