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It is summer holiday season, so what better time to take a break in the balmy Balkans? You can look at some deals while you're there.

This month, developer Krnovo Green Energy secured €97m in two loans for the first utility-scale wind project in Montenegro. The European Bank for Reconstruction & Development and German bank KfW IPEX-Bank each lent €48.5m to the subsidiary of Akuo Energy. It is the first significant investment by commercial banks in wind in the Western Balkans.

This is a small deal in a small country — Montenegro has a population of just 621,000 — and, in global terms, the project is small too, at 72MW. But it is the first major investment in electricity generation in Montenegro since the 1980s; and it represents 8% of the country’s total installed electricity generation capacity and 6% of the country’s total electricity use.

EBRD also said the deal is significant because it could open up the region to investment in wind farms by commercial banks. This includes Serbia (population: 7.2million); Bosnia & Herzegovina (3.8million); and Albania (2.8million).

But you should not expect colleagues to pack up their bags and head en masse to Belgrade, Sarajevo and Tirana just yet.

This is not the first time major investors have eyed this market. It benefits from similar wind as fellow Balkans nations Bulgaria and Romania, so it has attracted interest. The problem is most of the schemes mooted in the Western Balkans haven’t gone anywhere.

Let’s look back to 2013, when a subsidiary of US-based Continental Wind Partners said it would invest €450m in two projects in Serbia by 2017. It sounded positive but the subsidiary, Continental Wind Serbia, has said very little about the schemes since.

Likewise, work started on a 102MW project in Plandiste in southeast Serbia in September 2013 and commissioning was scheduled for early 2014. We have heard nothing more.

This is not just because the developers are publicity-shy. Official statistics show that Serbia has just 20MW of installed wind capacity; Albania has 42MW; and Montenegro and Bosnia & Herzegovina do not even register.

There are two likely reasons why we have not seen much activity over there. The first is that investors in these markets face trouble getting reliable access to the grid, which has certainly held back Serbia even while it is looking to grow the amount of renewables.

And the second reason for lack of activity is that investors simply do not find it as attractive as other markets.

Investors from the European Union would rather invest within the EU because it is easier for them to do business with fellow EU nations. If they look outside the EU then it makes most sense to invest in nations with fast-growing energy demand, such as South Africa or Turkey. Western Balkans nations are not in this league.

If governments in the region are serious about wind then they need interest from investors, reliable grid connections, and supportive policies working in tandem. This is not currently happening.

We respect the aim of Akuo and its backers to open the region to commercial bank investment in wind. First, they have to prove that commercial wind works. Completing in Krnovo would be a big step.

This week, Iran has reached a landmark agreement with six world powers to put limits on its nuclear programme. In return, economic sanctions on the country will be loosened.

The deal ends a 12-year stand-off over Iran’s nuclear programme, and is set to unfreeze $100bn of Iranian assets. Over time, this is set to boost investment coming out of Iran as well as investment going in. One impact should be a further fall in oil prices as Iran grows its exports while Saudi Arabia maintains high production.

We do not expect new oil to flow from Iran until 2016 but, even so, oil prices fell by $1 a barrel on Wednesday.

Iran has the fourth-largest oil reserves in the world, and the largest natural gas reserves. But what of wind? Is this deal sufficient to unlock Iran’s renewable energy potential?

If you are a glass-half-full person then you would say that wind will take off. Iran will look to export more of its fossil fuel reserves. In order to maximise the amount it can export, there is a strong argument for generating energy used locally from sources like wind and solar. It makes financial sense: Iran would make more selling fossil fuels overseas than burning them domestically for electricity.

However, if you are a glass-half-empty type you would point to Saudi, which has talked very positively about wind and solar for years but done next to nothing to deliver any. That’s curious too, since it also makes sense for Saudi to use renewable energy domestically to further boost oil exports.

Despite this, it hasn’t adjusted its domestic energy policy – and as a result, at home it still burns the black stuff by the barrel load.

Iran may take the same path as Saudi. It may ignore renewables in favour of seeking to dominate on fossil fuel exports.

Or it may seek to build wind farms to help maximise these exports, while establishing itself as a Middle Eastern leader in renewables. We are not alone in wishing we knew the mind of Iran's leadership.

Likewise, the sceptics will argue that the loosening of economic sanctions will make it easier for Iran to increase its natural gas and oil exports; and develop nuclear power stations. Wind has looked attractive while sanctions have been in place and the economy has faltered. If the challenges go then enthusiasm for wind may go too.

For the moment, though, we will focus on the few positives.

Last month Houshang Falathian, the deputy energy minister, said Iran has the potential to build 30GW of wind farms; and the country has previously committed to 5GW of renewable power from wind and solar farms by 2018. Loosening restrictions on imports should make it easier for wind turbine manufacturers, developers and investors to enter the country.

Iran has also introduced incentives to boost private investment, including a power price guaranteed at a rate of $0.17/KWh for five years; higher rates for power generated in peak hours; and extra top-up payments to counter exchange-rate risk and local inflation.

And there is already a handful of small projects in development. If Iran is to achieve significant growth in wind by 2018 then much will depend on its fraught relationship with Saudi.

Wind Watch

Wind Watch is published every Monday and Friday.

The Greek people may have voted against the European Union’s proposed bailout last weekend, but Grexit is not the only threat to the global financial system. In China, the stock market is crashing.

During the last three weeks the value of Chinese stocks has fallen by almost one-third, and 1,300 companies have stopped stock trading. This is almost half of the country’s main shares.

