Danish turbine owners as power traders

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A company specifically for the sale of green power credits was officially founded last month by the Danish wind turbine owners association, Danmarks Vindmølleforening (DV). The trading company, Danish Wind Turbine Owners Energy Company, will from January 2000 use professional power brokers to sell the around 600 million kWh of wind credits which are expected to hit the market at the start of the year. The same brokers may at a later stage also be asked to sell wind kilowatt hours as well as credits.

DV chairman Flemming Tranæs is optimistic about the earnings potential of wind plant operators on Denmark's about-to-be liberalised electricity market. "I believe the market for privately produced renewable energy will grow faster than we can imagine," he says. Tranæs stresses that the new trading company is entirely independent of DV and there is no question of a "wind turbine owners' monopoly." The utility sector is not so sure. It has already warned that it will keep a close eye on the company's activities, fearing that the wind turbine owners could attempt to monopolise trade with the new renewable energy certificates. If there is any suspicion that this is the case, recourse will be made to the competition ombudsman, one utility has warned.

As part of the broad electricity liberalisation upheaval, Denmark's existing system of wind power subsidies will cease. Instead, wind kilowatt hours will be allotted green credits, referred to in Denmark as "RE certificates." Sale of these by turbine owners will top up the price for which wind power is sold on the open market.

Before becoming eligible for credits, however, all turbines built before January 2000 must operate for a specific number of full load hours, depending on turbine size (Windpower Monthly, July 1999). During this period, and this period only, they receive a production subsidy of DKK 0.17/kWh. The first 600 million kWh of green credits to come onto the market in January will be from turbines old enough to have exceeded the full load hour limit.

To further cushion the transition from a subsidised world to the cut-and-thrust of market life, all wind turbines built before January 2003 also receive DKK 0.33/kWh for at least the first ten years of operation, plus a refund of the Danish CO2 tax on all electricity, amounting to DKK 0.10/kWh.

Quota market

The government has created a market for green credits by placing an obligation on all consumers to include 20% of power from renewables in their electricity consumption by 2003. In practice only large consumers will contract directly for green power, while domestic electricity users will shop among regional electricity suppliers. The onus will thus be on the supplier to ensure the right proportion of renewables in the supply mix. A minimum green credit price of DKK 0.10/kWh is stipulated in the new law, guaranteeing a market value of at least DKK 60 million from the outset (EUR 8.1 million).

Big potential

Tranæs bases his optimism on first hand experience gained even before the market opens in three months time. He reports that one Danish utility was asked if it could prove a 100% "green power" package if it received DKK 1 million extra. "When the utility apologised that no, this was not possible, the company asked whether the arrangement could work with an extra two million. It turned out that the company was getting ready to be quoted on the New York stock exchange and could strengthen its position if it had a one hundred percent green account," says Tranæs. "A couple of million crowns was peanuts to them. So, however the future turns out, it certainly won't be boring."

Any turbine owner in Denmark can own shares in the new wind trading company, which by mid September had over 1900 share holders so far. Until 2000, the share price for original subscribers is set at DKK 5 per installed kW they own, rising incrementally to DKK 6.5/kW by July. Green credits will be sold from a common pool in order to allow settlement to be equal to all shareholders and to smooth out big price fluctuations.

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