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“Meet the new boss. Same as the old boss.”

British band The Who wrote this line for their 1971 classic ‘Won’t Get Fooled Again’, but a similar sentiment is likely in Turkey after the general election this coming Sunday (7 June).

Turkish authorities have been denying opposition parties access to public squares for their pre-election rallies, and removing opposition campaign materials. This means there is little chance that the ruling Justice & Development Party could be ousted, despite questions over their fiscal competence; and, if the party wins convincingly, it is set to hand more power to President Erdogan.

This likely result also means there is little chance of a shake-up in Turkish energy policy, to step up the pace of growth in the wind sector. Turkey is promoting wind, and backing it through policy mechanisms like feed-in tariffs (as we saw in our Middle East report earlier this year), but it could do so much more.

After all, the fast-growing country has some decent targets. It has 4GW currently installed, and is looking to grow this fivefold to 20GW over the next eight years. It is also aiming that wind should be around 10% of the electricity mix by 2023, up from 3% now.

But government policies are also restricting the pace of growth, and this is forcing investors into tough and unpredictable auctions.

In the last week of April, for instance, the Energy Market Regulatory Authority invited bids for wind capacity of 3GW, but received bids for more than 14 times that (42GW). This clearly shows that there are investors ready and willing to push on with schemes.

If Turkey wanted faster growth then it could easily achieve it by simply letting more investors pursue more of these schemes. Not all 42GW of projects will be any good, but more than 3GW will be.

This would enable the country could provide more of the power that is desperately needed by its fast-growing population with increasing demands for energy. It would also help the nation to reduce its reliance on expensive foreign fuel imports. Sounds simple, right?

Unfortunately, though, wind is not the government's priority.

The problem for wind investors is that Turkey’s leaders are aiming to meet growing energy needs with a huge and environmentally-damaging rollout of fossil fuels, as well as nuclear. This coal programme will also be hugely damaging to people's health.

Last month, European non-governmental organisation, the Health and Environment Alliance, put out a report called ‘The Unpaid Health Bill: How coal power plants in Turkey make us sick’.

This reported that air pollution from Turkey’s 19 coal-fired power stations that were operational in 2012 cost the country €3.6bn a year in premature deaths, lung diseases and heart conditions. Now the government is planning 80 more such power stations, which is the third-highest number being planned by any country, and the amount spent on fixing health problems is expected to "skyrocket".

The fact that such a health scandal is being reported should give hope to wind investors. The risks of fossil fuels are plain for all to see. But, unless Turkey's leaders take these warnings seriously and act on them, they are unlikely to rein in their fossil fuel plans.

Turkey still has great potential as a wind market, but investors cannot expect many favours. They will have to battle hard with both policies and their rivals if they are to gain their hoped-for returns.

We just hope they are ready for the fight.

No doubt you are aware that Australia has been turning away from green energy under the leadership of prime minister Tony Abbott.

In fact, this month the coalition government has finally broken the deadlock on the future of the country’s Renewable Energy Target. The Liberal Party and Labor have cut the target of power from renewables in 2020 by 20%, from 41,000GWh to 33,000GWh.

This is clearly bad for investors in large renewables developments, including wind farms, as it reduces by one-third — to 5,500MW — the capacity of such projects that are set to be built by 2020. The only good aspect is that investors now have clarity on policy.

If we want to get an idea of the pain facing major renewables we should look at a case study: the two-year strategy announced by AGL Energy this week.

On the face of it the strategy looks pretty pro-renewables. AGL has committed to a series of non-core asset sales, totalling $1bn (€700m), to raise funds to invest in rooftop solar, battery storage and smart metering. It has also committed to moving away from coal-fired power generation by 2050. It’s a long-term move but in most cases would still be positive.

When you know about AGL, though, all of this is less impressive.

The investment in emerging green technology is good, but the company is also planning to sell its 50% stake in Australia’s largest wind farm, the 420MW Macarthur project, in a deal that could net it around A$500m (€350m). This tells us that AGL sees a brighter future in small-scale renewables than it does in the large projects that appeal to major investors.

Its backing for small-scale renewables is also a tiny step towards green energy, compared to the giant leap it has made towards black energy, mainly coal, in the last year. In August 2014 the company bought 4.6GW of coal-fired power stations in New South Wales, which followed its purchase in 2012 of the 2.2GW Loy Yang A brown coal scheme in Victoria.

AGL has slipped from its position as the greenest of Australia’s large utilities to becoming a huge emitter of greenhouse gases. Its new strategy is only a tiny step back towards green.

And let us not forget that AGL was one of the major utilities — along with EnergyAustralia and Origin Energy — that have been called for a RET to be either scaled back or scrapped altogether; and have backed the government’s earlier removal of a fixed carbon price. We should not laud a company that has been so key in these damaging policy shifts.