On top of this, Chinese regulators have stopped investors with stakes of more than 5% from selling shares for the rest of 2015.

The government has also told China’s largest state-owned firms to hold onto their shares and buy more to maintain stability in the financial market. Whether this will be enough to increase confidence in the Chinese stock market in the long-term is, however, a matter of huge debate. If investors in Chinese stocks are not free to take out their money whenever they want then we would expect fewer people to invest in Chinese stocks in future.

The big impact here for wind is the impact on oil prices. In the last twelve months, oil has fallen to its lowest levels for five years, as Saudi Arabia has opted to maintain production at high levels in spite of weakening key market demand, which includes Europe.

This may seem curious but don’t forget that, in maintaining high production levels, Saudi has put pressure on North American shale gas and its political rivals in Iran and Russia. There is more to this than simply matching market demand.

However, the Chinese stock market fall has raised further concerns for oil companies. Indeed, with a lower demand for oil from large listed Chinese firms, prices are likely to fall further. This keeps up the pressure on the shale gas sector, which is good news for wind.

After all, wind investors should welcome good news wherever it comes from. They are facing uncertainty over subsidies in many established markets, and so so many market participants will take comfort from the fact that shale gas rivals are also facing difficulties.

Meanwhile, in China, the stock market falls are unlikely to have much impact on domestic wind investment if they remain at current levels. And, even if energy demand falls due to the problems facing China’s listed firms, we expect China to keep pursuing wind.

Indeed, earlier this month, the Chinese Renewable Energy Industries Association confirmed its partnership with The Climate Group to get major Chinese firms to commit to 100% renewables.

Add to this a further confirmation from China that it’s looking to double wind energy capacity over the next five years, from a mind-boggling 115GW at the end of 2014 to an even-more-mind-boggling 220GW by 2020. This ambition – when set in the context of further plans to grow hydro to 420GW, double solar to 70GW and add 18GW of nuclear – only strengthens wind’s prospects.

China has always maintained that it recognises renewables as a way to preserve energy security so it is not overly reliant on fossil fuel imports or its own indigenous coal supplies.

The Chinese stock market prices may keep oil prices low in the short-term, but its leaders know they cannot rely on that in the longer term. For now, wind firms can remain confident.

One of wind’s biggest stories of 2015 is the acquisitive march of US solar giant SunEdison.

Barely a month goes by without SunEdison or its yieldco TerraForm completing a big deal and July has been no exception. This week it announced a $2bn acquisition of seven wind farms totalling 930MWin North America from US developer Invenergy. SunEdison and TerraForm have bought wind capacity of 2.1GW so far in 2015.

Since January, the companies have announced eight deals spanning nine countries. It has bought US developer First Wind for $2.4bn; Indian developer Continuum Wind for $650m; a 521MW portfolio of five wind farms from Atlantic Power for $350m; two businesses in South America; and a battery storage company. We expect more in the next six months.

Now, we do not want to dwell much on the strategy of SunEdison or TerraForm, both of which will stay acquisitive. We want to focus on
what this strategy tells us about the future direction of the global wind industry; and what this means for North American developers.

The most interesting aspect here is from Carlos Domenech, chief executive at TerraForm, who said this deal would “unlock significant value as we aggregate in a highly fragmented industry”. Clearly, he sees wind as a sector that is ripe for portfolio consolidation.

US wind developers are already aware that there are wind-focused yieldcos that want to buy portfolios of operational projects, so they can generate strong returns for shareholders. TerraForm has said it would continue to focus on opportunities in North America.

But the addition of yieldcos like TerraForm that traditionally focus on other sectors will only increase this competition. This should give wind developers more confidence that they will be able to sell their completed schemes. It also means these developers can recycle their capital into new schemes, either in North America or overseas.

The fact there is more competition for completed wind farms will increase the risk that these yieldcos will overpay for assets — not that this is a worry for the vendors.

Furthermore, the deal between SunEdison, TerraForm and Invenergy is interesting as it is not a one-off transaction. Invenergy is set to retain a 9.9% interest in the acquired projects, and it will continue to provide operations and maintenance support for them.

We expect tie-ups like this between major wind and solar firms to become more common. Companies in both sectors are looking at how they can grow in new markets, and teaming up to offer a wider range of renewable energy expertise is one way that to do so.

The partnership between SunEdison and Gamesa revealed last week is another example.

And with every deal, SunEdison is increasing its understanding of the wind sector, which is also de-risking itself from any issue thrown up by the idea that it doesn’t understand wind.

We expect other major investors to enter the consolidation game. But we doubt whether they will do so at the scale or pace that SunEdison has managed thus far.

Wind Watch

Wind Watch is published every Monday and Friday.

New York: the 'city that never sleeps' — if it can keep its lights on.

Last month, US state New York set a goal to generate half of its electricity from renewable sources by 2030, which could open the state to new large wind farms, including offshore.

It follows California, which has also this year announced a 50% goal by 2030. Both said they saw this target as achievable by exploiting existing technology and improving their grid. It is a great sign for investors that major cities and states back the idea of wind.

Both states announced these targets with great excitement but, compared to some cities around the world, they are relatively conservative. Sydney, Vancouver and Malmo in Sweden are among cities aiming for 100% of electricity from renewables by 2030.

