Purchase subsidy low says industry -- Norway announces incentives

Norway's announcement of a production incentive payment for renewable energy to replace its plan for a common green certificates market with neighbouring Sweden is being met with caution by the wind industry. "We are concerned that there is too little money for too many good causes," says Ane Hansdatter Kismul, director of a recently formed national wind energy association, NORWEA.

Norway's oil and energy minister, Odd Roger Enoksen, calls the new support of NOK 20 billion (EUR 2.5 billion) an "historic investment in Norwegian renewable energy." Half the money will be placed into an existing energy fund administered by the state's ENOVA renewable energy support agency on January 1, 2007, with the other half to be added January 1, 2009, he says. Higher profit yields from the bulked-up fund are supposed to finance not only a subsidy for wind power, biomass and small hydro projects, but also improved infrastructure for district heating in Norwegian homes, boiler conversions and energy efficiency measures.

Enoksen says Norway will extend and increase its goals for renewable energy production, previously at 12 TWh by 2016, to 30 TWh by 2016. But he did not suggest a new wind power goal (current plans called for 3 TWh by 2010), nor did he explain how the incentive will work or how much it will be, only that renewable production online since 2001 will be eligible. The government, he says, may release details by October.

Marius Gjerset, an analyst for Oslo-based energy and environment organization ZERO, says he does not believe the incentive will be as high as NOK 0.020/kWh (EUR 0.025/kWh), which was the rough price that green certificates were expected to fetch in a common Scandinavian market. Green certificate trading was rejected by Prime Minister Jens Stoltenberg as too expensive for domestic electricity consumers. The incentive will more likely be closer to NOK 0.12-0.15/kWh (EUR 0.015-0.019), Gjerset says, which is the difference between Norway's current electricity price and the NOK 0.45/kWh (EUR 0.057) NORWEA has calculated wind power producers must receive in total for wind plants to be profitable.

Even at the lower rate, Gjerset agrees with Hansdatter Kismul that ENOVA may not have enough money to meet its goals. "We have criticized this plan, it is not good enough," Gjerset says. "Of course it depends on what level the incentive is set at, but much better financing of wind is needed for this to truly be an historic investment."

According to Enoksen, ENOVA is expected to have about NOK 1.1 billion (EUR 141 million) available for renewables during 2007, rising to around NOK 1.5 billion (EUR 192 million) by 2010. If renewable developers managed to reach 12 TWh of production, an incentive of NOK 0.20/kWh would cost NOK 2.4 billion -- far more than the energy fund would generate in dividends, says Gjerset. Even if the incentive was just NOK 15/kWh the fund would not generate enough revenues, he says. Renewables generation in Norway currently stands at 6.6 TWh with wind generating 1.5 TWh.

Political pressure for Stoltenberg's government to provide new sources of energy, especially in the power hungry mid-section of the country, may force it to come up with more cash, adds Gjerset. "I think the electricity situation will force them to find the money." He concludes: "I would say in Norway that what we are looking at today is better than what we had yesterday -- maybe less than we thought it should be, but still enough to hope for the future."

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