Investors in Australian renewables will rightly welcome the fact that they have certainty on RET and can re-start business planning. These changes are likely to force some of them to be innovative and get involved in emerging parts of the market such as storage.

But investors should not cheer a situation where large wind and solar projects are in a far worse position than they were two years ago. AGL has shown that it sees major mileage in investing in coal and small renewables over the next few years.

In other words, just like Tony Abbott wants it.

Wind Watch

Wind Watch is published every Monday and Friday.

Remember those days when utilities used to rule the roost? Especially so when supplying power to energy-intensive corporations, technology plants and data centre operators?

Such days are long gone and, if anything, the power balance has shifted the other way. As the percentage of power purchase deals controlled by major corporations increases, one can’t help but think it is energy-hungry corporations, not utilities, that are in charge.

Take Google. The business is at the front of our thoughts following the participation of the firm’s head of renewable energy investment, Nicolas Coons, at our invitation-only Global Networking Reception as AWEA 2015 last week, sponsored by Vaisala.

When it comes to renewable energy investment, Google’s strategy is pretty unique. Unlike its peers, the tech giant has chosen to take a more active role in its investments. It has built a portfolio by taking strategic sites at a relatively early stage in the development cycle, typically pre-construction.

By then focusing on how it can use its own technological expertise to boost the project’s future performance — and setting a minimum project investment threshold of around $75m-$80m — the internet giant has pursued a strategy that enables it to trade the energy produced by its projects, while consolidating the financial risk.

This has enabled the firm to move fast, when combined with its wider interest in bringing new technological innovation to the market within the wider renewable energy space.

The net result of this is that Google has pulled off the neat trick of producing power to help balance out that used by its data centres, while at the same time introducing new and relatively unproven technology to the market. The Makani wind kite project is a case in point. Google bought Makani in 2013, and last month started test flights for the kites.

But that's not all. It gets even more interesting when you consider the diverse patchwork of strategies now being pursued by the many corporations that are active in this space. We are not seeing other online giants pursuing new wind tech investments to the same extent as Google, for example, but we are seeing a general focus on improving performance.

This can only be to the industry’s benefit.

As more corporate investors put their faith and money into renewables then that is likely to drive improvements in the operational performance at established sites, and some highly optimised fleets. Such improvements are vital as the wind sector looks to make a strong commercial case, particularly as established markets are reducing subsidies. In fact, such improvements can be the difference between whether some new schemes happen or not.

How different corporates improve their portfolios is, of course, up to them. Google has a focus on new technology, while others are looking at forecasting and modelling, financial hedging, and so no.

Make no mistake, though. While there are individual strategies, and early investment drivers may vary, one thing will remain constant. Namely, an incessant drive towards greater optimisation and utilisation as their focus on the bottom line only grows.

“Wind energy still hasn’t reached its full potential. The way wind farms are built today is still very sub-optimal. It’s far less efficient and profitable than they actually could be.”

So said Anne McEntee, president and CEO of renewables at GE Power & Water, at the American Wind Energy Association’s Windpower 2015 conference in Orlando this week.

She made the statement as the US manufacturing giant launched a new service called the ‘digital wind farm’, which uses ‘big data’ to help address that lack of efficiency. So what is this? And why is GE getting into performance monitoring in such a big way?

The ‘digital wind farm’ is a computer modelling service that takes information from sensors on turbines about how the wind farm is performing; and also pulls in weather forecasting and wind pattern information to correlate and predict how the wind farm is set to perform. The turbines can then be adjusted and refined accordingly to maximise production.

For investors and operators, this service has clear benefits. First, it can help them design schemes more efficiently in the first place; and, second, it can help them to run completed projects more efficiently. If turbines can store energy and predict weather patterns then it means they can sell energy to the grid when it is more lucrative; and it also enables wind farm owners to monitor their turbines and target maintenance spend where most needed.

In real terms, GE thinks the system would boost energy production by 20% and add around $100m in extra value over the lifetime of a 100MW project.

And, with more insight into their portfolio, investors can undertake better financial forecasts and develop a far deeper understanding of their project than they have been able to so far. This is good news for the investment community at a time when there is a growing need for transparency and greater understanding of the assets under management.

The introduction of this service therefore brings GE closer to the financiers behind the portfolios; and it also places the manufacturer squarely up against some of the more well-established consultancies in the field – that have spent years developing independent wind mapping, monitoring and optimisation tools that aim to tackle exactly this challenge.

For GE, therefore, they either feel that wind portfolio performance hasn’t been properly addressed; or they see a greater opportunity for growth in the sale of software support services, as opposed to in pure equipment sales. We think the latter is most likely.

Whether that’s a reflection on the wider state of the US wind energy market, or on the state of innovation and development within GE is of course very much up for debate.

