Waiting for Scandinavian green certificate -- Sweden on the brink of lift off

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Progress in Swedish wind power in 2004 was measured more in terms of political success than by new wind plant in the ground. The government promised to make its market for trade in green electricity certificates a permanent feature in Sweden's electricity landscape. If policy makers get the details of the new market structure right, the wind industry expects to at long last have the long term market stability it needs to prosper. It may even be able to fulfil government aims for the installation of 300-400 MW of new wind plant each year.

National wind capacity grew to 442 MW in 2004, up 10.6% from 404 MW in 2003, a disappointing result after the 16% growth seen at this time last year. Predictions at the beginning of the year were for 60-70 MW. Wind power electricity production for 2004 was 772 GWh, up 88 GWh from 684 GWh the previous year. Production is expected to increase by a further 80-100 GWh in 2005.

"You could say that we are more optimistic now of long term success, although there are still a few short term issues that concern us," says Gunnar Fredriksson of Sweden's wind power producers association, ViS. The main concern is whether Norway will launch its own green certificates market to be fully compatible with the Swedish version. That would enable cross border trade and would help boost the low market price for the certificates, says Fredriksson.

Prices have been dropping since September and in January reached a low of SEK 2.10/kWh (EUR 0.023). They will need to pick up in the coming months to help developers persuade banks and other sources of finance that wind investment is a good business proposition in the long term. With green power producers having almost met the government's current goal for clean electricity, there are too many certificates on the market: around 12 million, which is close to the quota for as far ahead as 2006. If Norway enters the market, its extra demand could instantly boost demand -- and prices.

Careful integration of the two national policies is needed for a functioning single market. Norway's intentions are still unknown. "It will remain a concern for the Swedish wind power industry until it declares what its ambition is, when it will join the certificates system and what quota it wants. When we get the answers, the confidence will come back," says Matthias Rapp at the Swedish Wind Investors & Developers Association (VIP).

The Swedish government is soon to announce which of three scenarios outlined in its overview of the green certificates market will be translated into regulation. Most observers are expecting it to choose the middle target, of 19 TWh of electricity from renewable energy sources by 2015, with at least 10 TWh likely to come from wind.

Of the producers already in the market, Vattenfall has dropped the heaviest hint yet that it is looking to consolidate its position, by taking over a 120 MW wind project at Örestad. Keen not to be left behind, Sydkraft's recently acquired wind developer Airicole and its 90 MW Utgrunden II offshore project (page 30).

More choice

Customers are also expecting more suppliers to show an interest in Sweden. Until now, the market has been dominated by Enercon and Vestas. Rapp says a long term perspective is vital. "We are pleased that the government has made the system permanent and although there may be some short term problems, we have to look at what is happening now as part of a ten year cycle, not just two or three years. The government has committed itself long term, so we should react accordingly."

This year should see a similar level of development as in 2004, but it will mainly be a year of laying foundations for much bigger projects to come online in 2007. Two or three projects currently in the pipeline could add as much as 250 MW. Meantime, Rapp expects about 100 MW to be added in 2006. Predictions that Swedish wind power could be providing 3-4 TWh of electricity by 2008/2009 no longer seem as unrealistic as they once did.

Sweden made the development of wind power an issue of "national importance" last year. Whether the closure of the Barsebäck nuclear plant will force a serious Swedish commitment to wind remains to be seen, but the trend should be markedly upwards in the next few years.

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