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Netherlands

Netherlands

No legal basis for utilities to pay more for clean power conclude arbitrators

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A premium rate of pay for renewable energy will not be forthcoming in the Netherlands. Four years of negotiations between the wind and electric utility sectors over the price to be paid for wind energy have failed to produce a result -- and now the arbitrators called in two years ago to solve the stalemate have ruled there is no legal basis for payments for clean energy which are higher than the standard tariffs. Unless the government steps in with a new law, wind energy development in the Netherlands will grind to a halt.

The ruling is contained in an interim report from the Arbitration Committee. This has been submitted to both EnergieNed, representing the electricity distributors, and Pawex, representing the wind turbine owners. Both organisations must now comment on the arbitrators' report -- and their views be incorporated in it -- before the document is officially released in early July.

Pawex had hoped the report might show a way forward, but it proved to be a bitter disappointment. The arbitrators had done no more than submit EnergieNed's booklet on standard tariffs, accompanied by a letter explaining there is no legal route open to force the distributors to pay more for wind energy.

Depending on the type of contract, the standard rate for power delivered to the grid in the Netherlands is NLG 0.07-0.09/kWh. At the discretion of the purchasing utility, wind power can also receive an environmental subsidy, NLG 0.044/kWh on top of the standard tariffs, paid from the utility sector's environmental action programme, MAP. Pawex claims that wind turbine owners need at least NLG 0.20/kWh ($0.10/kWh) to make clean energy generation worth their while.

The discussions over the past two years have centred on an amendment to the Electricity Law, introduced by energy spokesman for the Liberal D'66 party, Dick Tommel. The amendment stated that the price for electricity from wind and solar sources should be comparable to the costs avoided by the electricity companies by not having to generate electricity from other sources. By this formulation Tommel hoped to create a preference for wind and solar because they were sustainable sources of energy and therefore had an environmental value.

Wiero Beek, a member of the Arbitration Committee put forward by Pawex, says "avoided costs" should also include the investment in the wind plant which the utility has not had to make. The correct tariff for wind energy, according to Beek's interpretation, would be some NLG 0.16/kWh, a price which would allow private owners to break even on their investment. And by making independent production of wind power possible, argues Beek, the utilities would be seen to be working towards their bargain with government for 1000 MW of installed wind power capacity by 2000. At the moment the Netherlands has no more than 135 MW of wind power.

But the majority of the Arbitration Committee, including the lawyers, did not agree with Beek. "They stuck to the law -- and if you read it with a lawyer's eye, it says that avoided costs are related to the generation of electricity in general. That means that wind energy is only entitled to the standard amount that other private generators get," says a disappointed Beek. Strict interpretation of the law was an approach favoured by the representatives of EnergieNed on the committee. EnergieNed feared that other private generators would start to complain if wind generators got a better deal than them.

So far the amendment to the Electricity Law tabled by Dick Tommel is having the opposite effect to the one desired. Tommel, wrapped up in negotiations for a new cabinet, is unwilling to comment on the arbitrators' decision. Ernst van Zuylen of Pawex takes a pragmatic view: "We sort of expected the outcome," he says. "We have already decided that we have to go back to parliament. What we want is a law that obliges the electricity companies to pay NLG 0.21/kWh for wind energy. The current government subsidy for wind turbine development [about 30% of the capital investment] can then be dropped. If the government decides that NLG 0.09/kWh is enough, then it would be a serious blow for the development of wind energy in the Netherlands."

Beek, a former member of the General Energy Council, agrees. Not only is the standard tariff too low to make wind profitable, but there is also no obligation on utilities to use money they have set aside for reducing CO2 emissions on measures to encourage the use of clean energy. "The electricity companies can decide on the spur of the moment to cut back the environmental subsidy for wind energy. I'm afraid that this uncertainty will stop a lot of possible financiers from investing in wind," he says.

About 60% of the wind capacity in the Netherlands is owned by the electricity companies; 21% is privately owned while 19% has been developed by joint ventures between an electricity company and private owner.

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