But it does signal a new aspect in the complex relationship between what is offered by the consultancies and the major manufacturers.

Wind Watch

Wind Watch is published every Monday and Friday.

Glossy TV adverts, big growth plans, and promised returns of up to 8%. It is no surprise that German developer Prokon was able to attract €1.4bn in investment from the public.

But for consumer organisations it was little surprise when all of this came crashing down early last year. In January 2014, the company filed for insolvency after investors withdrew investments of €280m in 2013 and 2014. The reason for the exodus is that Prokon’s business model had been widely described as a Ponzi scheme, although the company said it was merely “unconventionally financed”. Creditors are still waiting to agree a settlement.

Now an end is in sight. In July, its creditors are set to vote between two recapitalisation options for the firm. The first option is continuing Prokon as a cooperative; and the second option is selling Prokon to Germany’s third-largest utility, EnBW, through a share deal. Last Wednesday, EnBW was selected as preferred investor to buy Prokon in a €500m deal.

Like Prokon, EnBW has been struggling with its own problems.

As with other European utilities, its fossil fuel operations have been suffering as countries including Germany have shifted towards renewables, mainly wind and solar; and the firm revealed last week that first quarter Ebitda in its renewables division fell 16.9% year-on-year to €35.5m.

It said this was a blip and that its results would look healthier after the 288MW offshore wind farm Baltic 2 is commissioned this year.

Even so, why does it want to touch Prokon?

Here is the short explanation of the problem. Prokon was formed in 1995 and raised €1.4bn by selling ‘profit-participation certificates’ to 75,000 creditors. These certificates do not give creditors any say in the running of the company, as traditional shares do; and also mean investors are liable for losses in the company. It sold these promising a 6%-8% return.

The business model proved highly controversial.

Consumer advocates warned that the developer’s generous returns were not being paid from profits generated by the wind farms, but were instead being paid out using fresh money from new investors — which they said is effectively a Ponzi scheme. The German courts also said investments were not being used to fund new developments; and had also accused the company of fraud.

Ponzi. Opaque. Fraud. Three words that would usually get would-be buyers running away from a potential investment at high speed.

But, in this case, EnBW is right to pursue its interest. It would be buying Prokon’s assets but ditching its financing methods.

By buying Prokon, EnBW would be able to buy its 54 operational wind farms in Germany and Poland with combined capacity of 537MW; and a pipeline of 170 projects in Germany, Poland and Finland. This would be a great boost for EnBW, and enable the utility to shift towards renewables in a high-profile one-off deal. Such deals do not come along often.

It also offers creditors a way to exit their troubled investments and, crucially, a clean break from Prokon. Continuing to run the company as a cooperative does not offer that closure.

We will only know after Prokon's creditors vote in July.

The UK election, eh? What a lot of fuss about nothing.

It is one week since the Conservative Party won a slim majority in the UK election. This is the party’s first chance to govern alone since Labour won its landslide victory under Tony Blair in 1997; and comes after five years in coalition with the Liberal Democrats.

In the run-up to the vote last week we argued that a coalition would be best for wind, as it would rein in the anti-wind policies of the Conservatives or the anti-business policies of the main opposition party, Labour. We stand by that analysis.

But unquestionably for those in the financial services industry, including those based in the UK who are investing in wind farms around the world, a Conservative victory is best. With five more years of David Cameron as UK prime minister there is little chance of a big crackdown on the financial services sector.

Put simply, the Tories will be unashamedly pro-business.

This helps breed confidence among UK businesses that they will be able to keep growing, keep investing, and keep creating jobs.

They can see that the government is committed to cutting red tape, and is opposed to pursuing policies that harm financial services. This confidence and stability is vital if the UK is to attract further investment from overseas wind firms, like the commitments by MHI Vestas and Siemens to open factories in the UK.

The only downside is the prospect of a referendum by 2017 on whether the UK wants to leave the European Union, which would have impacts in areas including energy policy. But overall, the result is undoubtedly best for UK investors and businesses as a whole.

There is, of course, a serious but.

The election result is the worst for developers who want to pursue onshore and offshore wind projects in the UK. The Conservatives say they want to axe subsidies for new onshore wind farms, and they will be free to pursue such a destructive policy without the influence of the Liberal Democrats in government.

No longer is there the moderating voice of Ed Davey, the Lib Dem former climate change secretary.

If the government takes the axe to onshore wind then offshore wind is not safe either. The continued growth of this global industry, in which the UK is a leader, is now in question.

And let’s just look at the composition of the new cabinet. On first glance, it looks good that new energy and climate change secretary Amber Rudd has been pro-renewables; and it is also good that Eric Pickles has been shunted out of the Department of Communities and Local Government, so he can no longer call in wind farm applications and reject them.

