Into the wind

August 23, 2004, 01:00 CEST

Hydro's plans to develop new wind energy projects in Norway, the UK and other countries are moving full speed ahead.

"We now have a whole portfolio of projects from Båtsfjordfjellet in the far north of Norway to Karmøy in the south," says Knut Øvreås, head of Hydro's renewables unit in Hydro Oil & Energy's Markets sector. "We're also evaluating potential acquisitions and strategic alliances with energy companies in the UK and other countries."

There's good reason. Wind power is blowing like a gale. Global growth is valued at about USD 8 billion per year. The wind energy industry has grown 500 percent worldwide since 1997. Most of that is in Europe, driven by the EU's energy directive calling for 22 percent of electricity consumption to come from renewable sources in 2010.

Full sail

Reaching just half of the EU's goal means building 1,600 wind parks the size of Hydro's Havøygavlen in northern Norway, explains renewables vice president and head of wind power Norway, Bjørn Drangsholt.

Havøygavlen - owned by joint-venture company Arctic Wind, held 44 percent by Hydro and 56 percent by Dutch energy group Nuon - has a 40 megawatt capacity and delivers some 120 gigawatt hours (GWh) of power per year to between 5,000 to 6,000 homes (based on 20,000 KWh per household).

Hydro also recently inaugurated the world's first wind and hydrogen power facility, located on the western Norwegian island of Utsira. The two-year test project will deliver electricity to 10 households and help determine the feasibility of autonomous energy systems based on wind power, hydrogen electrolysers and fuel cells.

Renewing renewables
Excellent wind conditions and ample land potentially make wind power plants in Norway very competitive, but a shortage of investment incentives is stifling new developments.

"The main reason for this absence of investments is the lack of a support scheme," Hydro President and CEO, Eivind Reiten, told participants at the recent 10th Nordic Energy Summit in Oslo.

Wind energy costs steadily decline, but are still higher than power produced by conventional means.

"To be economically sound, new wind power facilities must combine the electricity price with some kind of support, preferably through a system of tradable certificates," Reiten asserts.

Since the implementation of such programmes in the UK and Germany, investments have flourished. Hydro's Havøygavlen ranks favourably on competitive benchmarks, but, paradoxically, Dutch green certificates were instrumental to its development.

Taking action
The energy industry has been urging the Norwegian Government to present a market-driven green certificates plan for several years. In August, lawmakers finally submitted a proposal for a joint Norwegian/Swedish market to start in January 2006.

"We welcome this initiative and appreciate the fact the government proposes including both wind and hydropower projects into a reliable Nordic framework," says Reiten. "Still, in order to develop new projects, an effective transition plan must become operative soon."

Øvreås points out that individual EU countries are bound to fulfil the energy directive's renewables targets for 2010. While not a signatory to the EU's renewables agreement, Norway must also adhere to the renewables goals to legitimize a trans-border green certificates market.

There she blows
Like Norway, the UK and Ireland have the best wind conditions in Europe. Unlike Norway, the UK has been more proactive in encouraging wind power developments.

"They have very strong political support and targets, backed by legislation," says Ovreås. "They also have plans to become a world leader in wind power, and target 15 percent renewable power production by 2015."

The UK also has high market prices for renewable electricity and is rated at the top of Ernst & Young's "wind attractiveness index."