Sweden is on track to reach its 2030 renewable capacity target by the end of this year, the Swedish Wind Power Association said. Wind farm builders are in a rush to make final investment decisions on new projects, so by December 2018, Sweden will have installed capacity of some more than 7 GW and production of almost 18 TWh: the 2030 renewable energy production target for the country.
It all sounds exciting and good but there are problems. One is that the more new projects come online, the lower the prices for renewable certificates—tradable credits that are a component of all renewable energy products—as competition in this market intensifies, writes Jesper Starn for Bloomberg. In fact, the forward REC price for 2021 is about 70 percent lower than for 2020 and the culprits are all these new wind farms that have received the green light and are being built right now.
A spokesman for the SWEA told Bloomberg that the only way to avoid an investor exodus from Sweden’s wind power industry is to apply a volume-based stop rule—in other words, stop issuing approvals for new projects since the 2030 target for capacity has been reached 12 years early.
“For Sweden to remain interesting for investors ahead of markets with higher revenues but greater political risks, it is important for policy makers to show that they care about past investments,” Mattias Wondollek said.
Another problem—perhaps more hypothetical for the moment—is energy storage. Last month the UK suffered a wind power production outage when the wind stopped blowing and the portion of wind in the total energy production mix dropped to a little above 4 percent at one point during the nine days of the wind draught. This compares with 13 percent on July 1, for example. The weather can be fickle but so far, the global trend has been to prioritize generation capacity and not storage. This could become a problem in many places, including Sweden.
Related: The Most Overlooked Renewable Energy Source
Some market players, such as top turbine maker Vestas, are looking for a solution to this problem already. A recent interview with a senior executive from the Danish company revealed that Vestas has plans to expand into so-called hybrid solutions that include both generation capacity and battery storage.
“We’ve actively looked into developing hybrid solutions: combining wind, solar and battery storage,” Nils de Baar, head of Vestas’ northern and central Europe operations, told Wind Power Monthly. “It’s very important for the industry that we can offer baseload power to the grid with hybrid solutions.”
These hybrid solutions, also have another goal: keeping the industry going after the phase-out of subsidies, which, De Baar says, will happen sooner or later, starting with the Scandinavian countries.
So, hitting a target 12 years early is certainly an achievement, helped by generous subsidies and a government policy firmly on the renewables path. Now, if the government goes with the SWEA recommendation of a volume-based stop rule, the industry will need to find other ways to continue doing business besides building wind farm after wind farm. Hybrid solutions including storage seem like the direction that makes the most sense.
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By Irina Slav for Oilprice.com
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