Windbiz

Ontario Feeds in to Growth

Ontario is going with a feed in tariff, the first of its kind in North America - and hyping up its European growth approach.  The law is a nice step with around USD$0.09/kWh over 20 years - but why set a project ceiling of 10 MW?

In the end you're going to get alot of developers trying to work around that limit, clustering projects, to leverage economies of scale while tapping the feed in tariff. This is what's happened in France - decent feed in tariff decreasing over time with a 12 MW wind farm size limit. The small size made the sector less attractive for large players until recently when they started clustering projects and lobbying to lift the limit. The current dearth of turbines will make it difficult to get machines for a 10 MW project and the administrative costs of doing multiple 10 MW projects may make the model less attractive. All in good time I suppose.

What the Hellas Going On

As many have probably thought, wind energy in Greece is pretty much a no-brainer: excellent winds (+8 m/s nearly everywhere), hundreds of unconnected islands, and a lack of local fossil fuel resources.  Easier said than done - Greece has been infamous for byzantine permitting processes and tough resistance from the grid.

After much lobbying, there seems to be a glimmer of hope here.  The idea is to create development zones, kind of like France, that will facilitate permitting.  This policy puts development more in the hands of local planning councils, which may lead to varying degrees of transparency. 

There's big money going into Greek wind from several foreign players like Iberdrola, EDF, DONG and CESA-ERG.  These types of players put the pressure on PPC and the administration to make the market work, though grid upgrades will be key.  With the European Wind Conference lined up in Athens this February, you can bet they'll put some kind of new regulation together that will re-launch the market then. 

Underdog Greece won the European Cup in football in 2004, then hosted the Olympics a month later, behind construction schedule, with no problems. They'll have to pull through in the clutch again to get Greece's wind market camera-ready for the big show.   

EU 2007 Policy Review? Not So Fast

Our friends at the EWEA are not too keen on the EU for suggesting a 2007  review.  Taking a step back to look at things, from a policy point of view, the industy would need a major makeover quick to get through this unscathed. Here's why:

• Many countries are falling short of their RE policy goal.
• Some policies are too successful, while others have already been scrapped for new ones, creating an unclear picture of the way forward.  A review in two years doesn't show the kind of patience from the EU that countries need.
• The nuclear option is on the table, as the build rate of wind is not fast enough to replace decommissioned reactors and cover the increase in demand - the review could be indirectly used as ammunition for nuclear build.
• Offshore, which is the 'next big thing' for European wind, is facing alot of teething problems from permitting to turbine costs, and if this big contributor is taking too long objectives may be modified.
• The Kyoto protocol is taking a beating in Montreal, and few gains are expected in the short term - making the EU emissions-cutting initiatives look irrelevant in the grand scheme of things.

But it's not all doom and gloom here - Europe's going to put in a solid 5 GW +  this year, and some new markets are picking up.  They still need time to work out the kinks though.

Sometimes it's good to have a review as it provides a reality check on the industry.  But I interpret this review as suggestive of a cop out, and shows a lack of patience on the part of the EU to add this additional bureaucratic exercise.  On the one hand they recognize the industry's not ready for harmonization, on the other they want to have a look in two years when not much is going to have changed.  

Political Tornado Nears Spanish Wind Regulation

Perhaps it was a matter of time before this happened.  Spain's energy sector is more politically-charged than ever with Gas Natural's hostile takeover bid for Endesa, its pact with Iberdrola to divvy up the spoils, spiking natural gas prices, and wind IPPs raking it in to the tune of €90/MWh.  Phew. So Spain's energy secretary is threatening to monkey with a market-friendly system that enables producers to integrate wind into the pool market, in order to reduce end user electricity prices.  Instead of suggesting a reduction in the premium (40% of average end user price), he's saying they'll revert to a plain fixed tariff system (nearly 30% less/MWh). 

Spain's proven itself a model in the industry with some forward-thinking policy approved in March 2004 that enabled producers to sell onto the open market at a premium while tightening balance of plant restrictions.  This has encouraged wind forecasting and eases producers into the idea of one day taking on merchant risk.  It has also enabled wind IPPs to make a good deal of money.  If the politicians subtract this policy, which has served as a model for other feed-in wind tariff countries going forward, Spain stands to lose its industry leadership in a heartbeat. 

This is still far from happening, and the next months' evolution of gas prices, the hostile takeover, and the lobbying work by Iberdrola and other wind stakeholders will have to play itself out.  If the government is serious about this, I could foresee brokering a deal on the premium incentive - but taking away the whole open market option would be a travesty.   

Wind Energy Christmas List

Wind Energy EU Integration Christmas list:

• A harmonized EU-wide payment mechanism for renewable energy.
• Green certificates valid throughout the EU via a standardized guarantee of origin process.
• A common offshore wind energy policy.
• A permitting process template transposed from the EU into every municipality of the member states (or a least a nationally-applicable policy).

Now for a dose of reality:  The UK, Italy, and Sweden all have their own certificate programs for the time being, making an EU-wide policy a distant idea that will need a long transition period.  This postpones the possibility of a single payment mechanism as well.  As an indication of the 'unified policy' momentum, new member states have just recently split themselves among feed-in tariff systems, and quota models - showing a lack of coordination.  Permitting-wise, it is still hard to conceive of a unified international procedure that encompasses coordination across environmental, energy, transport, and industry policies for onshore projects, let alone offshore.   

Good show from the lobbyists - we'll keep waiting for Santa.  The objectives are the right ones, but the business models still need to deal with the highly localized market as is for the time being.   

India Wind, a Model for Developing Countries

India's  up to 4,228 MW of wind according to the government's latest count, and is on its way to becoming a 1.5 GW/year market rivalling Spain. This is a big developing country success story, as India serves as a key model for implementing wind both in terms of meeting power demand with clean energy, and creating local industry.  India is evolving as a key manufacturing hub for major turbine manufacturers operating in Asia including home grown Suzlon, as well as Vestas, Gamesa, and Enercon.

What is also commendable about India is that it has improved its policy to foster growth despite a flawed beginning.  In the 1990s wind farms serving as corporate tax shelters with little production requirements had capacity factors of under 20% - now they are aiming for an average of 25% by 2011-2012.  As it should be done, the government's policy focuses on ensuring quality projects by taking a more pro-active role in siting wind farms, providing tools to developers for assessing wind resource, and streamlining the permitting process.  Brazil, with a 1,100 MW wind goal, should take a cue from India.