More big fossil fuel ideas with CO2 recycling scheme

Industrial giant Norsk Hydro says a market for green power in Norway requires stable long term incentives -- and a European market in tradable green certificates could provide just what is needed. The company has its own creative ideas for making fossil fuel a part of that future with a scheme to recycle carbon dioxide emissions at its oil fields, thus generating co-called clean fuel.

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An industrial giant spawned by Norway's vast reserves of hydropower and fattened on North Sea oil and gas is turning its corporate attention to wind power. Norsk Hydro is viewing wind development in Norway as "promising, given the necessary incentives," according to the company's Dag Christensen. But he voices "great doubt" that existing incentives will do the trick.

Virtually all of Hydro's activities are related to energy, as producer or as consumer, in such energy intensive industries as light metals (aluminium and magnesium), fertilisers and petrochemicals. The company's annual hydropower production alone is running at around 8 TWh.

Wind power comes into the picture, predictably, as a possible solution to "one of the main environmental challenges for the power industry today"-the reduction of CO2 emissions, particularly in light of the Kyoto agreement. Renewables, however, must compete with other technologies promising increased efficiency and/or larger and faster returns on investment, stresses Hydro. In particular, says Christensen, "For Hydro as a company with substantial oil and gas production, technologies that reduce CO2 emissions from fossil-fuel-based power production are important." In short, wind must compete with "clean" fossil fuel.

In its favour, wind power shares with other renewables the virtues of security of supply, job creation and sustainability. And wind power is the renewable energy technology with the lowest production cost for electricity, admits Christensen.

Spurred by liberalisation

He argues that Hydro's approach to wind power is in large part a reflection of liberalisation in the Norwegian electricity market, which was opened up to competition in 1991 and which has ultimately given industrial and domestic consumers absolute freedom of choice of supplier. Other Nordic countries have followed suit, creating a cross-border market with one central power exchange, NordPool, located in Norway.

One of the most striking results has been a sharp decline in investment: construction of new power plants in Norway has virtually ceased since 1997, moving Norway "from a situation of overcapacity to a situation of import." In other words, investment in electricity generation now carries more risk as "the deregulated power market makes visible the real alternative production price for electricity which is often not clear in regulated markets."

Hydro has several wind power sites ready for development on the Norwegian west coast, where annual mean wind speeds vary from 7 to 10 m/s at 50 metres height. Although this compares well with other countries investing in wind power, there are still fewer than 25 wind turbines in Norway, generating about 25 GWh annually. Hydro power production is 113 TWh. The government, aiming for a production capacity of 3 TWh from wind (about 1000 MW), by 2010, has offered wind power investment grants of 25% and production support of NOK 0.24/kWh.

Green certificates

Hydro reckons that even allowing for these incentives its most promising project, a 30 MW plant on the island of Smøla, will still cost £600/kW with an average annual production of 90 GWh. "Under the current price level, this project will not be realised even though [it] is located at one of the best sites in Norway for wind power." Nor is the sale of wind power as premium priced "green power" very attractive "in a country where almost 100% of the existing power production is based on renewable energy sources-hydropower. "To get speed in this market there must be stable incentives over a longer period of time for the investors-otherwise there will be no wind power development in Norway."

Christensen aired his company's policy at a "green power" trading seminar held as part of the recent Sustain '99 conference and exhibition in Amsterdam (Windpower Monthly, June 1999). The development of green certificates in the Netherlands is considered "very interesting" by Norsk Hydro, although "we have not [yet] seen how a system of green certificates can work in a liberalised electricity market with cross-border trade," says Christensen. One option might be to sell Norwegian wind power in the existing Nordic power market while selling the certificates in "the separate future European market."

Hydro's suggestions for CO2 reduction using fossil-fuel technology have been nothing if not ingenious. One initiative that has caused something of a sensation in Norway involves building a huge 1200 MW/10 TWh gas-fired power plant in which the CO2 would be separated and pumped into underground gas or oil fields, where it would also enhance recovery. "However, É the costs for the project were so high that it is not possible under current market conditions to realise."

Here, too, Hydro calls for "market incentives similar to green certificates." In Christensen's view, given such incentives any "conflict between development of renewables as wind power and development of CO2-free power production based on fossil fuels" could become a creative force. Development of the two approaches "in parallel" would be "the bridge to the future-and that bridge would last for at least 50 years." Norsk Hydro's assumption that renewables will take 50 years to become a serious competitor could prove to be its Achilles heel.

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