But, looking a little deeper, we see hints that the onshore wind industry’s worst fears are set to come true. Pickles has been replaced by Greg Clark who, though nowhere near as divisive as Pickles, is also the architect of the government’s localism agenda. That means more powers for local communities to object to local developments, including wind farms.

And there is also the appointment of Andrea Leadsom, a big wind critic, as an energy minister. She is likely to be tasked with ending subsidies for wind farms, which she has said “still needs to be proven as a valuable contribution to our energy security needs”.

Leadsom celebrated her birthday on Wednesday. For the wind industry, her appointment is certainly nothing to celebrate.

You see something flying over your wind farm. Is it a bird? Is it a plane? No, it’s a drone. This prospect could fill you with terror or excitement. That depends on your prejudices.

If you associate the word ‘drone’ with the unmanned aerial vehicles used in war then you would be understandably alarmed to see one flying over your wind farm. If, on the other hand, you think a ‘drone’is most likely being used by a wind enthusiast to take pretty photos then you may welcome the aerial interloper. It is all about context.

Governments have been waking up to the risks posed by drones.

For instance, last month Dubai introduced new aviation laws with restrictions on them, in order to protect its airspace. Meanwhile, Japan is looking at changes after a man last month used one to drop radioactive sand on the house of Japan’s deputy prime minister. And the US is looking at the feasibility of Amazon’s plansto use them to deliver products to customers.

These governments have been looking seriously at drones. Now wind farm owners should look start seriously at this technology too. In real terms, that means investigating exactly how they can help manage wind farms more effectively, especially in the operations and maintenance phase.

It’s also of course, about recognising any potential threats. But, in simple terms, drones are neither good nor bad. They are simply another technology that needs to be managed.

This is why UK firm Aveillant last week launched a holographic radar that it said is capable of detecting and tracking drones. We have seen people flying drones over sensitive sites, and so it is important for wind farm owners to understand the risks.

Now, the prospect of unidentified drones flying over wind farms is worrying, and it therefore makes sense for owners to be fully aware of all aviation traffic, including drones.

After all, if drones fly too low then they could hit turbines and damage them; or get knocked out of the sky and harm people at ground level. There’s also a chance of competitors using drones to monitor their rivals' activities, although that risk is minimal, at best.

Either way, the wind sector should not be too hostile to drones because of the potential benefits they could bring.

For instance, wind companies can use drones to see if there is damage to turbine blades before sending people to assess them in person; or to assess potential development sites. These are significant benefits that can help companies to run their operations more effectively, and maximise their returns.

In fact, French construction firm Bouygues last year launched drone inspections for wind farms. And since the specific drone technology is not cost prohibitive, in theory at least, this type of surveillance is potentially something that owners could do themselves.

And it’s that element that sits right at the heart of the issue. Yes, drones could pose risks to wind farms every so often, but they could also bring benefits day in day out, too.

Time then, to develop a better understanding of a technology that has the potential to go mainstream. There is a raft of willing contractors out there already setting up shop – and generating increasingly attractive revenue streams – and we do not expect it to be too long before a developer snaps up one of these outfits.

And that, crucially, will provide ultimate proof that the technology has a viable long-term future.

Take a swig of coffee and steady yourself. You may not want to hear the next four words of this article: end-of-warranty inspections.

This increasingly common four-word phrase is liable to cause headaches for many developers and investors with established operational wind portfolios. But why?

Primarily, because these end-of-warranty inspections — or EOWs as they are known by their friends — often mark the beginning of developers and investors having to take on proactive operations and maintenance of turbines in their schemes. This marks the start of increased financial exposure to turbine failures on projects.

But these EOWs are still highly necessary. These inspections help owners to detect failures of critical components in their turbines in order to establish warranty claims; and to ensure that their turbines provide effective operation for as long as possible. That is a good thing when managed effectively.

In fact, if handled appropriately from the outset, EOWs actually present an opportunity for portfolio owners and investors to hold manufacturers to account and create a far more compelling finance and insurance proposition. This can only ever be a good thing.

The trouble for owners and operators, however, has been finding an effective and impartial way to manage these inspections. These companies have been keen to find alternatives to the more traditional approaches that are simply too closely linked to either turbine manufacturers, developers or operations and maintenance (O&M) service providers.

The reason they are looking for alternatives is that, in each of the instances above, there’s a vested interest that all too often sits at odds with the long-term benefits of the owner and operator.

All of this makes a joint venture, which was set to be announced by energy consultant Dulas and WTG Partners this week, all the more interesting. This collaboration is set to provide independent third party UK inspections and due diligence support, to portfolios of all sizes, from January 2016.

For new investors that are beginning to deploy capital into the market, that’s a compelling proposition since it presents an alternative, impartial opinion to traditional type certifiers from two parties with a clear market track record.

