Hydro and biomass beat wind on price -- Europe-wide green tender

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Hydro power beat both wind and biomass cogeneration in a unique tender to supply Germany's federal environment ministry with green power. In a three year deal running from the start of 2004, the ministry will get an annual 13 million kWh of hydro power from Italy and Austria.

The ministry's tender specifications required green power without any public subsidy. Two further stipulations were for a minimum 30% of the electricity to come from new plant operational from this year and for the deliveries to achieve a minimum 30% reduction in CO2 emissions. Extra points could be gained with each additional percentage saving.

To arrive at a winner, the price of the power was divided by the number of points from CO2 savings. Even though a cradle-to-grave assessment of the technology revealed that hydro's C02 emissions are much higher than wind power's, hydro power won the tender thanks to a particularly low price. The tender aroused substantial interest with applications from 36 companies, although only seven placed bids. Three were excluded because they did not fulfil formal requirements leaving four companies in the running.

The winner was green electricity trader Unit Energystromvertrieb (Unit-e) with a bid for power from hydro plant owned by its former parent Unit Energy Europe, from whom it was divested in 2002. Its offer was for power that is 82% CO2-free. Unit-e's parent, Dutch energy supplier Nuon, was not involved even though it has substantial renewables holdings, says Sicco Kopka of Unit-e.

First runner up was another green power trader, Lichtblick-die Zukunft der Energie, based in Hamburg, which bid 100% CO2-free electricity from a biomass cogeneration plant located outside Germany. Number three was Enetko of Cologne, a subsidiary of the Trianel Group, an energy trader. Its bid was for wind energy from Ireland and hydro power from Switzerland.

Best ever

While disappointed about not winning the contract, Gero Lücking of Lichtblick praised the tender procedure. The 60 page documentation "was the best we have ever seen, very professional, with stringent ecological demands and excellent transparency," he says. "The ministry must be congratulated on achieving such a good price in the bidding".

Unit-e indicates that its supply of green power will add no more than 5% to the ministry's energy bill. Whether the company offered a special price for the flagship deal is not clear, but it remains to be seen whether other public authorities can achieve similar deals.

The exercise was to demonstrate that it is possible for public authorities to switch to eco-electricity, according to environment minister Jürgen Trittin. The ministry will save an annual 5300 tonnes of CO2 emissions, and will fulfil its pledge to reduce CO2 emissions by 30% to 2005 compared with 1990. Lücking suggests the ministry's tender procedure could also be used by companies.

Such tenders facilitate cross-border trade in green power because they avoid the complications of subsidy barriers. Ironically, although buying exclusively green unsubsidised power from abroad, German customers will still be obliged to pay the statutory renewable energy levy to support national renewables development that is charged as a component of network usage charges. The German renewable energy law leaves them no other choice.

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