FEATURE - Europe's power firms see the green light
Date: 28-Mar-01
Country: BELGIUM
Author: Duncan Shiels
Hemmed in by U.N. climate change conventions, public anxiety over some of the continent's worst ever floods and imminent EU directives on the use of green energy, the industry this month held its first ever conference devoted to renewable energy sources.
"We (and the environmentalists) are talking and both realising we will have to live with each other," said Ulrik Stridbaek, market designer at the Danish utility Eltra and a delegate at the conference, organised by Eurelectric, the Union of the Electricity Industry.
"The industry knows now that green energy is something politicians and consumers want so we just have to integrate it into our power systems."
The world is sufficiently worried about climate change to have concluded a United Nations protocol to combat global warming.
Agreement was reached in Kyoto, Japan in 1997 but no major industrialised country has yet ratified the protocol, which aims to curb the increase of so-called greenhouse gases from burning oil, coal and gas blamed by many for causing increases in the Earth's temperature.
The European Union plans to ratify the Kyoto deal in 2002 and as part of its efforts will pass a Renewables Energy Directive later this year boosting the proportion of renewable energies in total power production to around 22 percent by 2010.
Progress so far on boosting Europe's use of renewables has been patchy.
Germany, the continent's largest energy consumer, has reached six percent of total electricity output, including 4,000 megawatts (MW) of wind capacity, while Denmark has topped 10 percent using 1,700 MW of wind power alone.
Both have used direct government subsidies to boost wind power - by far the most advanced renewable energy source (RES) in terms of scale - mainly through charging high fixed prices for renewable energy and forcing industry to buy it.
BRITAIN LAGS BEHIND
In contrast Britain, Europe's windiest country, has built only around 500 megawatts of capacity, the equivalent of one small coal-fired power plant.
The British government and the country's Electricity Association, while recognising more has to be done, oppose Danish-style fixed price mechanisms to encourage RES which they say distort the market.
"We do not like the idea of government subsidies," said the Electricity Association's chief executive Philip Daubeney. "We believe in energy efficiency and what I would qualify as 'economic RES '."
Stridbaek says Daubeney's view that fixed prices invite inefficiency has been borne out in Denmark.
"Our experience indicates that it's very difficult generally to adjust tariffs with technological developments. So there will always be a tendency to over-subsidise," he says.
GREEN CERTIFICATES
So how can governments continue to support the development of renewables without destroying innovation and efficiency?
Enter the "green certificate", an attempt to harness market mechanisms to boost revenues for renewable generation.
Under the scheme certificates are issued to renewable power producers who can then sell them on to electricity users, themselves required to purchase a certain proportion of renewable energy.
The certificate sale recompenses the renewable plant, which can then afford to sell its power at the market rate. As a market for certificates develops, certificate prices will fluctuate, creating a market of their own.
They also act as a "letters of origin" of green power.
A voluntary Europe-wide pilot scheme, the Renewable Energy Certificate System (RECS), is already in place.
"There's real demand there," said Nina Marenzi, who trades RECS certificates for Natsource-Tullet. "There are buyers who have customers who want to have green energy and want to be sure of where it came from."
But the architects of RECS say that if the scheme really is to grow then governments will still have to use legislation to force users to buy green power.
"RECS is a market mechanism which exists as a tool
