Limited grants and promises for a market -- Norway still mainly in limbo

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After another stagnant year for Norway's wind industry, little if any development is expected this year either. Just 30 MW went online in 2008 to complete TrønderEnergi's 57.5 MW Bessakerfjellet wind farm, while a single Scanwind 3.5 MW turbine was decommissioned at Nord-Trøndelag Elektrisitetsverk's 56 MW Hundhammarfjellet site. The net result is 436 MW of wind capacity in Norway. Only a single demonstration turbine for offshore use is expected this year.

A new sense of optimism has arisen, however, following last month's announcement of an offshore wind development roadmap (page 121) and the government's confirmation that Norway will comply with the spirit of the EU's renewable energy directive, even if it is not a member of the European club. Norway intends to raise the proportion of its energy needs coming from renewables to 70% by 2020, up from 60% today.

Wind power and replacement of old hydro plant are expected to account for the 10% increase. For wind, the capacity will come as part of the government's long-standing generation goal for 3 TWh from wind, up from around 1 TWh now, although this target is for 2010. For it to be achieved, 1 GW of wind needs to come online.

Despite the declarations of good intentions, no market structure is in place to attract investment in developing Norwegian wind energy. Back in 2006, the government abandoned a plan with Sweden for a shared trading exchange for green power certificates, with demand for certificates created by legislation requiring their acquisition by electricity retailers. Sweden has since built up a separate market facilitated by green certificates (page 78).

With Norway's program of capital subsidies for selected wind projects severely limited -- just two projects with a combined capacity of 92 MW were selected for the current round of funding -- the non appearance of the Norwegian wind market has left at least 1400 MW of approved wind projects in limbo. The government is still grappling to find an effective solution. A plan first mooted by former energy minister Åslaug Haga to double Norway's minimal wind power purchase subsidy from NOK 0.08/kWh (EUR 0.009/kWh) failed to attract interest last year. Projects receiving the purchase price subsidy would not be eligible for government grants covering 25% of capital costs. Haga's replacement, Terje Riis-Johansen, has promised to continue investigation of a suitable market structure to attract investors.

Capital subsidies

Neither of the two projects selected for a capital subsidy in 2008 has yet broken ground, and Jaeren Energi, the developer behind 74 MW Høg-Jaeren proposal, has still not yet made a firm decision to proceed. The oil and gas ministry's renewable energy arm, ENOVA, plans two more rounds of capital subsidies during 2009, although details about the exact level of support to be offered have yet to be revealed. "We should not be too critical," says Øistein Schmidt Galaaen of the Norwegian Wind Energy Association (NorWEA). "This government has some real opportunities ahead of it, even if the projects it gets going will not be built until after the next election."

Schmidt Galaaen believes the EU renewables targets are applying serious pressure on Norway. "The government will have to do something. It can go slow or it can move quickly, but this is a major shift." He also notes that when it comes to the country's 3 TWh from wind by 2010 goal, "the way ENOVA interprets the pledge is that they need to have offered investment support to three terawatt hours of wind production projects by the deadline," says Schmidt Galaaen. "Of course, we are hoping for more."

ENOVA has NOK 1 billion (EUR 113.33 million) to spend specifically on wind projects to meet the 3 TWh by 2010 goal, but almost half of this has now been allocated. But does have an extra NOK 1.2 billion (EUR 135.5 million) in the pot from the government's crisis stimulus package. Whether wind projects will benefit has yet to be seen. Marius Holm from environmental organisation Bellona says the extra money should be granted to the Ytre Vikna wind project, at 90 MW one of the largest "shovel-ready" projects. Ytre Vikna was previously denied ENOVA capital subsidies because of the cost of building an extra power line from the project to the main power grid.

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