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Cheap renewable power can become a disrupter

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Cheap renewable power can become a disrupter

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Letter

Cheap renewable power can become a disrupter

From Auke Lont, Oslo, Norway

The decline in nuclear investment rightly raises questions about future energy priorities (“ The UK must reassess its long-term energy plans”, editorial, November 14). Across Europe, a quiet revolution has taken place in electricity markets over the past year, which is worth reflecting on. Technological improvements and optimised supply chains have driven down the cost of wind power to levels where subsidies are no longer required.

In the Nordics wind farm projects are now based on market prices or on power purchase agreements with a fixed price for 20 years of 3 to 3.5 euro cents per kilowatt hour. New mills are able to produce up to 4,300 full load hours a year. With these types of costs and availabilities new opportunities arise.

Today, aluminium smelters and data centres are the new customers in the Nordic power market, while wind project developers increasingly often request connection to our grid. The customers lock in a significant part of their long-term power needs at a convenient level with no climate risk exposure. The developers are able to secure finance for their investments — power purchase agreements have taken over the role of subsidies.

So what is next? Suppliers of next-generation windmills (2020+) promise an availability beyond 5,000 hours and further cost reductions. Power purchase agreements of 2.5 euro cents per kilowatt hour are within reach, creating a better climate for new investments that could challenge old technologies.

Cheap renewable power accommodated by a carbon price that pushes up the costs of old technologies and supported by demand for “green” products can be become a strong driver for change. It can create the perfect storm that disrupts traditional industrial processes.

Steel, ammonia, aluminium and plastics production are today heavy carbon polluters (more than 40 per cent of global industry CO2 emissions). The carbon footprint of these products could look dramatically different in an environment with cheap renewable electricity, a carbon price that bites and consumers that demand “green” products.

In a world where electricity is renewable, available and cheap, where governments and citizens require that polluters must pay and where companies and customers demand “green” products, the tables might turn again. At a power price of 2.5 euro cents per kilowatt hour and a carbon price of €50 per ton, natural gas-based fertilisers will lose out. And the cost of a meal increases by less than 1 euro cent.

Auke Lont
CEO and President,
Statnett,
Oslo, Norway

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