Denmark

Denmark

Huge repowering market comes alive -- Industry sales again in Denmark

One in every four of Denmark's more than 6000 wind turbines will be replaced with about 280 MW of new and larger machines over the next 18 months. The long awaited repowering of Denmark's oldest wind plant will see a radical change in the Danish landscape, with just 300-400 turbines replacing 1500 older machines turning today.

The repowering boom is a consequence of legislation -- the most recent details of which were announced June 19 -- which drastically cuts the wind tariff for old machines from January 1 while offering a fixed premium price for power produced from those that replace them. The aim of the legislation is to reduce the number of small turbines spread over much of Denmark's landscape while at the same time increasing the country's wind generation capacity.

When the Danish electricity market is fully liberalised from the start of next year, wind turbines that are more than ten years old and which have been in operation for more than a fixed quota of "full load" hours, will no longer be eligible for the EUR 0.08/kWh that utilities are obliged to pay for wind output. Instead they must sell their turbine output at market prices, plus a subsidy of EUR 0.013/kWh. The fear is that this may not be enough to meet their operation and maintenance costs.

Eight cents a KWH

But the owners of old turbines with rated capacities of 150 kW or less who choose to scrap their machines and co-invest in a new one before the end of this year can still receive an average of EUR 0.08/kWh for the first 12,000 "full load hours" of their new turbine's operation, a rate that then drops to EUR 0.058/kWh until a machine, on an average wind site, is about ten years old (the EUR 0.058/kWh is applicable for 22,000 "full load hours" of operation). Owners can receive these rates for an investment in up to three times the generating capacity of their old turbine. From next year the rate for the first 12,000 full load hours of a repowered turbine is $0.07/kWh.

For new turbines installed after January 1, market rates apply, plus EUR 0.013/kWh and an "environmental bonus," the size of which is still under discussion. An owner of a new turbine installed under the repowering incentive scheme after this year also receives a bonus of EUR 0.023/kWh for the first five years of the turbine's operation. Transition arrangements to the new tariff are in place for wind turbines less than ten years old: wind turbines which have not operated for their allotted number of "full load hours" receive EUR 0.08/kWh, dropping to DKK EUR 0.058/kWh until the turbine is ten years old.

Scrap certificates

The repowering incentive was introduced as long ago as April 2001 by the former Social Democratic government under Svend Auken's leadership as energy and environment minister. But ongoing uncertainty about wind rates from 2003, exacerbated by a change of government, has meant a slow marekt birth. During the past year, however, the new market has spawned a breed of "repowering developer," specialised in buying up old turbines to secure their "scrap certificate" value -- a guaranteed premium rate for up to three times their replacement capacity. Advertisements placed by these developers, encouraging owners to sell their old turbines, have become common place in the Danish press.

By last month the country's two power system operators, Elkraft in the east and Eltra in the windy west, could report that 81 MW of repowering capacity is on the way. In the west of the country, much of the repowering is expected to be undertaken by Danish utility Elsam. It has entered a provisional agreement with NEG Micon for installation of 32 turbines with a combined capacity of 55 MW to replace 90 older turbines in five utility-owned wind farms.

Rescue net

For owners of old turbines who still have large loans in them -- and thus risk being trapped in debt by the severe cut in their wind tariff -- the government has promised to step in if economic hardship is proved. So far, however, the owners of no more than five of the country's up to 2000 old turbines have requested the state to take over both the turbine and its debt. The five cases are currently being considered by the energy agency and decisions are expected this month. Among the five is a turbine against which a new loan has been taken, which, according to Danish national newspaper Jyllands Posten, is greater than the original purchase price of the turbine.

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