Is It a Breeze?

6 minute read

At a breezy stretch of the North Sea 14 km off the west coast of Denmark, the world’s largest offshore wind farm is under construction. When the installation at Horns Rev is completed later this year, it will have 80 towering windmills, each producing about 2 megawatts of electricity. That’s enough to power 133,000 households. More important, the addition of Horns Rev and a second offshore wind farm will boost Denmark’s output of wind-powered energy next year to 21% of the country’s total electricity production, the highest in the world. “Wind power has finally entered the mainstream,” says Arthouros Zervos, president of the European Wind Energy Association. “Last year there was nearly twice as much wind power installed as nuclear power.”

Because it has been promoting wind energy since the 1970s, tiny Denmark has become the world leader in production of wind technology. Last year Danish companies controlled more than 50% of the worldwide market for wind-energy technology. “Our overall goal is to make Denmark into the Silicon Valley of wind turbines,” says Peter Hjuler Jensen, head of the wind program at the Ris National Laboratory outside Copenhagen.

Denmark is not the only European country to have bet heavily on the breeze. Germany now has the world’s largest installed base of wind turbines, totaling 8,734 megawatts, which reflects average growth of 45% a year over the past three years. Ironically, Germany has some of the worst wind resources in Europe. But what’s made the difference is a government commitment to expanding renewable energy by offering substantial subsidies for wind power. At the moment windmill owners are paid ?.009 per kilowatt hour, compared with a market price closer to ?.002. “It’s a real success story in Germany,” says Jens-Peter Molly, executive director of the German Wind Energy Institute. “It’s a success in all countries where there is a fixed-price system that gives developers security for their investments.”

Wind power is also booming in Spain, which adopted a fixed-price system offering producers a long-term subsidy over the market costs of electricity production. Spain is now the second-largest market for wind power within Europe after Germany, having grown an average of 59% a year over the past three years. Spain has enticed big developers with generous offers of financial support in return for agreeing to open factories for wind turbines, creating thousands of new jobs.

In all, Europe accounts for 70% of the world’s wind-power installations. Interestingly, Britain and France have the highest level of wind resources in Europe, but their programs are still in the fledgling stages. Britain’s policy of awarding competitive contracts, which tends to drive prices down, as well as opposition to wind farms on planning grounds, has left the U.K. with only 525 megawatts of installed capacity, one-fifth the level in Denmark. France, which has traditionally relied on nuclear plants, has only recently set up a fixed-price system for renewable energy.

Driving the growth of wind power in Europe is the pollution-control requirements set forth in the Kyoto Protocol, which called for a 5.2% reduction in greenhouse gases like carbon dioxide. To meet the demands of Kyoto, the European Union adopted a target of producing 22% of electricity from renewable resources — hydro power and biomass in addition to wind power — by 2010. Merrill Lynch, the investment firm, said in a recent report that it expects wind power to grow 15-fold over the next 20 years, raising its market share to 6% in Europe and 5% in the U.S.

Another factor in the popularity of wind power is that the technology is steadily improving. The market is analogous to computer chips, with performance vastly increasing while price is coming down. Back in the 1970s, when Denmark started experimenting with wind power, windmills were about 20 m high, with blades 10 m in diameter and an output of 55 kilowatts. Today’s windmills stand 100 m off the ground, have blades that span 75 m and are capable of producing 2-2.5 megawatts. The U.S. firm GE Wind Energy recently announced new turbines capable of producing 3.5 megawatts offshore.

The technological improvements have lowered the production cost of wind power to about one-fifth what it was 20 years ago — a level that promoters say is broadly competitive with newly constructed coal- or even gas-fired plants, the cheapest source. Because of its high initial investment costs, wind power is still not economical without some form of subsidy. Wind’s advocates call subsidies a necessary anti-pollution tradeoff. “If you decide to pay only the market price for coal- and gas-fired plants, it’s not possible to make clean electricity,” says Birger T. Madsen, who runs a wind consultancy in Copenhagen. Denmark offers a good example. Thanks to tax incentives and subsidized prices, the country now has 6,500 windmills. But since the government decided that wind power should be priced according to the market two years ago, construction of new turbines has fallen sharply.

One of the beneficiaries of Denmark’s early move into wind power is Vestas Wind Systems, based on the North Sea coast in Ringkobing. Originally a maker of farm equipment, Vestas began manufacturing windmills as a sideline and sold them to farmers. The company, which now makes only wind turbines, is the largest manufacturer of them in the world, claiming a 24% market share. Starting with 60 employees after a bankruptcy filing in 1986, the company now employs 5,000 people, had 2001 revenues of $1.1 billion and a profit of $112 million. “Once considered an alternative energy, today wind power is a mainstream, environmentally friendly supplement to other sources of energy,” says Svend Sigaard, managing director of Vestas.

Sigaard says the future is likely to see more offshore wind farms like the one his company is building at Horns Rev. With its high population density Denmark is running out of room on land. Plus, offshore farms have the advantage of being out of sight. The only new sales onshore, Sigaard says, are likely to be to farmers who put up windmills in the early days and now want to upgrade them to newer, more efficient models. “Size is no longer a problem,” he says. But as Denmark illustrates, for wind power to keep expanding, governments have to continue supports that pay windmill owners a premium over the market price of electricity. Only then will wind power be as sustainable as it is clean.

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