Minimum price guaranteed -- Government fixes offshore finances

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Denmark's government and utility sector have agreed on a price for the wind power supplied by the first two of the five offshore wind farms that utility Elsam in the west and Energi E2 in the east, have been instructed to build -- at Horns Rev near Esbjerg and at Rødsand, south of the main islands of Lolland and Falster. Each 150 MW wind farm will receive a guaranteed DKK 0.33/kWh for the first 44,000 full load hours of operation, plus DKK 0.023/kWh to cover balancing charges, plus a guaranteed minimum price for its green certificates of DKK 0.10/kWh.

The two offshore wind farms have thus secured a guaranteed price for their first 6.6 billion kWh of production, or 660 million kWh a year. Once the wind plants have reached their allotted number of full load hours of operation, expected to take about ten years, the guaranteed price will be dropped.

What proportion of the total price of DKK 0.453/kWh (EUR 0.061/kWh) will come from a levy on consumers depends on the market price of electricity. In presenting the agreement in late January, Peter Hansen-Nord, energy spokesman for political party Venstre, said the cost to consumers would be DKK 470 million a year. This, however, was based on a selling price for the electricity on the open market of just DKK 0.15/kWh, requiring the government to make up the difference to DKK 0.33/kWh. Last month, however, the trading price of electricity on the Scandinavian power exchange was DKK 0.19-0.20/kWh, considerably higher than DKK 0.15/kWh on which Hansen-Nord based his statement.

"If the market price of electricity rises, the cost of making up the difference to 33 øre [cents] will be less," confirms Inga Thorup Madsen from the Danish energy agency.

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