Swedes envy hands on approach in Denmark

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The Danish government has decided that offshore wind power represents infrastructure projects of such magnitude that it should play a role as lead sponsor. Sweden is still trying the private sector route

xOnly a few short years ago Sweden looked as if it was going to be a formidable player in the offshore wind market. Along with Denmark it was a pioneer in the sector in the 1990s, installing several of the first wind turbines at sea in projects with a combined generating capacity of 23 MW (Windpower Monthly, March 2005). But then everything stopped.

xUnlike Denmark, where the government decided that major offshore wind development was not going to happen without it as project sponsor, Sweden has focused on creating a framework where market forces push wind turbines out to sea. Matthias Rapp of the Swedish Wind Investors & Developers Association is exasperated by his government's foot-dragging on getting the job done. He looks with envy over the border.

x"In Denmark the government sponsored the two big offshore developments -- Horns Reef and Rødsand [Nysted] -- by guaranteeing the uptake of electricity and thereby making development and investment relatively risk-free," Rapp says. "In Sweden, this is not the case. We suffer from both the extraordinary long permitting times and the economic uncertainty that makes it difficult to take an investment decision even after all permits have been obtained." To Rapp's frustration, Sweden is now delaying implementation of a long term market framework based on trade in green energy credits until Norway can take part in the system from January 2006 (page 28).

xMeantime Denmark is proceeding with government tenders for two 200 MW extensions to the Horn's Reef and Nysted stations, which have attracted a number of utility bidders, including from overseas (Windpower Monthly, March 2005). Each tender will go to the applicant who can build and operate the wind farm for the lowest subsidy per kilowatt hour over the lowest number of hours of operation over the projected 25 year lifetime.

xDenmark settled on the government-sponsored route last year having given up on an attempt to spur commercial development of offshore wind without its financial involvement. In 2003, its tender for bids to build an offshore wind power based on the market price of electricity and very little subsidy was laughed out of the water by the industry (Windpower Monthly, December 2003).

xThe Nysted and Horns Reef projects resulted from a program in the late 1990s for five government-sponsored offshore wind plant. As development of the first two was underway in 2001, the government changed direction, proposing that the next three demonstration projects go out to international tender. At the time it appeared that a European and Scandinavian green certificate market was imminent and that sale of certificates from the offshore projects would provide the necessary cash flow to make them a going concern.

xSweden's decision to stick with green certificates and its subsequent slow progress down that route is the prime reason for Denmark's offshore lead, says Rapp. Technology is another concern. Rapp says there are not enough fully fledged examples of how effective offshore production can be, especially in deep water. At least 1200 MW of projects are aiming for construction in Swedish waters within the next two or three years: Krieger's Flak (two projects for a combined 970 MW), Lillgrund (120 MW), Utgrunden II (90 MW) and Klasården (42 MW). But the 5 MW turbines developers want to use in projects like Krieger's Flak are not yet on the market -- and investors are not going to invest in untried technology.

xAchim Berge of Sweden Offshore Wind suggests a way around the problem would be for technology suppliers to effectively guarantee their products. "What we need is for manufacturers to come up with a turnkey plan for a project, confident in the knowledge that they can deliver both in terms of technology and price," he says.

x "If we had a turbine producer, a specialist in grid connection and makers of other components offer us a fixed price with guarantees that the new technology will work and remain cost effective, we can then take those firm plans to investors."

xBerge is frustrated by having to operate in a market controlled by huge utilities. "We only have a market in Sweden because of the political pressure that state-owned Vattenfall can put on the government," he says. "This situation, where one or possibly two huge utilities have such dominance, is not healthy, and the only way we will be able to attract foreign investment in the future will be by having a real market structure and the right, long term economic environment."

xRapp is confident Sweden will come to rely more and more on offshore wind power. "We have a reasonable pipeline with offshore projects that we believe will come on-stream before 2010," he says. Indeed, only recently Sweden's environment and energy minister, Mona Sahlin, urged more progressive development offshore.

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