Long term market security still missing -- Sweden's green certificates

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The introduction of green electricity certificate trading in 2003 led to a busy period for the wind power industry in Sweden, although the rate of new installations was only slightly up on the previous year. The continuing unease at the long term prospects for the sector under current rules remains, however, although energy authority STEM is due to present a revision of the existing market framework by the spring.

Modifications to the certificates system -- particularly to the penalties for failing to acquire the requisite volume of certificates -- could help, but if the government is serious about reaching targets of 300-400 MW of new wind power a year, then it will have to streamline the permitting process and make it easier for large scale projects to get off the ground.

By the end of last year, installed capacity in Sweden totalled 399 MW from 675 turbines, which marks an increase of 54 MW from the previous year, or 16%. The year ended on a high note with December's production reaching a record high for a single month of almost 100,000 MWh, 68% higher than the corresponding period in 2002.

Despite what seems to be an initial success for the new market framework, the length of time involved in gaining construction permits, which can take as long as seven years, remains a major barrier, as does the difficulty of gaining long term power purchase contracts under the current rules. "The two things on most peoples minds in 2004 will be permits and finance," says Gunnar Fredriksson from Vindkraftleverantörerna, a group representing wind power suppliers.

He hopes that a political decision to elevate wind power's status to one of "national importance" will positively influence authority treatment of wind plant siting permits. But raising loans for wind farms without long term contracts is proving nigh on impossible (Windpower Monthly, December 2003). "We can plan development until 2010 or 2015, but beyond that we still don't know -- and that is going to put investors off unless they see a stronger commitment on the part of the government." He is confident the current market framework has been introduced by government with the long term in mind, but the regulations must be adjusted to make long term planning possible, he stresses.

STEM seems to have listened to the industry's concerns, especially over the pricing structure, and is promising to reform the market framework this year. The government has also pledged SEK 350 million of financial support for new projects over a five year period. Applications for a slice of the money have to be in by this month. Most players in the industry are after funds for developing offshore projects.

Fredriksson comments, however, that it is pressure from the European Union that is forcing the Swedish government's hand on renewables, rather than any eagerness to see the country's green energy resources developed.

Small and steady

Fredriksson describes 2003 as a good year, but without any significantly sized projects. He hopes to see larger projects built in 2004, but the lengthy permitting procedure could prevent existing plans moving forward, he fears. Sweden should see an increase in capacity this year of some 60 or 70 MW thanks to a number of smaller plants coming online.

On a note of caution, the government is passing down some of the decision-making power regarding planning and permits to individual councils. These are notoriously slow to act and frequently conservative in their views and the wind lobby fears it will continue to face an uphill permitting struggle.

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