However, perhaps more interesting are the long-term ramifications that such a service will have on the finance and investment markets. In an instant, it is set to provide far greater visibility and insight into a project portfolio and into the operational specifics of individual turbines. In turn, that enables more effective planning of scheduled servicing and maintenance, minimising project downtime and helping portfolio performance.

End-of-warranty inspections have, for too long, been viewed as a unwelcome cost that can throw up complex problems that create acute, short-term challenges. However, with increasing numbers of portfolios reaching the end of warranty periods and/or changing ownership as developers sell projects on, the outlook on such necessary inspections needs to change.

As the Dulas/WTG deal demonstrates, EOWs are an opportunity, not just a challenge – and the benefits of absolute impartiality are quickly becoming critical to managing long-term financial risk.

Onshore wind added more than £900m to the UK economy in 2014, new research has shown. But this economic activity is at risk after the general election on 7th May.

That is the warning from trade body RenewableUK, which published a report by BIGGAR Economics about the contribution of onshore wind to the UK economy. It is a timely report, as there is set to be wrangling over policy between potential coalition partners after next week’s vote. Some of the parties may hate wind power, but will they want to kill a growing industry that supports jobs?

The ‘Onshore Wind: Economic Impacts In 2014’ report said 69% of total spending on onshore wind farms in the UK stays in the nation, including 98% of spending on developing a project and 87% of spending on operations and maintenance. Of construction spending, only 48% remains in the UK because most developers have to get their turbines from suppliers based in mainland Europe.

However, even in that case, not all of that remaining 52% of construction spending is lost from the UK, as those turbine manufacturers will often use parts from UK companies. Renewable UK said this is a success story that is often ignored by parties including the Conservatives and UKIP.

Maria McCaffrey, chief executive at RenewableUK, said the contribution of onshore wind to the UK economy has grown by two-thirds over the last two years, which is a rise of £358m.

“The industry is helping to propel Britain to a brighter, cleaner and more secure future. Onshore wind is already the lowest cost of all low-carbon options, and is set to become the least costly form of all electricity within the next five years,”she said.

“Despite these facts, onshore wind projects are under threat from misguided Tory and UKIP policies aimed at stifling their development, blatantly disregarding rational economic evidence and consistently high levels of public support.”

If wind makes such a contribution with hostile policies, imagine what it could do with a supportive government. This is vital evidence, although it will be months before we see whether it makes a difference to the policies of the coalition government in power from May.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, you can catch up with our analysis on this week’s UK election, which we originally published last month.
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This time next month the UK election will be over and investors will be able to get back to planning their investments in the UK.

At least, that’s the theory. The problem is, this is one of the most difficult UK general elections to predict in the last 100 years, which is mainly due to the growing influence of small parties.

We are likely to see a coalition government again and so, even after the votes have been revealed, the talks between the parties will continue with compromises undoubtedly having to be made. These parties would all bring very different energy policy priorities into a coalition government. It is difficult to see how wind will fare.

But let’s try.

Neither of the two main parties — the Conservatives or Labour — is set to win an overall majority. This is good news.

The Conservative Party has committed to a ban on subsidies for all new onshore wind farms if it wins an outright majority; and pledged a referendum in 2017 on whether the UK stays in the European Union. Exiting the EU would weaken the UK’s international renewable energy targets and its business ties with Europe.

Meanwhile, the Labour Party is a bigger supporter of renewables, but is also regarded as being more anti-business. It has pledged to freeze the prices...

Guy Hands last month said a Labour coalition with the Scottish National Party would be the best UK election result for the wind industry. The founder of private equity firm Terra Firma said he wanted a change from the negative attitude of the Conservatives.

Hands will not have to wait long to see if he gets his wish. The election is this Thursday.

But a series of recent news stories has got us wondering whether Hands’s own attitude to wind is changing too. Terra Firma has been an enthusiastic backer of renewables through investments in UK developer Infinis, US developer EverPower, and solar firm RTR.

Now, though, it is reportedly working with Bank of America Merrill Lynch on a potential sale of EverPower for $1.5bn; and six months ago said it was looking at selling its 69% stake in Infinis. It also fell short of a planned first close for its $2bn renewables fund in 2014.

So do these stories suggest Terra Firma is going cold on the renewables sector? Well, no.

The firm told A Word About Wind it could not comment on these stories or its strategy. In our view, though, a sale of EverPower or Infinis would be driven by good business sense.

Let’s start with that $2bn fund, which has faced problems including the loss of managing director Damian Darragh last February; and missed that planned close in December. The fund has struggled to buy assets due to competition from yieldcos, which target lower returns than Terra Firma and can therefore outbid Hands and co.

This competition from yieldcos has been a problem for Terra Firma’s fund, but also means it is a good time to look at a sale of EverPower, which it bought for $350m in 2009.

