Green or black windpower? Salzburg 30 August 2011

Frede HvelplundAalborg Universitet

Department of Development and Planning

Ownership and marketconstructionI. Ownership construction ( Ownership for efficient

climate protection.Todays presentation)

II. Detailed marketconstruction:a. Feed in for wind power (cannot react on market

signals)b. Active market design for introduction and

management of an ”intermittency infrastructure”.The marketdesign is I+II

I. Background for the ownership design

Historical experience1. The Danish heat and electricity system has

been locally developed and owned by consumers and municipalities.

2. The recent successful (from 1975-1999) development of wind power and other Renewable Energy sources has been bottom up generated.

(3. New technologies in Denmark were established in a period of economic crises. So now Denmark and Europe has an innovation opportunity!)

The present conflict between distant ownership and consumer ownership models

The “black trend”:1. Offshore wind parks are mainly owned by large power companies.2. The share of co-operative ownership is reduced.3. Offshore wind power is becoming increasingly expensive (DONG/Anholt)4. This is due to monopoly in the bidding process (DONG/Anholt)5. Lack of democracy in the research processes. (the Østerild testcenter case).The “green trend”:6. Consumer and municipality ownership examples. (Samsø, Wind People,

Ringkøbing Skjern wind energy planning, “Near shore” wind parks)The “1-5” development is against :

(a) the present technological needs, (b) the need for acceptance and participation, and (c )a long succesfull consumer ownership tradition on the Danish energy scene.

The “6” development is supporting (a),(b) and (c)

II. Why is local/regional ownership necessary?

Characteristics of present situation1. Very large turbines2. The paradigmatic change: A need for a new infrastructure

to integrate of intermittent wind energy into the grid.3. Reduced need for power companies and increase political

resistance from Power Companies.4. Not a free market. Only DONG was bidding at the Anholt

offshore park. 5. Increased need for income in the areas with much wind

(hinterland areas).

1. Large wind turbinesa. Large investments, often more than 30

mill. Euro.(20 MW capacity- 7- 3MW turbines)

b. Visible in large areas.c. Ownership consequence (1) :

Ownership should be linked to a larger area than the closest neighbors. (Combined ownership models with municipal etc. ownership)

2. The Paradigmatic changeFrom SCARCE STORED (fossil fuel/uranium) energy sources to

ABUNDANT INTERMITTENT renewable energy sources

THAT’S THE big change CHANGE!

Balance electrical system and grid stability (Wind power 2-6% of electricity consumption. System in

Denmark untill around 1996)

Decentral producers

Wind/RE

Central power and cogeneration units

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Active componentsIn-active components

www.planogmiljo.dk

Decentral producers

Wind/RE

Central power plants and

cogenerationConsumption

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System 2 (2000- wind power 15%-19%)

Activating RE via flexible decentral combined heat and power units

Active componentsIn-active components

www.planogmiljo.dk

Electricity distribution companies, heat companies, consumers, etc.

Decentral producers

Renewable energy

Central power plants and

cogenerationConsumption

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Heat pumps

System 3 (2011- wind power 25%-30%) Activating RE via increased electricity consumption

(heat pumps and water storage)Active componentsIn-active components

www.planogmiljo.dk

Electricity distribution companies, heat companies, consumers, etc.

Decentral producers

Renewable energy

Central power plants and

cogenerationConsumption

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Heat pumps

WindEl for

transportation etc.

System 4 (2015- wind power 50%-100%)

Activating RE via increased electricity consumption (for heat pumps and transportation)

Active componentsIn-active components

www.planogmiljo.dk

Electricity distribution companies, heat companies, consumers, etc

Decentral CHPs

Renewableenergy

Central power plants and

Cogeneration/ CHP

ElectricityConsumption

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Heatpumps

The evolving integrative SMART GRID Renewable Energy system (REC system)

Coordinating (1) district heating, (2) electricity, (3) renewable energy , (4) conservation and (5) transportation.

Active componentsIn-active components

Heat market

Heat storage

ElectricityHeat

Transportation market

“Smart grid systems”Integration is the “smart grid” element: Integration of intermittent renewable energy into the energy system consisting of a combination of:

a. Electricity b. Heatc. Transportationd. Heat, electricity and transportation conservation e. And a sustainable use of biomass

Reduction of transaction costs

When owners of intermittency infrastructure owns wind turbines, the transactions costs of establishing this infrastructure may be reduced.

Minimising transactions costs

Windturbine ownership by owners of the ”intermittency

infrastructure owners” reduces the transaction costs

Consequence for infrastructure and ownership

Technical infrastructure:a) Establishment of heat pump capacity.b) Establishment of heat storage capacity.c) Co-ordination with the a transition to electric cars.d) Co-ordination with energy conservation activitiese) Sustainable use of biomass (NEVER for heat!, and sometimes as back

up system for intermittent RE)This infrastructure is situated close to the consumer!

Ownership consequence (2): Households and organisations that OWN the above ACTIVITIES is important and should be given ownership priority to wind power both onshore and offshore. With this ownership model the transaction costs linked to solving the ”intermittency” ”problem”are minimized.