It is difficult to compare states or cities with each other, of course, in the same way it is difficult to compare cities with each other. Energy use in New York will be far higher than in Malmo, and so finding the sites for wind and solar farms to power the city will be that much harder. But other cities and states will follow what New York does.

What we can also do is make a strong argument that those in the wind industry should make a strong case for wind to local leaders.

You see, there is an interesting contrast here between local and national governments. National leaders may be those who set the grand energy policies, but it is the leaders of cities and states that can make things happen locally. Wind should do more to promote itself to those who run these areas which, though they are geographically smaller are, nonetheless, economically important.

If a city leader likes a project there is a good chance it will happen.

This comes back to a theory that we became aware of a couple of years ago, in a book by political theorist Benjamin Barber called ‘If Mayors Ruled The World’. Barber argued that the world would make more progress tackling issues like climate change if city leaders were more involved in solving them.

The logic of Barber's argument is pretty simple.

National leaders calling for more renewables would make such an announcement, but then get mired in debates about national energy policy and international targets. It is for this reason French president Francois Hollande has said getting a significant agreement at the United Nations climate change talks in Paris in December would take a “miracle”.

However, city leaders do not tend to get so tied up in ideology. They are pragmatists that have to keep transport running and keep sewers flowing, while still listening to people. If they set energy
polices then they have to meet them or the lights go out.

Therefore, if they set green energy targets, we would expect them to push harder to achieve them than national leaders would.

If they say they are pro-renewables then the wind industry should seize the chance to make its case for new projects. Local leaders may not be able to override national policies, but they can be vital allies in making sure projects happen. This means they can be key allies for investors that want to turn wind farm plans into reality.

New York and California have both set public targets for renewable energy, and this is a great opportunity for those working in wind.

If investors can turn up with viable schemes and money in place then they should be pushing at the proverbial open door.

On Sunday, people in Greece are due to go to the polls again.

Five months ago they voted anti-austerity party Syriza into power, and the party has been an annoyance for the European Union ever since. Now, is has inflamed the situation by giving the Greek public the chance decide whether to accept a €15.3bn bailout from the EU and International Monetary Fund.

The stakes could not be higher. A ‘no’ vote to reject the terms of the bailout package would likely result in Greece leaving the euro, with EU leaders calling the referendum a decision on whether to remain in the eurozone. Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis are both campaigning for a ‘no’ vote because they said the terms of the bailout amounted to “blackmail” by lenders to impose more fiscal austerity on Greece.

A ‘no’ vote is not certain. Indeed, a 'yes' vote in favour of the bailout package in order to stay in the euro looks slightly more likely at this stage. But one thing is certain: whether the Greek people vote ‘yes’ or ‘no’ on Sunday, it will not end the political and financial turmoil.

And that is a continued headache for those working in Greek wind.

The country has strong wind resources, which rank close to Scotland’s. It is still one of the 25 largest wind markets globally, with installed capacity of more than 2GW. And we have seen enough activity to know that wind development in Greece does work.

The problem is that uncertainty over the country’s financial situation has contributed to it falling well short of its target of 4GW installed wind capacity by 2014. Investors from the likes of France, Germany and Spain have invested in the country, but new installations have stalled at around 100MW a year due in part to wider financial and political concerns.

Meanwhile, the focus on austerity has pushed the country away from renewables.

Under Syriza, the government has committed to pursuing further development of lignite, which already accounts for 70% of Greek electricity generation, because it sees is as a cheap option. Tsipras spelled out the party's approach to renewables last year.

He said: “We were a party that had the environment and climate change in the centre of our interest. But after these years of depression in Greece, we forgot climate change.”

And the other reason wind has suffered in Greece is because feed-in tariffs were so much higher for the solar industry between 2009 and 2014. The led to a rush of investment in Greek solar and attracted companies to solar that would otherwise have invested in wind. The country now has 2.6GW of installed solar and met its 2020 target for solar installations in 2013, with the sector accounting for 7% of the country’s electricity demand last year.

That latter problem is not the fault of Syriza, but uncertainty around the referendum is. At the moment, Greek wind is in the hands of the EU’s most controversial political pair: Tsipras and Varoufakis.

It is a frustrating place to be. Both have said they would go in the case of a 'yes' vote but, in that case, the uncertainty would remain.

Wind Watch

Wind Watch is published every Monday and Friday.

Nine of the world’s ten largest software firms are now present in the Republic of Ireland.

The nation was one of those in Europe hit hardest by the economic crash of 2008, which led to a devastating property bust and harsh public sector cuts nationwide. But the country has continued to attract US tech firms keen to open a European headquarters. They have been attracted by the fact Ireland is English-speaking, that it is in the Eurozone, and that it has a favourable tax regime.

Think of a well-known website and it probably has a significant operation in the country. Amazon, Dropbox, eBay, Facebook, Google, LinkedIn, PayPal and Twitter have regional headquarters buildings in and around Dublin, while Apple operates in Cork.

This is relevant because this cluster of strong technology firms is also providing much-needed corporate backing for wind.

The likes of Amazon, Apple, Facebook, Google and Microsoft have all signed significant wind power purchase agreements around the world over the last year, and Ireland is getting in on the action too.

Earlier this month, Facebook submitted an application to build a €200m data centre in Clonee in County Meath, which it is looking to power using locally-sourced wind energy.

This follows Apple’s announcement in February that it is planning a 1.2m sq ft data centre in Galway powered by renewable energy, along with one in Denmark.