This developer have seven wind farms totalling 752MW, and a pipeline of 20 projects totalling 2GW. That is a portfolio that would make any yieldco drool, and therefore it is a good time to explore a potential sale. Demand is there so it makes good business sense.

Another alternative would be to sell EverPower to a solar developer keen to branch out of solar, like with SunEdison’s $2.4bn buyout of First Wind that concluded this year. We would expect SunEdison’s solar rivals to be looking at ways to take on this new giant.

The risk is that huge demand for assets from yieldcos, particularly in the US, could push out some major investors out of the market — albeit sending them away with a big payday.

And Infinis? Well, the drivers there are very different.

Hands is concerned that a new Conservative government could stall growth in the UK wind sector is it carries out its plan to block subsidies for new onshore wind subsidies after this week’s election. In that context, it would make sense for Terra Firma to sell its 69% stake if the Conservatives win.

There is no indication at this stage that Terra Firma is turning away from renewables. We have two separate stories and should be wary about conjuring up links that do not exist.

Europe’s Nordic countries have operated a single energy market for the best part of two decades. It is a a little odd, therefore, that we haven’t seen a pan-Nordic wind developer.

That is due to change this month. Norway’s Havgul Clean Energy and Sweden’s Triventus Wind Power are set to merge to become Havgul Nordic, which will operate in Norway, Sweden and Finland.

The new firm is not targeting Denmark because the wind market is more mature and, therefore, it sees that its opportunities to get involved there are more limited.

Havgul Nordic is set to start with a portfolio of almost 1.6GW, with seven projects totalling 504MW in Sweden, five totalling 865MW in Norway, and three totalling 185MW in Finland. Its wind projects range from small sites without development permits to large consented projects, such as 350MW offshore scheme Havsul 1, and the 200MW Tonstad wind farm.

In an interview with A Word About Wind, Havgul Nordic chief executive Harald Dirdal said that the discussion about a merger started last year as Havgul Clean Energy was looking to raise equity. Dirdal said it made sense to merge the portfolios of the two firms as it gave them coverage across the Nordic region; and enabled them to share their expertise.

The benefits for investors are that the new company would offer a single point of contact to invest in schemes across the region; and that Havgul and Triventus would be able to cut the overall costs of developing schemes due to the economies of scale post-merger.

And Dirdal also said that this would enable the new company to capitalise on recent changes in Norway and Sweden that those of us based outside the region have not talked about much.

One of these is the deal between the Norwegian and Swedish governments to raise their joint target for renewable electricity production to 28.4TWh/year by 2020. This is 2TWh/year more than the previous target and is due to come into force on 1 January.

This gives the new firm confidence that there will be plenty of opportunities in wind.

Then there is the Swedish government’s decision to phase out nuclear power in the next 15 years; and the planned export cable that Statnett and National Grid are looking to build between Norway and the UK, which is set to enable both countries to trade excess renewables. Both of these indicate a growing market for renewable energy both domestically and overseas.

Dirdal also said that Norway’s huge hydro capacity — the country gets 99% of energy from hydro — meant it has huge potential to export extra power generated by sources including wind.

He said: “98% of oil and gas is exported; 95% of everything we produce in fisheries is exported; and you will see the same situation in wind because of our wind resources.”

Havgul Nordic is now looking to attract further investment to support its plans in the region. The developer will hope that investors have as much confidence in the Nordics as it does.

Terra Firma mulls $1.5bn EverPower sale

Private equity firm Terra Firma is reportedly mulling the sale of US wind developer EverPower for an estimated $1.5bn.

The Financial News reported that Terra Firma is working with Bank of America Merrill Lynch on a potential sale of EverPower from its third fund. Terra Firma bought a controlling stake in EverPower for $350m from Good Energies in 2009, which was its first US deal.

EverPower has completed 752MW wind farms across seven sites since its first project in 2008, and now has a pipeline of 20 projects totalling 2GW in eight US states. Terra Firma and Bank of America Merrill Lynch have both declined to comment.

ESB and Coriolis in £600m tie-up

Irish energy company ESB and UK developer Coriolis have entered a partnership to develop nine projects in the UK worth £600m.

The companies have agreed a development partnership to build projects with a combined capacity of 400MW. The majority of the projects are in Scotland, but the partners have said they would also pursue opportunities throughout the UK.

Coriolis and ESB expect their first project to be operating by 2019.

Natixis leads $254m Peru financing

French bank Natixis has led a $254m financing for two wind farmsin southwest Peru with combined capacity of 129MW.

The bank led a group comprising the US Export-Import Bank, the French Development Agency, the German Investment Corporation, and the Netherlands Development Finance Company in making the loans to Spanish energy company Cobra, part of the ACS Group.

