Project Development, Wind Power

Policy Not Cash Main Block to Wind Power Growth

The average high street bank manager may look askance at being asked to finance a wind farm, but it tends to be government policy which holds back growth more than lack of finance.

(condensed from Reuters, Dec 14) “On the whole I don’t get many people complaining about having trouble getting funding for their projects,” said Vicky Pollard, chief executive of the European Wind Energy Association (EWEA). She said it was government policy that created, or failed to create, the right conditions to attract investment. Wind power comes in various guises throughout the world, ranging from vast wind farms spread across hundreds of acres with turbines up to 100 m high, to small community windmills that may provide power to only a couple of houses. The modern wind era got into gear after the OPEC shock waves of 1973 buffeted western economies. Wind is the fastest growing energy technology in the world with total capacity of about 13,500 MW from under 2,000 MW 10 years ago. Pollard said investment was easy to attract in leading wind countries like Germany, Spain and Denmark because legislation favours the industry. A report by the American Wind Energy Association agrees. “The fuel for European growth continues to be policy incentives that have facilitated the birth and development of the wind energy industry,” it said. In Spain, a country with one of the strongest growth rates in wind energy, active political support from national and regional governments has propelled capacity to over 1,700 MW from only 72 in 1994. Some slowdown is expected because the regional governments of Castilla and Leon have developed additional requirements regarding siting of wind programmes. Germany, the world’s leading wind power country with over 4,000 MW installed capacity, has a guaranteed renewable energy tariff that pays high prices for green electricity. “In Germany there is state encouragement to develop wind. The price wind farms receive is relatively high, making projects attractive to investors,” said Ian Taylor, a renewable energy analyst at environmental group Greenpeace. Boasting over 1,700 MW, Denmark is a wind tour de force. The country generates over 10 percent of its electricity from green resources and targets a 50 percent rate by 2030. Experts attribute the growth to both public and political enthusiasm for the green power source. Other countries enviously look at the Danish experience, which has produced the leading turbine makers and where the industry exports 75 percent of production. Wind turbine firms Vestas and NEG Micon are big players on the Danish bourse, at times driving the market. In the U.S., the wind industry is set to expand from a current 2,500 MW of capacity, primarily due to a federal tax incentive which encourages the construction of wind farms. When the production tax credit runs out on December 2001, there are fears growth will be slowed. In contrast, Britain, Europe’s windiest nation with enough offshore wind alone to supply three times current electricity demand, lags behind with a little over 500 MW of capacity. “British ministers say the right things, but there are consultation after consultation and renewables have become tangled up in the liberalisation of the electricity markets,” said Taylor. The EWEA’s Pollard said difficulties in getting planning permission have hindered growth in Britain. “The project lead-in times are too long. The main barrier is not investment concerns but the planning process,” she said. Dale Vince, managing director of UK-based Next Generation, one of Europe’s leading green electricity providers, said more support is needed. “We need to level the playing field and give renewables a chance, but NETA (the government’s reform of the wholesale electricity market) is going the opposite way.” In the developing world, there are other problems. “In Africa, the low price consumers pay for electricity is an issue for all power projects,” said Pollard. India was one of the fastest growing wind markets in the 1990s, but the extensive use of investment credits led to unsustainable revenue losses and the government modified the credits, a move which slowed growth.