Tariff dispute

The Dutch government's proposed new tariffs for wind power are based on a report by the national Energy Research Centre (ECN). It calculates wind plant can be built for EUR 0.074/kWh onshore and EUR 0.10/kWh offshore. The wind industry strongly disagrees, saying the returns on investment at those rates will not cover the risk of diving into a politically volatile market.

The ECN report assumes that wind power producers can sell the physical power for EUR 0.021/kWh while receiving the full EUR 0.029/kWh "flush-back" available from electricity retailers. The "flush-back" derives from eco-tax revenues collected by retailers, which they can either hand to the taxman or use to buy green power. To this total of EUR 0.05/kWh, ECN adds a proposed production incentive of EUR 0.024/kWh for onshore wind and EUR 0.05/kWh for offshore, rates proposed last month by government under its now shelved MEP plan, bringing the respective wind tariffs to EUR 0.074/kWh and EUR 0.10/kWh.

Wind industry market players, including power giants NUON, Essent and Shell, argue strongly that these calculations make no allowances for green power marketing and sales costs. In practice, they explain, only half the "flush-back" payments will go to producers.

Diederik Samsom of green electricity retailer Echte Energie says the onshore rate of EUR 0.074/kWh is based a 6% loan for 80% of the project cost and a 15% return on the 20% equity stake. "But the devil is in the details," he stresses, such as the length of the loan and the income tax variables. "The ECN model is based on an optimal tax arrangement which is really only available to energy companies and financial institutions, not for private investors." He also points out that the proposed production incentive is only available for 18,000 hours of full load operation -- or only about seven or eight years. "So you couldn't even pay off one of these turbines with the proposed MEP rate," he says.

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