Subsidy ceiling a problem

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Less than a week after the introduction of the Netherlands' new renewables support package, the Dutch Energy Research Centre (ECN) acknowledged there are problems with a controversial regulation limiting the subsidy payment per kilowatt of output to the first ten years of operation, or first 18,000 hours of operation at full capacity. The 18,000 hour ceiling was introduced on the ECN's recommendation as a rider to the new flat rate Environmentally Friendly Electricity Production (MEP) subsidy. The aim was to ensure that wind farms on windy sites would not attract higher subsidies than less favourably placed projects, or, in the words of ECN, to prevent "the over stimulation of wind rich sites." Instead of achieving this aim, as the Dutch wind industry has long argued (Windpower Monthly, July 2003), ECN now concedes the ceiling will encourage the installation of machines with inflated capacity ratings. Because these less efficient machines will take longer to reach 18,000 hours of operation at full capacity, they will also receive the production incentive payments for a longer period. A full-capacity hour is determined by a turbine's output divided by its rated capacity. The ECN report examines the subsidy systems in neighbouring countries, but concludes that none resolves the problem of providing a cost effective stimulus. It also examines a subsidy system based on "reference" output of specific turbines -- as employed in Germany -- but concludes that it is too difficult to assess its pros and cons relative to the current system. Economics minister Laurens Jan Brinkhorst has promised to review the regulation next year.

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