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Active and willing

Utilities were once seen as the "enemy" of the wind industry. Today it is good to see the growing number of utilities engaging in the business of wind power. This signifies that real markets are being born, both for the output from wind power plant and for wind power derivatives. The news this month that TransAlta of Canada has clinched a deal for the carbon offsets from wind plants owned by Hannover Electric in Germany is a wake-up call if ever there was one. There is no denying the signals: if such global deals can be done before electricity generators are mandated to reduce their emissions -- and even before a market framework is in place -- the potential demand for wind derivatives must be huge.

A key requirement for stable growth of the wind market is "the active, willing and responsible engagement" of the utility sector. So stated the European Wind Energy Association in its strategy for wind power, "A Plan of Action," published in 1991. At the time, utilities were seen as the "enemy" of the wind industry. In some countries that attitude still prevails. But nearly ten years on, and a power market revolution later, it is good to see the growing number of utilities engaging in the business of wind power.

EWEA did not foresee the many different forms that such engagement would take as electricity markets were opened up to competition and "pollution credits" became a tradable commodity. The association was right, however, about the positive impact the "responsible" involvement of utilities would have. From the big-utility development of hundreds of megawatt of wind plant in Spain, to Latin American tenders for wind plant, to small co-operatively owned utilities in the United States eager to offer wind kilowatt hours to their customers, there is no doubt that much of today's wind industry growth is thanks to utility money.

Spain is a special case. The utility involvement there is driven as much by job-creation policies in deprived regions as it is by demand for electricity from wind plant. Outside of Spain, however, what the utility willingness to do wind business signifies is that real markets are being born, both for the output from wind power plant and for wind power derivatives -- the carbon offsets that are now gaining value as a commodity in their own right. The news this month that TransAlta of Canada has clinched a deal for the carbon offsets from wind plants owned by Hannover Electric in Germany (page 18) is a wake-up call if ever there was one. True, the amount of wind power and carbon offsets involved is tiny. But there is no denying the signals: if such global deals can be done before electricity generators are mandated to reduce their emissions -- and even before a market framework is in place -- the potential demand for wind derivatives must be huge.

Not that wind will have that market all to itself. It will be in competition with other forms of clean power. But if European negotiators at November's climate change talks -- the sixth Conference of the Parties following the Kyoto protocol -- get their way, nuclear carbon offsets will not be recognised as a "Clean Development Mechanism." That will make wind a commodity in great demand. The wind lobby would do well to shout its support of the EU's common negotiating position load and clear from the rooftops -- especially since France and Britain only very reluctantly signed up to the partial exclusion of nuclear. The message is a simple one to sell: wind can deliver where nuclear must not be allowed to.

Utility engagement in emissions reduction trading aside, there are other doors into the wind business. Dutch utility NUON has just opened one. Popular demand for its green electricity is so great that it is building wind farms in Germany and China to add power to its pool of "Natuurstroom" (page 20).

With NUON selling green power generated in Germany and China to Dutch citizens and a German utility selling emissions credits to a brother in Canada, the political questions raised become frighteningly complex. Do TransAlta's Hannover carbon dioxide credits accrue to Canada instead of Germany? Or does TransAlta simply own the rights to Hannover's contribution to Germany's CO2 savings? If Hannover is selling wind power at the national premium rate in Germany, is it not getting paid twice for the environmental value of wind by selling the carbon offsets as well? What of the "green certificates" that in the Netherlands would have been attached to NUON's Chinese and German power? Who has the rights to them? NUON, or Germany and China? Rules are needed before this market can really fly.

Green-E-Trade

Smart and flexible utilities are also entering the wind business through the electronic door, though they tend to be following the lead of independent power marketers rather than opening the door themselves. If ever there was a product suited to e-commerce, it has to be electricity. It requires no packing and posting, no instruction manuals, yet its fluctuating price does require a trading floor with instant purchase options. Enron's on-line business has already become the world's biggest in e-commerce (page 28), outstripping the likes of Amazon.com. The great benefit of electrical e-trade for sellers of green power is that it opens up the market to customer choice -- and many customers are willing to choose green.

No greater proof exists of the potential of this market than in the number of power marketers jumping on the internet's green power sales wagon, utilities among them. Enron's deal with IBM and America Online to set up a power company to sell exclusively to AOL customers is the latest major example. Green power will "probably" be one of the Enron products on offer. If so, just watch demand for wind power soar. Active and willing utility sector engagement, it seems, is no bad thing, even if utilities want some of the profits. But that's business.

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