3. Reduced need for power companies

The OLD fuel based system: Where the money goes - or the value-added distribution in a coal-fired electricity system.

I. Direct Electricity Supply System

1. Fuel

26

2. Powerproduction9.3

3. Transmission

3.4

4. Distribution

14.6

8. Sale

100

II. Indirect Electricity Supply System

5. Power plantequipment27.6

6. Transmissionequipment8.6

7. Distributionequipment10.5

Where the money goes - or the value-added distribution in a RE electricity system.

I. Direct Electricity Supply System

1. Fuel

26

2. Powerproduction9.3

3. Transmission

3.4

4. Distribution

14.6

8. Sale

100

II. Indirect Electricity Supply System

5. Power plantequipment27.6

6. Transmissionequipment8.6

7. Distributionequipment10.5

Lost value added and ”raison d’etre” for large power companies.

The new integrative system: Where the money goes, or the coming renewable

energy systems

I. The Direct Electricity Supply System

II. The Indirect Electricity Supply System

(6 ) Sale100

III. Consumer level

(1 ) Transmission3.4

(2 ) Distribution14.6

(3 ) Centralisedrenewable energyequipment 27.3

(4 ) Decentralisedrenewable energy

equipment 27.3

(5 ) Consumerorganisedconservation andrenewable energy

equipment 27.3

The reduced role of existing power companies

1. Wind- and photovoltaic ”powerplants” are automatons produced at factories (not in power companies).Once in place, they just feed electricity into the grid.

2. The value-added share of electricity prices linked to power company activities is reduced by 60%-80%.

3. The new ”power plants” are small flexible heat and power plants close to the consumers.

4. The needed regulation infrastructure is close to the consumers.

Ownership consequence 3. It has no technical or economical sence that wind turbines and photovoltaic plants are owned by the old power companies (DONG, Vattenfall, E.ON, RWE, EDF).

4. Oligopolistic “competition” on the power market.

1. Low motivation for investing in wind power in DONG, Vattenfall, etc. More wind power gives lower prices at the Scandinavian Nordpool market, and losses to these companies.

2. Insufficient competition in the bidding process for offshore parks. (Only DONG at the 400 MW Anholt offshore park.)

3. Expensive wind power resulting in political resistance.Ownership consequence (4) : Establish Municipal etc. ownership, as competitor to the power companies when bidding on coming offshore plants.

5. Need for accept of windpower

Profit per kWh from wind parks (example) Wind turbine onshore, 2200 hours/ pay back time 13 years.Source Profit in Eurocent/per sold kWh

Via electricity sale 2

Via land rental 0,65

Income to local entrepreneurs: 10% of investment.

0,65

Total profit per kWh 3,3 (If locally owned)1,3 (If owned by distant

owners)

Example:

A 400 MW regionally owned onshore wind park will give around 24 mill. Euro annually more in profit to the region than the same park with distant

ownership.

Ownership consequence (5) :

Wind turbines should be owned by local/ regional actors in order to generate regional incomes and local accept and participation.

III. Conclusions

A coming ownership model (Example)Wind turbines1. 50% ownership by local municipalities, CHP

companies and/or local electricity distribution companies.

2. 30% ownership by local/regional households, farms and companies.

3. 20% ownership by large power companies.Alltogether at least 80% local/regional ownership.

District heating100% Consumer/municipality ownership of technical

monopoles. (Close to present situation!)

Community integration of wind power”Community power” is important for the needed regulation infrastructure.

For instance by giving ownership priority to local municipalities, companies,households and organisations so that they are enabled to establish the above regulation infrastructure.

This also requires new policies designed in the parliament .

Black wind power 1. Distant owners. (DONG, Vattenfall, E.ON, etc.) 2. Only minimal money flow goes to local actors.3. Minimal local and regional influence in the planning

process behind locating wind parks.4. Closed process, when establishing test centers. 5. Minimal environmental concern.6. Minimal local and regional technical integration of wind

power.7. Expensive wind power, as it is owned by companies

that needs profit without having much to give.8. Result: Wind power will be expensive and politically

unpopular, and thus only get a limited share of energy supply in the future.

Green wind power1. Local and regional owners (Municipalities, el.

companies, households, etc.). 2. At least 80% of the ownership income stays in the

region.3. Local and regional influence in the planning Process.4. Open and local participation, when establishing

research and test centers. Include research in accept and participation in wind power projects.

5. Environmental concern has high priority.6. Maximum and economically efficient local and regional

integration of wind power.7. Relatively cheap wind power.8. Result: Wind power will supply a high share of the

energy production.

Phases of development1. Civic driven and policy driven2. Policy driven3. New ”intermittency technology owner”

driven (New companies and civic driven)

Conclusion: Need to change the present trend from

black to green windpower!1. There is a tendency towards a centralised and

undemocratic wind power development, here named BLACK WIND POWER.

2. There is a technical and institutional need for a change towards openness and local and regional participation in the planning processes, and local/regional ownership. And co-ordination with energy conservation!This is here named GREEN WIND POWER.

Thank you!