Introduction

Summary

History

Bogus Crisis

Opinions

Remedies

Solutions

Feedback

Excerpts from an article written in 1997 by Andreas Wagner of the Fördergessellschaft Windenergie (German wind turbine manufacturers' association). It gives an overview of "feed-in" or REFIT laws in Euopre.--Paul Gipe

During the early 1990s, most Member States of the European Union introduced a number of mechanisms to support wind energy. These national schemes have been successful to various degrees. Obviously, installed wind power capacity is the best criterion to measure the success of national policies.

In Europe, installed capacity has grown almost ten times between 1990 and 1997, from 473 MW to almost 4.500 MW. Denmark and Germany account for two thirds of total European capacity. A favourable legal framework for wind power has allowed for the development of a strong national wind turbine manufacturing industry in these two countries. As a result, more than 20,000 people have been employed in the German and Danish wind energy business within the past 10 years.

Last year, Germany has become the world wide number one as regards to installed wind power capacity. Thanks to favourable legislation introduced in 1991, the country has seen a twenty-five-fold increase between 1990 and 1996, from 60 MW to 1552 MW. At the end of 1997, Germany is close to the 2000 MW borderline while Denmark is approaching 1000 MW. The former global leader, the US, has seen only a very small increase during 1990 and 1996, from 1485 to 1651 MW.

Today, the crucial question is this: How can the European success story of wind energy be best translated into the future? And, can the most successful examples of wind power development in Germany and Denmark be extended to other countries?

At present, the global political environment seems to be very favourable for a positive answer to these questions. Two events happened just recently that could push wind energy further ahead on the international agenda:

The first one is the Third Conference of the Parties (COP3) of the UN Framework Convention of Climate Change that took place in December in Kyoto. The European Union committed itself to a 15 % reduction of greenhouse gases by 2010. The second one, for Europe even more important, was the adoption of the White Paper on Renewable Energies by the European Commission in late November. It contains specific actions and measures on how the share of renewables can be doubled by 2010. With a contribution of 25 % to the overall renewable energy target, wind power is expected to play a major role in fulfilling the Commission's target. One of the most important proposals of the White Paper is to grant renewable energies fair access to the grid.

. . . Apart from that, European energy markets have been highly distorted historically. Until now billions of - both public and hidden - subsidies are being spent every year for conventional energies. In Germany, for example, nuclear power has received more than 35 billion DM of direct public support during the past 20 years, says the government. Not to talk about the indirect subsidies and the ten billion DM spent every year for German coal. Compared with that, the few millions given to renewables every year are more than negligible.

There are several instruments of how to arrive at a level playing field:

• internalisation of external (social and environmental) costs and benefits of all energy sources, e.g. by energy taxes. Although existing energy or CO2 taxes in various member states do not fully reflect all external costs of conventional energies, they have at least supported wind power development. This will also be true for the EU tax on energy products proposed by the EU on 12 March 1997, since the Commission proposal contains a relatively low tax burden.
• all direct and indirect subsidies (past and present) given to fossil and nuclear energies must be eliminated and transformed into market introduction activities for renewable energies,
• other market obstacles and barriers against renewable energies need to be removed, such as insufficient tariffs for wind power, discriminating conditions for grid access, administrative barriers, etc...

The easiest way to calculate REFITs is a tariff that is linked to the household tariffs paid in a country, as it is done in number of member states, e.g. Denmark, Germany, Greece, Spain and Portugal. The REFITs shall either include national taxes or apply a refund scheme, as is the case in Denmark.

Logically, when drafting a Directive on REFITs, experience gained at national level should be taken into account. Basically, the existing national support schemes for wind power can be divided into two categories:

• statutory or voluntary premium payments which are linked to household electricity tariffs or to avoided costs (with very different calculation methods applied at present) plus an environmental bonus, either for all projects that receive planning permission, or for a limited capacity with a tendering process like in the UK, Ireland and France.
• plus fiscal and financial incentives (e.g. refund of energy or CO2 taxes, green labels, etc.)

When comparing the various national schemes - keeping in mind national installation figures - it is quite obvious that common minimum standards for REFITs are the best means for a rapid market introduction all over Europe. Because of market distortions, voluntary agreements have not proven to be an alternative to statutorily granted REFITs. The serious implementation problems in the Netherlands which has a rather small number of co-operatives is a very good example for this. It took five years to finally come to an agreement for wind power tariffs in 1995. Furthermore, the agreement lasted only for one year and was not renewed. Therefore it is very difficult for small private developers to successfully realise a project.

Contrary to these negative experiences, a European Directive would allow to repeat the German and Danish success stories elsewhere. It is important that the REFITs are sufficient to allow the development of local community projects. If only the Danish figures of installed capacity per capita were achieved in all other Member States, Europe could have installed 60,000 MW of wind power. As in Denmark, the European Directive should contain a provision to oblige all grid operators to fully bear the costs for grid enforcement or grid extension caused by wind power. Grid connection costs up to the 10/20 kV lines should be divided among the grid operator and the wind turbine owner.

The REFITs paid in Germany and Denmark are a concept of shining simplicity. The one-page text of the German Stromeinspeisungsgesetz (Electricity Feed Law) is one of the shortest and simplest among all the laws ever adopted in Germany. All private producers of electricity from renewable energy are statutorily granted a fixed price which utilities are obliged to pay. The price is calculated on the basis of the average electricity rates in Germany.

The high rate of installation in densely populated countries such as Germany and Denmark - compared with countries like the Netherlands or the UK - has only been possible because of a coherent planning policy and, even more important, a high share of private and local developers. Acceptance problems usually occur only in exceptional cases and are more common when utilities are involved.

Furthermore, favourable tariffs that are granted by law contribute to further cost reduction and foster mass production because of higher demand. This has been clearly shown in Germany and Denmark.

It is important that the tariff structure set by the Directive for REFITs applies to all projects that are granted planning permission. Quota or tendering systems contain many structural disadvantages in this respect since they do not allow to fully exploit the existing technically and economically feasible potential of wind power. This has been clearly shown by the heavy oversubscription of the NFFO and AER in the UK and Ireland.

In addition, the tendering process is very costly, bureaucratic and time-consuming for both the developers and the authorities. Since only the lowest bids have a chance to win a contract, small projects with community involvement cannot compete with big projects on a mere cost basis. Lengthy and expensive application procedures are an additional barrier which are harder to overcome by small investors.

Even when a project had received a power purchase contract after the tendering process, it can often not be implemented due to planning restrictions or local opposition. In the case of wind power, local opposition was often caused by limited involvement of the local population, or by limited profits for the local communities.

Experience in Denmark and Germany shows that smaller co-operative schemes are usually much more accepted in densely popuplated countries. In the meantime, many observers in the UK have realised the deficiencies of an over-competitive system.

"A preferable promotion mechanism would seem to be one of certainty and more stringent application requirements, rather like those which exist in Denmark or Germany, where a standard payment per kWh is known about before the application." (C. Mitchell. Renewable Energy in the UK. Sussex 1997)

Call for tenders result in stop-and-go schemes (strawfire effect) which do not allow for continuous market development. Therefore, the British wind power industry is negligible compared with the large Danish and German wind turbine manufacturers. The latter have been so successful since they had been able to take advantage of stable domestic markets.

A European Directive for REFITs would therefore ideally complement the Commission's target for renewable energies. It is important to note, that ambitious targets can only be achieved when ambitious legislation is being introduced. The experiences of Denmark which is even surpassing its ten per cent share of wind power by 2005, and Italy which is far away from the goals set in the National Environment Plan in 1991, clearly show the need for strong and effective policy measures such as minimum standards for REFITs.