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Tiered Tariffs, Complexity, and Demands on Staff

Article by: Paul Gipe


Some critics have charged that determining wind tariffs after a five-year test period is too complex and too demanding of staff time and that a flat tariff is easier to implement than tiered tariffs.

Both Germany and France use a five-year test period to determine total payments for wind contracts. In Germany, the test period is used to determine the amount of time in months the initial price is continued until it drops to the lower tariff or T2. In France, the test period is used to determine the actual tariff, T2, paid during the second period, years 6-15. Neither country has encountered any difficulty in doing this or required the creation of any new bureaucracy.

According to Deutsche Windguard, a consulting company in Germany, the Local Distribution Company processes contracts and determines the payment stream. Windguard’s Gerhard Gerdes believes this is done automatically as part of the normal billing cycle and doesn’t expect much direct human intervention. The only data required are the actual production and the type of wind turbine. Simple look-up tables (a spreadsheet function) are then used to determine whether the payment is made under T1 or under T2.

In France, ADEME’s Bernard Chabot explains that EDF Distribution (the state utility’s local or regional distribution offices) processes contracts and payments. The only data required are average production and the wind turbine’s rotor diameter or more specifically its swept area. From this a linear interpretation is made to determine the price paid under tariff T2. This too can be automated.

In both cases the question of complexity and staff time required perplex both Gerdes and Chabot. In all the criticisms of either system this has never been an issue. In fact, one of the merits of the Advanced Renewable Tariff system is its simplicity and ease of administration. Using tiered tariffs for wind projects does not compromise this advantage.