Meanwhile, Microsoft is seeking consent for another data centre at Grange Castle Business Park in Clondalkin in west Dublin, while Google is also reportedly planning further data centres. Both firms have previously done deals to power data centres with wind energy.

The Irish Wind Energy Association has said there would be ‘several hundred megawatts’ of wind farms needed to support this growth in the number of big data centres in Ireland. This is an important addition for the wind market in the Republic of Ireland, which has capacity of 2.3GW in 191 wind farms, as of February, and capacity of 222MW completed last year.

But such deals rely on there being enough wind power available. Irish leaders are currently looking at measures that would restrict where developers can site new wind developments.

For instance, the Irish environment minister is preparing new planning guidance that would specify that no turbine could be erected within 700metres of a house, up from 500metres now; and there would also be a height-to-distance mechanism that means that the taller a turbine is, the further it has to be located from homes. This would cut the number of places in Ireland that could accommodate wind farms, and would particularly hit larger projects.

This may help placate people who object to the spread of onshore wind, but it also makes it tougher for developers to build new wind farms; and the knock-on effect of that is it makes it more difficult for tech firms to find the power they want for new data centres.

The Irish government is not alone in looking to introduce tougher rules for onshore wind farms, of course. But it must be careful not to hinder investment in large tech projects.

She was the speaker everyone wanted to hear.

The Global Offshore Wind 2015 conference, run by RenewableUK, started in London on Wednesday morning with a full conference room. For most, this was the first chance to hear from Amber Rudd, the UK’s new secretary of state for energy and climate change.

She has already wielded the axe for the onshore sector. Would offshore wind be next? The question is important to the global offshore industry because the UK is the world’s largest offshore wind market, with 5GW installed, and one of its key players.

If growth in the UK were to be curtailed then it would be a setback for investments in Europe, Asia and North America.

But, thankfully for those in the sector, Rudd talked positively: “The industry now supports 14,000 jobs, and represents one of the 21st century’s biggest industrial success stories,” she said.

Her message was that the government would continue to support offshore wind in UK waters, but with caveats. UK leaders want to support the growth of a sector that has the potential to export products and knowledge globally, but offshore wind would have to keep driving down the cost of energy and win over the UK public.

One concern in the room was lack of clarity on the future of the Levy Control Framework after 2020/21.

The LCF is a cap on how much money can be levied on consumer energy bills to support new ways of generating energy in place of coal-fired power stations. Those taking investment decisions now on large offshore wind farms need more certainty. Rudd could not give that certainty: “Conversations with the Chancellor will happen at some stage. I hear you and I will come back on it,” she said.

And another concern was on the second Contracts for Differenceauction, which is set to happen this October. Rudd said she could not make a precise commitment on the size of funding in that auction or the timing of it, but would do so “in the next few weeks”.

This sounds good in theory but those in the audience, when polled in the second session of the day, were less confident about the future. This is understandable. The Conservative government has shown it is willing to axe support for onshore wind investors, and those in offshore wind will only gain confidence if Rudd makes a positive announcement on CfD.

The panellists in that session, however, were more positive.

Scottish energy minister Fergus Ewing was “heartened” to hear Rudd support offshore wind, and said it would play an important role in the UK energy mix until 2030. He added that his impression was there would be something to replace the LCF after 2020/21.

And Benj Sykes, vice president and head of asset management at Dong Energy, said he was confident and urged the audience to be more positive.

But confidence has to be earned. The UK offshore industry may be on track to achieve its 2020 goals, but it needs tangible government support if investors are to get the confidence to make investment decisions that will spur the offshore industry on to 2030, both in the UK and overseas.

It is good that Rudd had some positive words for the industry. Now we need to see actions.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, we would love you to check out the blog on the A Word About Wind website. If there are any burning industry issues you would like to talk about in a guest blog post then please get in touch with our editor Richard Heap.

Here is a taster of our most recent guest post…

Building Offshore Wind In Indian Waters
by Charles Yates, managing director of CmY Consultants

India's government plans to radically increase renewable energy generation in India and is actively seeking foreign help to do this.

The government has set a target of more than doubling the existing 21GW of wind generation to 45GW by 2020, and foreign investors are critical to funding the new renewable energy projects and supporting grid infrastructure, with an estimated value of $300bn.

As well as investment opportunities for developers and financial institutions, there are opportunities to...

Do you believe in miracles?

You probably need to if you expect an ambitious deal at the United Nations climate talks in Paris in six months’ time. Indeed, French president Francois Hollande said gaining backing from 196 nations for global renewable energy targets would be a “miracle”.

Nevertheless, we can hope. That is why we have been reading a report from the International Energy Agency, called ‘Energy and Climate Change’. This looks at the latest changes in the global energy market, including the growth of renewables, and includes a wish list of agreements the agency would like to see in Paris.

In particular, it sets out four goals it wants to see at that UN meeting if countries around the world are going to continue to promote the growth of renewables, including wind:

• Peak in emissions: IEA wants leaders at the UN summit to commit to a peak in energy-related emissions in 2020. It said this could be achieved with steps including promoting efficiency in the energy sector; phasing out fossil fuel subsidies to end users by 2030; and growing renewables investments from $270bn in 2014 to $400bn in 2030.

• Five-year revision: Leaders should commit to a mechanism by which they could review their level of ambition every five years. The IEA said this would sent a clearer message to investors that world leaders are committed to decarbonisation of energy sources.

• Lock in the vision: The IEA said governments should build on the support they give to the development of technology in the wind and solar sectors by providing similar support to energy storage technology, which promises to improve the reliability of these sources.

