Beyond tomorrow

Politically, wind energy now occupies a supremely advantageous position. Governments, pressed by the expectation that binding limits on CO2 emissions will soon be set, are demanding clean electricity. Politicians are clearing a path for renewables to the negotiating tables. Yet the wind industry also faces unprecedented upheaval of its major markets. To rise to the occasion it must fight on three fronts: commercially, it must adapt to a market of new competitors, serving customers with highly individual demands; technically, it must provide an infinitely flexible variety of products for the new niche markets; politically, it must fight for a global framework for pro-renewable energy policies.

In the political arena, wind energy currently occupies a supremely advantageous position. It has a captive audience. Governments the world over, pressed by the expectation that binding limits on green house gas emissions will soon be set, are demanding clean, safe and economic electricity. Wind is among the few technologies capable of providing just that. What's more, politicians are fed up with listening to the nuclear, coal and oil lobbies. Eager to hear from renewables, they are clearing a path for them to the negotiating tables. In Kyoto, the United Nations has planned a warm welcome for wind; on Capitol Hill in Washington, wind energy's support group has never been larger; in Brussels, the first European policy paper for renewables is soon to be put before governments.

Yet at a time when the wind industry's chances for making political impact have never been better, it is also facing unprecedented upheaval of its major markets. Liberalisation is either under way, or just around the corner. The challenge to the wind business is immense -- and packed with unparalleled opportunity. To rise to the occasion the industry must fight on three fronts: commercially, it must adapt to a market of new competitors, serving customers with highly individual demands; technically, it must provide an infinitely flexible variety of products for the new niche markets; politically, it must fight for a global framework for pro-renewable energy policies.

In Windpower Monthly's "Beyond Tomorrow" series (pages 36-51), we examine the battle ground. Interestingly, on the commercial and technical flanks, the industry is already bending to the inexorable forces of the market, not least in a Canadian firm's offering of tradeable credits (page 23), a Dutch company's green-funds project (page 34) and a UK company's proposal for systems benefit credits (page 45). Technically, our look at design trends tells a similar story (pages 46-47). On the political flank, however, the wind lobby appears to be in a state of hard pressed dither. Windpower Monthly, with the aim of moving the agenda forward, argues strongly in this issue that on a liberalised electricity market, which we favour, the best policy instrument on which to concentrate lobbying efforts is tradeable renewable energy credits.

First, though, a word on liberalisation, often referred to in the US as deregulation, somewhat confusingly. By liberalisation, Windpower Monthly means giving consumers the freedom to buy electricity from whom they please by removing restraints on competition. This is not synonymous with abandoning regulation of transmission and supply; it is the task of governments to ensure clean and safe electricity for all.

Applying economic liberty to electricity generation and supply, however, gives rise to a deal of "conscientious objection" in much of the renewables community. The fear is that free markets would lead to rampant capitalism of the worst kind, with gas and worse things ruling the world. It is an outmoded line of thought, preventing entry into a liberalised future of opportunity. The difficulty to be overcome is construction of a market which allows for a more sensible supply of electricity than that achieved by governments to date, or likely to be achieved in the future. Markets, at their best, serve the general interest. So should our elected politicians. But neither markets nor governments are perfect. If left to themselves, markets do not provide essential goods and services, while governments, never left to themselves, tend to get sidetracked by a variety of special interests, interests likely to be hurt by liberal economic policies. So while politicians probably understand the economic benefits of market competition, they understand even better that winning the election comes first -- and that requires populist and interventionist policies.

What could be more appealing to rulers then, than a policy which, while popular (and wind power plants are popular with over 80% of those living with them), also adheres to the basic tenets of liberal economics? Such is the market framework discussed and outlined in this issue for tradeable renewable energy credits (pages 41-45). They are not the perfect market mechanism, but they are a good compromise between what governments can implement and what the market can achieve. The perfect mechanism would be full cost accounting: the internalisation of external costs. That goal, however, has proved to be politically unobtainable. A goal within reach is binding limits on greenhouse gas emissions. Development of renewables, through mandated fixed percentages of total electricity supply, is in the front line of options for meeting those limits. To comply with their mandates, suppliers would trade, globally, in credits.

The beauty of tradeable credits is that they allow renewables to by-pass major barriers, not least utility control of the means of electricity transmission (Germany), and utility reluctance to comply with regulation (witness Portland General Electric's about turn -- page 25). At the same time, tradeable credits do away with the need for today's fixed tariffs, impossible to retain in a liberalised market anyway; and they circumnavigate crude eco-tax systems, with their inherent predilection for politicians to misspend the resulting income.

Granted, this is the real world and such radical policies do not get introduced overnight. There is good argument for moving one step at a time, for tinkering with NFFO-5 in the UK, for retaining, for a while, Germany's fixed tariff system, and for temporarily keeping the eco-tax systems in Denmark and Holland. There is no argument whatsoever, though, for not recognising that market liberalisation requires a whole new approach. Europe's imminent White Paper is in danger of doing just that. High time, it would seem, for the European wind lobby to get its act together.

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