The funds wills support construction of the 97MW Tres Hermanas project, which is set to complete in December; and the 32MW Marcona, which completed in April 2014. The latter scheme is the first large-scale wind farm in the South American country.

Work starts on 30MW Block Island…

Off-site construction has started on foundations for the 30MW Block Island project, which is set to be the first US offshore wind farm.

Developer Deepwater Wind said that welders at Specialty Diving Services started work on the components earlier this week. Full construction on the project off the Rhode Island coast is due to start in summer. The scheme is made up of five 6MW Alstom turbines.

The development is scheduled to complete in 2016.

…as build costs delay Virginia pilot

Dominion Virginia Power has put its planned 12MW offshore wind pilot scheme on hold over concerns about rising costs.

The US utility has been planning to complete the project, which is comprised of two 6MW Alstom turbines, by 2017; and last year it estimated construction costs would be $230m. However, the firm only received one bid, which estimated it would cost up to $400m, and would have exposed Dominion to potential extra costs later on.

Dominion has now delayed the project until at least 2018 as it looks for ways to cut the cost. This is the second high-profile US offshore project to be put on hold this year after the proposed 468MW Cape Wind stalled in January over power purchase agreements.

Need further proof renewable energy development is going mainstream? Then look no further than Dale Vince’s renewable energy business, Ecotricity.

Here, the former New Age traveller has amassed a personal fortune worth more than £100m by dedicating the past 15 years to building his own renewable energy electricity supplier.

In doing so, he has built a business that has a loyal customer base of more than 150,000 individuals and campaigns tirelessly for UK domestic energy independence. He has continued to plough profits back into the business, reinvesting in energy generating technology and new developments, and growing organically year on year.

But here’s the thing. In the last few weeks there has been a subtle but important shift in this growth approach, with the news that Ecotricity has secured a £70m refinancing deal for its 60MW wind and solar portfolio from UK fund manager Aviva Investors.

The deal provides the energy supplier with an important opportunity to capitalise on its existing portfolio and generate greater value by freeing up capital to increase the existing rate of development.

And that’s all the more interesting because it is the first time that Ecotricity has really started to shift its future financing strategy off the balance sheet.

Admittedly, in the past, when additional capital has been required Ecotricity has tested the private finance approach, issuing so-called ‘eco bonds’ on two previous occasions. But not this time.

So why the change?

Our take is that this simply boils down to lending ratios and the ability to quickly raise and manage larger pools of capital. In the past, ‘eco bonds’ and development on balance sheet have provided sufficient capital to keep pace with development – but not anymore.

In order to remain competitive with the market and keep pace with increasing commercial growth, it simply has to look further afield for fresh ways to raise new capital. Re-financing the existing portfolio is the natural next step.

Sure, set in the context of the wider refinancing market and the ways in which existing developers have recapitalise the balance sheet, the Ecotricity deal really doesn’t look like anything special.

But this more aggressive financial strategy shows that developers and financiers can no longer afford to operate in virtual silos. There is no conflict with pursuing green goals and securing finance from mainstream lenders. If ardent environmentalist Vince now recognises this, then others should too.

This week the Spanish news agency Europa Press reported Spain’s Ministry of Industry, Energy and Tourism was preparing to launch a 500MW wind auction. Isn’t this good news for a country that has essentially been dead for wind since 2012, when the government put a stop to all new developments? Sadly not, it would seem. First, there is the paltry level of capacity involved.

The Spanish Wind Energy Association (Asociación Empresarial Eólica or AEE) points out that 500MW is well below the 4.6GW to 6.5GW of new wind that the Ministry itself recognises is needed to reach the country’s 2020 objectives. In fact, the 500MW is not even solely for new projects, but also covers up-rates and the replacement of old machines.

But what has really upset the AEE is that the Ministry has put together the auction plan without consulting the sector or moving to eliminate some of the regulatory insecurity in Spain’s current energy legislation. It is believed the government is looking to spend €21m on the wind auction, or around €40,000 per MW.

That’s about 60% less than even what was given to the few projects installed in 2013 and 2014, following the abolition of Spain’s feed-in tariff (FiT) system, says the AEE. The Ministry is also assuming wind developers will be able to cut 20% off their capex and 21% off opex, while increasing the number of hours of operation by 52%.

If any wind developer is willing to accept these terms, there are a couple of other points to consider. The first is a practical one. Spain’s current Minister of Industry, Energy and Tourism, José Manuel Soria López, has claimed his government has improved the regulatory security of the energy system by axing FiTs to get rid of a ballooning tariff deficit.

In actual fact, the opposite is true. The most recent energy reform gave the government carte blanche to revise the regulatory framework every six years. That means any incentives agreed with the Government today could be thrown out of the window when the next review comes around, in 2019.