• Track the transition: Governments should introduce a rigorous process for tracking the progress towards nationally-determined climate change mitigation goals. It said tangible evidence would give investors, and others, confidence that everyone is acting together.

It said these steps were key if sectors including wind are to build on their current progress.

The cost of technology is coming down, and investment in energy storage will help further improve the business case for wind, but subsidies are still needed in most markets. A big statement of support for wind would be great for the confidence of investors.

In our view, the IEA ambitions for the Paris talks are sensible. Investors want certainty and these targets would give certainty.

That, however, does not mean they will happen. We have seen from bitter experience how tough it is to reach global deals on climate change. And yet, such political support is vital to wind. Yes, we have seen strong investment in wind in the last year: almost half of energy generation capacity added worldwide in 2014 came from renewables (128GW), of which wind accounted for one third.

However, the recently-released 'BP Statistical Review of World Energy' shows how much further wind has to go.

In the last year, the share of renewables and nuclear in the world energy mix was 13.7%. This is only a small increase from 13.1% in 1995. There is still a lot to be done if the world is to wean itself off its reliance on fossil fuels.

A clear and ambitious deal in Paris would be a big step down that road. But, at present, it looks like that is only for the faithful.

Guest post by Charles Yates, managing director of CmY Consultants.

The Indian government has plans to radically increase renewable energy generation in India and is actively seeking foreign help to do this.

The government has set a target of more than doubling the existing 21GW of wind generation to 45GW by 2020, and foreign investment is critical to funding the new renewable energy projects and supporting grid infrastructure, with an estimated value of $300bn.

As well as investment opportunities for developers and financial institutions, there are opportunities to follow clients into India and provide professional services such as due diligence, bid support and project management.

And the Government’s plan also involves kickstarting the development of offshore wind farms in Indian waters.

The Indian government sees offshore wind as part of a mixed-generation strategy, which will help to provide clean power independent of imported fuel such as coal; and to connect 300 million people that do not currently have electricity. Part of the appeal of moving offshore is that it can avoid the land issues that have plagued some onshore wind projects; and that it will generate power close to major demand centres.

Other attractions of offshore wind include higher load factors than onshore wind, and an opportunity to develop new technology and a local supply chain. However, there are major challenges for offshore wind, which include affordability and the availability of transmission to take the power to market.

This ambitious programme is an opportunity for those working in the sector in the European Union. For instance, the EU and UK are supporting actions to unlock India’s offshore sector, including funding resource mapping, policy guidance and capacity-building measures.

The Indian government and the European Union are collaborating through the Fowind (Facilitating Offshore Wind in India) project to provide technical and economic analysis of the potential for offshore.

As a result of this Government decision, it seems likely that the offshore programme will be accelerated with a pilot offshore wind project in the next few years. This pilot is likely to be in either Tamil Nadu or Gujarat which both have long coastlines, shallow water and relatively strong wind. A UK consulting team is building on best practice to frame commercial and technical aspects of the pilot.

While the Indian government, supported by a number of Indian states, is the prime mover behind this initiative there is also interest from the private sector. In particular Suzlon, the largest turbine manufacturer in India, is keen to develop a 300MW project off the coast of Gujarat and to sell the power to the well-run local state power company.

There are significant challenges to be overcome. These include developing an appropriate regulatory structure; an accurate, comprehensive and integrated assessment of the wind resource, sea bed, wildlife, and appropriate ports; and other uses of the marine resource. Even so, this vital government initiative is being strongly promoted by Prime Minister Narendra Modi.

Modi is putting in place policies that should lead to significant developments in offshore wind in India. The country will gain from the rapid development of turbine technology in established markets, which is reducing the cost of energy from offshore wind. If offshore wind experts want to benefit from growth in this new market, they should get involved now.

Charles is a member of the UK team working with the Indian government to progress the pilot offshore wind project.

It was billed as the ‘showdown of Cuxhaven’ and it happened last Tuesday. However, we must wait longer before we know the winner.

The ‘showdown of Cuxhaven’ may not sound an interesting name for a big battle. It is not exactly the ‘Rumble in the Jungle’. But, for us wind industry onlookers, it is a fight worth following because it concerns the future of German developer PNE Wind.

The firm may have sold its UK portfolio for €141m this week, but that is the least interesting thing that it did.

The ‘showdown’ itself took place the PNE Wind’s annual general meeting on Tuesday. On one side is PNE chief executive Martin Billhardt, chairman of the supervisory board Dieter Kuprian, and some other members of the supervisory board. On the other side is Volker Friedrichsen, who owns 15% of PNE, is a member of the supervisory board, and enjoys some of his own support on the board. The battle surrounds who should control the firm.

However, in the end, there was no resolution last week. The fight raged for 12 hours and, in the end, the meeting was postponed to be continued at a later date as yet undecided.

But how have things got so heated at PNE?

The animosity follows PNE’s acquisition of a 53% stake in fellow German developer WKN for €93m, which concluded in July 2013, from Friedrichsen. In its 2014 results, PNE said it had been forced to make writedowns because some of WKN’s projects were overvalued; and PNE claimed €6.2m from WKN in late 2014 because of the hit to its operating profit.

Billhardt has since said Friedrichsen is “exposed to a permanent conflict of interest” that “negatively impacts” his work on the PNE supervisory board. Billhardt has called for his removal, along with fellow board members Peter Baron von le Fort and Astrid Zielke.

