Small swords with sharp points

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Germany's tiny clutch of independent green power traders may lack political muscle, but it is brain, not brawn, which is needed now. Within reach of the independents is a weapon for directing the course of competition on Germany's liberalised electricity market that is way sharper than perhaps they and others have guessed. Learning to wield this weapon for greatest effect could be a wise step for the country's would-be traders of wind electricity to take.

While most of the renewables industry is hoping its world of cosy protection will be continued within the amended ramparts of the Renewable Energy Feed-In Tariff (page 16), the traders are preparing to wield their tiny swords at the cutting edge of the market. They will be the first to test new rules on access to the grid, without which they have no access to customers, even when the customer wants to switch from its traditional supplier and buy wind from an independent. The weapon up their sleeves is for jabbing recalcitrant utility opponents exactly where it will hurt them most. Indeed, coupled with a judicious twist of the sword, great discomfort can today be caused to a utility giant bent on making life difficult for an irritating Lilliputian power supplier. For if green traders deem the grid access rules inadequate, their complaints will have the attentive ear of the Federal Cartel Office (FCO), the country's watchdog on competition matters.

And the FCO has clout. It has the power to stop utilities proceeding with the mergers and takeovers considered to be both urgent and vital in their jostling for position on both the German and European electricity markets. One important merger now receiving the finishing touches is that of the Viag and Veba groups, which will bring together Germany's second and third largest utilities, PreussenElektra and Bayernwerk. This merger, however, will not receive the blessing of the FCO until there is a truly open market-and that means fair and equitable rules that make grid access practical and feasible for independents, says FCO boss, Dieter Wolf. Faced with this Catch 22, and anxious to move ahead and form larger more competitive units, utilities could well concede to rules on access to the grid that are fairer to independent green generators and traders than the electricity establishment might otherwise have been willing to go along with.

This is a critical period for competition in the electricity market. Keen to catch up with liberalisation already long underway in England and Wales and Scandinavia, the German government, in theory, opened up the national energy market in April 1998 to all consumers, from the largest chemical company to the smallest household. It then sat back to see what would happen. Rules allowing new suppliers access to the grids, so that they could supply new customers, were drawn up by utilities and industry associations. In force for the past 18 months, the rules have been subject to a steady barrage of criticism for being too complicated and too utility-friendly.

The barrage has had an effect. Last month, on September 28, a revised version of the rules was presented to the federal economy ministry for approval. For green traders, the political climate in which this approval has to be given is balmy indeed, with the Green Party a junior partner in a coalition government with the Social Democratic Party. Greens spokeswoman Gunda Röstel has made it clear that both her party and Werner Müller, the economic affairs minister, will not only closely scrutinise the proposed rules for their economic influence on the electricity market, but also for their ecological impact on the country. The FCO is taking an even tougher stance. It wants to see the rules working in practice-and truly creating an open market-before it nods through those mergers.

The power of the pioneer

This is where brave pioneers like Naturstrom (page 25), Plambeck Energie (page 22) and Unit Energy Europe (page 6), can unsheathe their swords. Although as yet they have comparatively few customers-Naturstrom with just over a thousand of the 43 million electricity customers in Germany-their experience of the day-to-day workings of the free market will undoubtedly be of great interest to the FCO. If the green marketers report a utility blockade preventing access to customers, the FCO is hardly likely to declare that the market is fully open. The priority now is for the green power traders to gather a good store of experience with which to feed the debate on grid access rules. It is these rules which will form the market framework of tomorrow. Getting them right is of paramount importance to the future of wind power.

There is no time to waste. For the time being, the government and the FCO have their eyes keenly focused on the electricity sector. Grabbing their attention is not too difficult. But before long the focus is going to shift. In August 2000, rules for liberalising the gas market will be forged into national law and before long Germany's energy market decision makers will be up to their ears in gas problems. Independent traders of green electricity could well find it hard to make themselves heard.

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