Green power export may raise emissions -- Denmark policy backfires

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Electricity from Danish wind turbines is on its way to the international market, taking with it the CO2 credits that would have contributed to Denmark's pollution reduction commitments. Facing a drop in payment at the start of next year from EUR 0.08/kWh to around EUR 0.035/kWh under new wind tariff regulations, the owners of older turbines are seeking a better deal abroad. Yet in 2000, as much as 3.7 million of the four million tonnes of CO2 emissions saved in Denmark were secured by wind power -- while in 2001 Danish CO2 emissions rose by 0.6%. By 2012 Denmark has committed to reduce its greenhouse gas emissions under the EU's climate change agreement by 21% compared with emissions in 1990.

Between 80% and 85% of the owners of Denmark's older turbines have grouped themselves into the Danish Wind Turbine Owners Energy Company, commonly known as DV-Energi. It is negotiating for the sale of 52.5 million wind produced kilowatt hours a year to the Netherlands. Under existing tax-credits for green power consumption, Dutch consumers can save EUR 0.06/kWh by choosing to buy renewables power.

DV-Energi is seeking to take advantage of the shortage of supply of green power in the Netherlands to persuade Dutch consumers to share some of their EUR 0.06/kWh tax reward with Danish wind turbine owners. In Denmark, wind turbines that are more than ten years old and have operated for more than the set quota of "full load hours" for which price subsidies are available, must sell their power at market rates from January 1, though until a turbine is 20 years old a bonus of EUR 0.013/kWh is available.

That bonus could be doubled if the Dutch buyer chooses to share its EUR 0.06/kWh credit and buy Danish wind power instead of paying more for electricity from non renewables sources, says DV-Energi's Per Lauritsen. Even if border tariffs are taken into account there is still a profit to be made, he adds.

"If the sale to Holland falls into place there is obvious potential in selling our output to Holland," says Lauritsen. "It would be to the advantage of both Danish wind power producers and Dutch consumers. But for Denmark it will mean that the CO2-reduction benefits are awarded to Holland, so not only will Denmark need to burn more coal to replace the sold power, but also find another way of achieving CO2 reductions."

The plan could fall apart, however, if the Netherlands' new government carries through its plan to axe the existing tax credit for green power (page 28). DV-Energi, however, also has the option of selling wind power on Scandinavia's NordPool power exchange in Oslo. It is here that it expects to trade most of its wind power -- and to this end the group has already secured the required EUR 2.7 million bank guarantee for NordPool trading. The aim is sell 80% of DV-Energi's wind power through long term NordPool contracts, while the remainder will be sold on the spot market.

Market rates for wind power in Denmark after 2003 remain a matter of speculation. The country has not introduced the expected mandate on customers to buy green power and there is little incentive for electricity companies to secure wind power in their portfolios once the market is liberalised next year. Lauritsen says that as far as he knows no Danish utility has said it will continue to buy output from a wind turbine when it is no longer obliged to by law, and certainly not at the law's fixed premium rate.

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