Meanwhile, Friedrichsen has raised concerns about the way PNE is run, and particularly about pay. He argued that remuneration on the firm's supervisory board is one of the highest in Germany, even though the company’s turnover in 2014 was just €158m.

He also argued that PNE shareholders were being kept in the dark about the €341,000 that Kuprian was paid last year in his role as chairman of the company’s supervisory board, because €229,000 came from PNE and €112.500 from WKN. Friedrichsen also said he had lost confidence in PNE management, including Billhardt.

The PNE management and supervisory boards are set to thrash out these arguments at another AGM in the near future. It is difficult to imagine them coming to a resolution, and we would not be surprised to see one or more key player leave in the near future.

The big issue here to us is the accusation that pay is too high, as it goes right to the heart of how PNE is run. We cannot comment on whether PNE leaders are paid too much as, ultimately, this is a free market and it is not a concern as long as shareholders are happy.

However, it is natural that executive pay will come under scrutiny when a company has seen first quarter sales fall 54% year-on-year to €15.2m; and first quarter operating loss grow from €800,000 to €6m in the same period. This is from PNE first quarter results.

In its defence, PNE has asserted that it had a strong start to 2015, including a healthy set of development projects in Germany.

We are not particularly interested in those projects, though. We just want to know who will be in charge when they complete.

Wind Watch

Wind Watch is published every Monday and Friday.

Hawaii will never have a problem attracting business people that want a glamorous overseas trip. But now those in renewables have an even stronger business reason to visit the island state.

This month, Hawaii governor David Ige signed a bill stating that the US island state should run on 100% renewable energy by 2045. The aim is to build on the state’s existing goal of 70% renewable energy by 2030; and save the $5bn a year that the state currently spends on foreign oil imports.

It is a sensible ambition given the current uncertainty over oil prices. Yes, they may be low at $60 a barrel, but it is difficult to predict how long that will last. Two years? Five years? Longer? However long it is, as long as Hawaii depends on oil imports it will always be keeping an eye on what Middle Eastern oil producers, led by Saudi Arabia, are doing with production and how that affects prices.

Because one thing is for sure. Oil prices will not stay at this current low level forever. Saudi Arabia is keeping them low at present because it makes sense to put financial pressure on political rivals in Syria and Russia; and on rival energy sectors, including shale gas and renewables. But at some point it will restrict production and prices will grow to well over $100 a barrel, maybe even $200.

Hawaii wants to do what it can to reduce its dependence on oil before that happens. This opens up opportunities for developers in sectors including wind and solar who want to build large projects on the island; and also for manufacturers to want to sell community- or residential-scale technology.

Both of these sectors will be supported by developments in energy storage, which means excess power generated at times of high production and low demand can be stored and then used later at times of low production and high demand. We are seeing great progress in this sector, from firms including Elon Musk’s Tesla, and we expect this technology to continue developing at pace.

Hawaii’s commitment to renewables is good for both large and small renewables companies. The larger developers include the likes of Denmark’s Alpha Wind, which submitted a plan in March to build two floating wind farms off the Hawaiian coast totalling 816MW. The US Department of the Interior has to decide whether to grant it a lease, but the 100% renewables goal will do no harm.

Meanwhile, the target also opens up opportunities for firms that make residential- and community scale energy solutions. Hand-in-hand with the 100% target, the governor also signed a bill that would create a community-based renewables programme to allow residents and businesses to buy renewable energy from a community facility, if they are unable to install their own technology.

So if you work in renewables and want a trip to Hawaii, then what are you waiting for? There is surely no better time to visit.

It is always tough re-building an energy market. Just ask Mexico.

Next month (15 July), the Mexican government is set to auction the rights to search for oil in 14 areas in the Gulf of Mexico. This is the first auction since the government opened up the country’s energy market to private investors last year, after 76 years in state control.

The auction has attracted major interest from multinational oil and gas companies, with the government pre-qualifying bidders such as Chevron, ExxonMobil and Marathon.

It shows that the country’s energy reforms are starting to have an effect, and Mexico’s leaders are expecting $62.5bn of foreign investment in the energy market over the next three years. But this dash for fossil fuels contrasts with its approach to renewables.

It was only last year that president Enrique Pena Nieto said there would be no limitations on inbound investment in renewable energy, which piqued the interest of the wind sector.

But Mexico has not followed up by giving clear direction on the future of renewables auctions, incentives or annual targets. This lack of clarity is itself proving a limitation.

Investors need certainty, but such certainty is hard to come by in a period of major change. As a result, we expect slow growth in wind to continue. It would be unrealistic to think Mexico would have new mechanisms in place to support fast growth in the wind sector; but it is also unrealistic for Mexico’s leaders to expect fast growth in wind without that support.

One of the problems for Mexico is that we are judging it against its own ambitious targets. It has committed to growing wind capacity from 2.6GW in 2014 to 9.5GW in 2018, which is unlikely given that the energy market is going through significant changes.

Meeting such a target would require 1.7GW of installations a year, whereas 634MW was added in 31 wind farms in 2014 and around 700MW is expected in 2015. We expect growth to continue at this slower level until more support is put in place for wind investors.

If this support is put in place then its long-term prospects look good.

Mexico has strong winds in the states of Baja California, Oaxaca and Tamulipas; and companies such as Invenergy and SunEdison are looking to join Spanish companies Acciona, Gamesa and Iberdrola in the market. We see no shortage of wind players in North America and South America that would see Mexico as an attractive market for them to expand into.

