However, electricity markets have not internationalised in line with energy producers — they remain largely national, with little energy traded across political boundaries in most parts of the world. Even within the EU's 27-nation free market, only 5% of energy is traded between member states.
How much longer can national electricity markets, particularly those in the EU, remain isolated from each other? Increasingly, those in the know are suggesting that the wind industry will prove the catalyst for a new era of transnational energy trading.
There remains a surprisingly low level of awareness amongst energy policymakers within European national governments that they already possess the power to establish transnational schemes that would support further growth in renewable-energy generation. There has been little publicity given to the so-called cooperation mechanisms that accompany the 2009 EU renewable-energy directive. These are the tools that policymakers could deploy to create links between their national electricity markets and those of neighbouring countries.
One of these mechanisms allows EU member states to agree statistical transfers of renewable energy. Under such an approach a specified volume of renewable electricity generated in one country could be allocated to another without any actual transfer of energy.
It is possible that some statistical transfers will take place as EU nations scramble to meet their 2020 targets, however, few wind industry insiders think this mechanism holds much potential. One reason is that nations with surplus renewable-generated electricity will probably need to physically export their excess power in order to protect the stability of national grids, and since statistical transfers are virtual they would do nothing to support grid stability.
Another factor behind the wind industry's lack of interest in statistical transfers is they are not forecast to become a powerful enough market force to promote additional investment in wind generation, says Peter Niermeijer, secretary general of RECS International, an organisation that promotes the development of a pan-European renewable electricity market.
Of far greater interest to RECS International and other renewable-industry players is the option of creating multinational support schemes. Current regulatory frameworks for incentivising renewables are generally national and in some parts of the world, such as North America, support is set on a state-by-state and province-by-province basis. Niermeijer argues that support schemes covering relatively small energy markets are a financially inefficient method of developing the renewables sector and that gradual expansion of support schemes should be prioritised.
Thus far, the only example of a joint support system in Europe is a newly operational scheme covering all of Sweden and Norway. At the beginning of the year, the two neighbours harmonised their financial support systems for renewable energy. By creating one two-nation scheme, Sweden and Norway have taken an important first step toward international rather than national support for renewables.
Essentially, Norway has adopted Sweden's quota system, which dates back to 2003. Under the enlarged scheme's rules, energy companies and large energy users must purchase renewable energy certificates - known as Elcertificates - equivalent to a specified proportion of the electricity they themselves sell and/or consume. This year, Swedish companies must purchase certificates representing 17% of supply/use, while their Norwegian counterparts must purchase certificates representing 3%. By 2020, the quotas should converge.
This scheme offers both a larger market for renewable generators selling certificates and greater flexibility to purchasers, allowing the latter greater scope to seek out the most cost-effective certificates. It is too early to know how the enlarged scheme will affect investment in wind energy. It is hoped Swedish wind operators will benefit over the next couple of years from Norwegian demand for Elcertificates, since Norway's renewable installed capacity is currently too small to supply sufficient Elcertificates, explains Claes Hedenstrom, senior advisor on energy policy at Swedish energy company, Vattenfall, and president of RECS International.
Low cost
However, the price of Elcertificates has been low over the past year, with all-time lows recorded since the enlarged, two-nation scheme went live, notes Nasdaq OMX senior market developer, Ola Garmann. But, Nasdaq OMX could itself act as a driver for the Elcertificate market, as it has plans later this year to unveil an "integrated electronic platform" allowing its customers to trade in Elcertificates alongside all of its other products, says Garmann.
There is strong support within the Swedish government for further extension of the two-nation renewable energy support scheme, says Hedenstrom. "The Swedish government has been very proactive in seeking to internationalise and harmonise renewable support schemes. It was in the mindset from the beginning, especially since we already have a regional electricity market," he says.
Might the Netherlands harmonise aspects of its scheme to link it with Sweden and Norway? Reform of the Dutch renewable-energy support scheme is on the horizon and coordination with an emerging Nordic scheme or, alternatively, with the UK's renewable obligation certificates (ROCs) market is a possibility, say industry insiders. Meanwhile, Niermeijer suggests that policymakers in the Benelux nations - Belgium, the Netherlands and Luxembourg - have expressed interest in greater cooperation on renewables.
There is another way that wind energy may act as a catalyst for the gradual rise of transnational electricity markets - via joint support by national governments for new offshore wind farms and related infrastructure, such as subsea cabling.
It is Ireland, in partnership with the UK, that could prove a global first-mover in this regard. In February, the Republic of Ireland government announced it would not introduce a feed-in tariff for offshore wind. Instead, it is pursuing an agreement with the UK government to develop sites in Irish waters in the Irish Sea that would feed into the UK national grid rather than into the Irish network and that would support UK compliance with its 2020 renewables target.
Ireland currently boasts just seven offshore turbines. However, several developers, among them Mainstream Power and SSE Renewables, are keen to expand once a regulatory framework and support package is confirmed. They both support the Irish government's export strategy based around a bilateral agreement with the UK for Irish offshore projects to feed directly into the UK grid.
According to energy minister Pat Rabbitte, the idea has solid support from within the UK Department of Energy and Climate Change. Meanwhile, Mainstream Power's head of offshore wind, Andy Kinsella, believes there is enthusiasm for the plan from inside the office of the UK prime minister.
The prospect of an Irish-UK agreement on the development of offshore sites in the Irish Sea is a potent reminder of the potential for nations to collaborate to ensure the success of the emerging but higher-cost offshore sector. RECS International's Niermeijer suggests that governments bordering the North Sea, particularly Denmark, Germany and the Netherlands, would be wise to cut costs by collaborating on subsea cabling. "Interconnector cables represent an opportunity to share costs and rewards. And it would be possible to share the electricity generated by one or more offshore projects between nations," he says.
Niermeijer is correct to point out that sharing electricity generated by an offshore wind farm between multiple nations is legally possible, but for such a collaborative approach to gain ground, policymakers in powerhouse nations such as Germany and the UK will have to accept the concept - and get to work on it.
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