In a landmark deal, the first green certificates facilitating the sale by a foreign company of renewables power on the Dutch market were issued to Norway's Statkraft power company on March 21 and 22. Although the 25,000 certificates have been issued for small hydro power, the signs are that Dutch demand for green electricity could provide a significant boost to Norwegian wind energy production.
Along with the 25,000 certificates -- which facilitate the sale 25,000 MWh of small hydro -- Norway's state-owned Statkraft will also receive a renewables production subsidy of EUR 20 MWh, paid by the Dutch taxpayer, a total of EUR 500,000. This is the first time the subsidy has been paid to renewables producers outside Holland under green power import regulations, which came into force in January. "Twenty euro a megawatt hour sounds like a lot of money," says Tony Ellis of Statkraft Markets, "But at the moment we have to show physical proof of transport, which means paying for auctions at each border. Costs vary according to route and time."
In some months, says Ellis, there is a an economic incentive to routing power from Norway to the Netherlands, at other times less incentive. "There is quite some risk involved and you have to know what you are doing to mitigate that risk. It's not something everyone can do, because if you don't have the channels at the right price you lose money." Ellis points out that a certificates-only market to facilitate sale of virtual power would do away with the need to supply proof of physical power delivery. "It would obviously be more advantageous in terms of getting the full subsidy back to the developer of new renewables."
Statkraft goes green
In response to what Ellis terms "the strong political signals coming from the EU and the Netherlands in particular, and the targets set by the Norwegian government," Statkraft has embarked on a major program of renewables investment, including generation of 2 TWh of wind power by 2010. This requires about 600 MW of installed capacity, the first 40 MW of which is now being built at Smøla. The 20 Bonus 2 MW units are due on-line in October. Construction of a further 104 MW at Smøla using 2-3 MW turbines will go ahead if the economic conditions are right. Until now, producing wind power in hydro-rich Norway has been difficult. While there are incentives and subsidies, wind has to compete against the price of conventional power, which varies according to the annual snow and rainfall. "Current electricity prices do not make wind parks economically attractive and the current downward trend in construction prices needs to continue," says Ellis.
Dutch demand could change today's dependence on subsidies, however. "I think the signals coming out of the EU are very important in creating more confidence in investment decisions. We've got ideal conditions: a long coastline with fantastic wind sites with stable high wind levels; low population density and instead of building wind turbines, say, off the Dutch coast, it makes sense to build in Norway." A decision on the 104 MW phase two of Smøla will be easier once Statkraft has "a good idea regarding the value of green incentives for the renewable certificates."
The market incentive is considerably greater for wind generated renewable energy than hydro. As of January, hydro, unlike wind, solar and biomass, is no longer exempt from the Dutch government's ecotax on electricity of EUR 5.83/kWh. In practice this means the returns on selling wind on the Netherlands' lucrative domestic-user green market, where retail prices can reach EUR 195/MWh, are considerably greater than on hydro. Most hydro coming into the Netherlands is now sold to large industrial users who are looking to green their image and whose fuel bills are, in any case, ecotax exempt in order to preserve their international competitiveness.
Nor is there any shortage of demand. According to the Netherlands Green Certificate Body (GCB), 800,000 households have signed up for green energy. But between July 1, 2001 and March 1, 2002 only enough renewables power was generated for the needs of 550,000.
The Statkraft deal also provides a significant endorsement of the international green certificate trading scheme currently being developed by the Renewable Energy Certificate System (RECS) group. Under Dutch import regulations, green power can only be accepted into the Dutch system where there is reciprocity between the national markets, the power is physically transported to the Netherlands, and its renewable source is certified at the point of origin. To meet these requirements the Statkraft power was first transformed into RECS certificates issued by the Norwegian RECS Issuing Body (The Transmission System Operator, Statnett), and exchanged for Dutch green certificates by the Netherlands' GCB.
Statkraft will not disclose the final destination of the certificates, which could be redeemed against power sold to end users directly or via Dutch power retailers. Ellis will only say that the company has a number of customers in mind and Statkraft is likely to be "active" in this market.