But this is heavily reliant on the government, which has to make good on its commitment to wind and other renewables, even if it does not think they are as cheap as oil and gas. It must maintain that renewables are important in the country’s energy mix.

The big danger we see is the government getting swept up in the enthusiasm for fossil fuels and sidelining renewables. We need only look at the market’s excitement last week when Mexican state-run utility Pemex revealed it had found an oil reserve in the Gulf of Mexico that is believed to hold 350million barrels of crude oil.

Wind needs backing from the government, even if it does little that is quite so head-turning.

When Deepwater Wind started construction on the first offshore wind farm in US waters in April, it was always bound to lead to a series of other firsts.

Last month, we had the announcement that LM Wind Power is set to supply the 15 blades for the five Alstom Haliade 150-6MW turbines used on the 30MW project; and also the announcement that high-speed catamaran ferry company Rhode Island Fast Ferry has won the 20-year crew transfer contract to support construction and maintenance. In other words, the first US offshore blades deal; and the first US offshore wind crew transfer deal.

These two deals are significant because they show that the idea of building wind farms in US waters is becoming reality. This is particularly needed for the sector that experienced a huge blow at the start of the year as utilities National Grid and NStar announced they were planning to agreed power purchase deals at the 468MW Cape Wind. The two withdrawals have sent the project into a downward spiral that it is now battling to escape.

Meanwhile, the latter deal has enabled Rhode Island to launch a commercial wind support services division, Atlantic Wind Transfers; and to commission Blount Boats to build the first US-built crew transfer vessel. These are significant steps because the US needs a supply chain if it is to support the development of new offshore wind farms in US waters.

However, this supply chain will only be able to grow further if there are more US offshore wind farms to supply to, and there is nothing obvious. Cape Wind is in trouble; Dominion Virginia Power pushed back a 12MW pilot scheme last month because of anticipated high building costs; and there is nothing else that is obviously going to follow Block Island. We keep looking to see if there is anything we have missed but, frankly, there is not.

These deals highlight two gaps for US offshore: in new projects; and the supply chain.

The new projects need to come first. If US offshore wind is to take off then it needs people, like Deepwater, that are pushing ahead with viable projects. Developers will find it tough to come up with viable projects until they have access to sub-contractors that can appraise offshore risks realistically and charge realistic prices. But most sub-contractors are unlikely to offer such certainty until they have experience working on some projects.

This can be solved with the input of sub-contractors from Europe —indeed, the blade firm LM supplying to Block Island is headquartered in Denmark —but they too will be reticent about opening in the US if there is no clear project pipeline. This will take years to emerge.

It is a catch-22 situation for US offshore that, thus far, only Deepwater has negotiated. But there is a good chance that Block Island will still look very lonely in years to come.

The race is on. There are now two contenders to be west Africa’s flagship wind farm.

On Tuesday, American Capital Energy & Infrastructure (ACEI) announced it is set to invest $86m (€76m) in French developer Sarreole’s planned 152MW wind farm in Taiba Ndiaye in Senegal. The scheme is expected to require total investment of $340m (€302m), and ACEI said the rest of funds are set to come from senior and mezzanine debt investors.

Meanwhile, financial close is scheduled this year for the 225MW AyitepaWind on the coast of Ghana. Last year, Mainstream Renewable Power agreed a deal with Swiss developer NEK Umwelttechnik to buy the scheme, which is set to require total investment of $525m. If completed on schedule, the project would start generating power in early 2016.

Both are looking to reach financial close, and whichever does first will take pole position in the race to be west Africa’s first major wind farm. This would make the winning scheme hugely symbolic, much like the 310MW Lake Turkana in Kenya has done in east Africa.

So which will be the first? Well, ultimately, it doesn’t really matter.

What really matters for the region is that one or both attracts the financial backing they need. This would prove institutional investors are happy to invest their money in west Africa, and gain an early foothold in these small but growing markets. It would also pave the way for developers to pursue projects in the wider region.

Because, on the face of it, both AyitepaWind and Taiba Ndiaye are viable investment propositions.

We looked at Ayitepa last September after that Mainstream deal and, since then, its prospects have further improved with the signing of a power purchase agreement with the Electricity Company of Ghana in March. This is the first such wind power deal in Ghana.

Meanwhile, Taiba Ndiaye has been through a difficult gestation.

Investigations into wind conditions on the site started in 2008; and, in 2012, after years of negotiations, developer Sarreole agreed a 20-year power purchase deal with national utility Senelec in 2013. The new deal with ACEI is important because it shows the project makes financial sense.

It also has political support. Senegal’s leaders have committed to improving energy security by diversifying the mix away from fossil fuels, and a 152MW wind farm in a nation with total energy capacity of around 600MW would play a huge role in that.

Currently, over half of Senegal’s energy comes from non-renewable biomass, with oil imports accounting for 40%; and other resources, mainly coal and hydro, providing the remaining 6%.

The demographics are good, and this should be enough to attract the investors they need. Wind in Africa has grown fast in the last 18 months. Almost 1GW of capacity was installed last year, taking total capacity to over 2.5GW. Growth was mainly in South Africa (560MW) and Morocco (300MW), and we are also seeing big plans in Egypt, Kenya and others.

This shows that investors are confident going north, east and south. Soon, we expect to see more of them go west.

Wind Watch

Wind Watch is published every Monday and Friday.

Humans have been benefiting from the power of the sun since we evolved from primates about five million years ago. It is a wonder it has taken the ‘solar age’ so long to arrive.

But some say it has, almost. The Saudi Arabian oil minister Ali Al-Naimi said last month at a climate change conference in Paris that the ‘solar age’ could be with us as soon as 2040.

By this, he means that the Middle Eastern fossil fuels powerhouse could see fossil fuel exports as a thing of the past as early as 2040, with Saudi exporting solar power overseas instead.

“In Saudi Arabia we recognise that, eventually, one of these days, we’re not going to need fossil fuels. I don’t know when — 2040, 2050 or thereafter — we we have embarked on a programme to develop solar energy,” he said. Al-Naimi added that oil prices as low as $30 or $40 would not make solar power uneconomic because the costs are falling fast.

Investors in wind energy can either see this as a threat or an opportunity. The emergence of cheap solar power could threaten the status of wind investors as governments opt for solar over wind; or it could present an opportunity, with acceptance for solar meaning that wind is also taken more seriously.

Investment in solar would also lead to major investment in battery storage that wind farm developers could also use to their benefit.

In our view, the emergence of solar presents an opportunity for wind investors. This year we have seen more developers looking to get involved in both sectors.

US solar giant SunEdison completed its $2.4bn takeover of US wind developer First Wind in January to make its first push into the wind sector, and is now reportedly in talks to buy Indian developer Continuum Wind for $650m to give it a foothold in India. Meanwhile, US wind developer Pattern Energy is getting ready for a solar push.

We expect these types of wind and solar operations to become more common in the next few years, and the reasons are simple. It gives developers more options for what they can do with sites. If a site does not work for wind then try solar, or a combination of both.

It also enables companies to enter more markets.

Some countries are sunnier, others are windier. Some governments prefer wind, some prefer solar. Investors with interests in both sectors have more options when it comes to expansion, and better placed to benefit if we see interest rocket in either sector. Likewise, investors are protected if either plummets.

Wind investors and developers would do well to look at the opportunities in solar. Energy consultancy Woods Mackenzie, for example, has said solar could be “the next shale” as it is likely to be as cheap as fossil fuels in 19 US states within the next five years.

But what of Saudi Arabian solar? Frankly, we are not that excited.

Five years ago the country set up its King Abdullah City for Atomic & Renewable Energy to build 54GW of renewables as an alternative to fossil fuels; but ditched the plan in January. It now has only 50MW of solar power installed, out of a world total of 177GW, and needs to do a lot to catch up before the ‘solar age’ arrives. Read more in our Middle East report.

If solar takes off as some predict then it should not worry wind investors. Rather, it gives them a perfect excuse to branch out.

UK wind is well aware that the Conservative government plans to axe subsidies for onshore wind. That does not mean it should meekly accept these destructive cuts.

The government has long said it would stop new subsidies for onshore wind farms if it won the general election last month, which it did. But now the Department of Energy & Climate Change is looking to go a step further by stopping subsidy support under the Renewables Obligation regime one year earlier than planned, in April 2016 rather than April 2017.

Both the ban on new subsidies and retrospective cuts are policies that need to be strongly opposed. And, thankfully, it appears that those in the wind industry are not going to cave in to this assault.

Trade body RenewableUK has said it would fight the retrospective changes; while Marcus Trinick, partner at law firm Eversheds, has written in the Guardian that changes to the RO could result in legal action: “In such a position we could not afford not to fight,” he wrote.

Legal battles are, of course, expensive and time-consuming, but the wind industry is right to consider this tough course of action in order to try to retain subsidy support.

For one thing, a fight would underline the point that wind is a serious industry, not simply the preserve of environmentalists.

Currently, 5% of UK electricity comes from wind and that can grow much further as part of the UK energy mix. It is right that wind firms should look to drive down the cost of wind energy and, if subsidies can help achieve these aims, then so be it.

One common argument against the wind sector is that it cannot function without subsidies, but why should it when fossil fuel industries still gorge on such support? Globally, the International Energy Agency said that $544bn of subsidies went to fossil fuels in 2012, compared with $101bn to renewables. The current support in the UK is not about giving wind an unfair advantage, but rather helping it to compete against those subsidy-suckers.

The wind industry should also not be afraid of holding the government to account. Critics of wind have said the government has been elected with a popular mandate to axe these subsidies, but that ignores the two-thirds of people regularly quoted in the government’s own polls saying they support the use of onshore wind. These people need representation.

And that is quite aside from the point that the government is acting against its stated aims of backing ‘green’ technology development in the UK; and rolling out low-cost renewables. Its policies would harm the development of wind tech; and it makes no sense to try to bring in cheap renewables without onshore wind, which is the cheapest of them all.

And the final point about the Renewables Obligation is not about wind at all. Rather, it is about the UK’s attractiveness as an investment destination. If the government shows it is happy to retrospectively axe support for wind farms that are already in development, then how do the developers of other projects know they are safe? Today, it is wind farms, but tomorrow is could be HS2, nuclear power station Hinkley Point C, or something else.

Investors need certainty. Retrospectively axing support for wind harms the UK’s status as a safe destination for large institutional investors in infrastructure. If that status is at threat then any legal action on wind is very likely gain support from those outside wind.

This may end not end up in court, but that would mean UK leaders
accepting they were wrong on wind. How likely is that? Not very.

Wind Watch

Wind Watch is published every Monday and Friday.