And in scrapping the FiT scheme for existing projects, the ruling People’s Party (PP) has already shown it couldn’t care less about reneging on promises. Even if you are prepared to deal with that bleak prospect, however, there is still a matter of principle.

After single-handedly dismantling Spain’s once-leading wind and solar sectors, the PP holds what is arguably the worst record on renewable energy development of any political party on the planet. And earlier this week it emerged that the party’s regional mandarins had taken bribes to fast-track wind projects when the previous administration was in place.

Now such antics are under scrutiny as the PP faces stiff competition in local elections next month and a general election before the end of the year. It is not unlikely that the planned wind auction represents a last-minute attempt to claw back some environmental credibility ahead of the polls.

But if the auction does indeed go ahead, and that is a big ‘if’ to start with, then any developer stepping forward to take the bait would be giving this administration a vote of confidence that it frankly does not deserve.

€110m wind fraud uncovered in Spain

Spanish tax authorities this week launched an investigation into a wind sector fraud thought to total €110m.

A 94-page report accuses developers including Iberdrola of providing back-handers to fast-track projects in Castilla y León, which has a quarter of the wind capacity in Spain.

The affair, reported this week in the Spanish daily El País, involves politicians from Spain’s ruling People’s Party, which is already fighting a rearguard action on corruption ahead of local elections.

TRIG raises £110m in share placement

The Renewables Infrastructure Group (TRIG) has completed a £110m fundraising round with £7.7m from retail investors.

The £110m was raised in four weeks through the issue of 107.5m shares priced £1.0225 each.

TRIG intends to use the cash to repay a revolving acquisition facility and “take advantage of the strong pipeline of attractive investment opportunities.”

Gamesa to install 220MW in Egypt

The Spanish turbine maker Gamesa is celebrating the sale of 110 G80-2.0MW turbines for a project in Egypt.

The machines are destined for a wind farm in Gulf of El Zayt, on the Egyptian Red Sea coast, Gamesa said.

The project is being funded by the Japan International Cooperation Agency and was awarded through an international tender by the Egyptian New & Renewable Energy Authority.

Pöyry report warns of investor risk

European wind investors need to be on alert for changing support structures, Pöyry Management Consulting has warned.

Germany, the UK, France, the Netherlands and Belgium are all on course to abandon support structures that could previously guarantee investors an easy return, says the report.

Guy Auger, CEO of Greensolver, said the report "runs counter to the yieldco phenomenon and shows renewable energy investment is not as easy as it looks."

Jan De Nul picked for Dong cables

Dong Energy has handed Jan De Nul Group the task of providing cable installation at the Burbo Bank Extension offshore wind farm.

The work involves laying a 25km export cable between the offshore transformer platform and the beach, and installing 32 infield cables.

Jan De Nul will be working on the project, in Liverpool Bay, UK, over Spring and Summer next year

Guest blog by Henrik Stamer, managing director at K2 Management

Imagine you are planning a house extension. Would you hire a carpenter to do all the electrics and plumbing too? It might be cheaper than using qualified experts, but would you trust the carpenter to deliver the same standard of work as specialist tradesmen?

Now look at offshore wind and ask the same questions. If the sector is going to reduce its cost of energy significantly, it has to stop forcing suppliers to expand their scope of work beyond their core competencies. It is easy to see why this trend has developed. Banks often prefer one contractor for an offshore project, usually under an EPC (Engineering Procurement Construction) contract, because they consider that this reduces their risks.

And the same is true for other types of investors. Cash-strapped utilities that used to finance offshore projects from their own balance sheets are now seeking co-investors. However, these co-investors —equity funds and other financiers— are like banks: they too want to reduce risk, so they often ask suppliers to expand the scope of their work.

In certain cases, EPC arrangements may be the best solution for a developer because, if no single organisation controls all aspects of a multi-contract project, problems sometimes go undetected. Therefore, we increasingly see turbine manufacturers mobilising their organisation and subcontractors to deliver turnkey wind projects.

At the other end of the value chain, installation vessel providers are starting to offer full balance-of-plant solutions under engineering, procurement, construction and installation contracts.

However, this perception that engaging one big company automatically reduces risk is misplaced. The financial crisis taught us that companies —in that case banks and other financial institutions —are best when they focus on their core business, making it more efficient, lean and competitive. These organisations got into trouble after overreaching themselves and trying to expand into areas beyond their traditional businesses.

By forcing different suppliers into what are, for them, unknown areas, we believe that we will see more mistakes happening. This will increase project costs. And bear in mind that lost power generation due to delays is rarely covered in these contracts.

We should not be forcing suppliers to widen their scope of products and services. We ought to be challenging and enabling them to do what they are best at, their core business, and letting them handle their own risks within that sphere.

This is an edited and abridged version of this article on the K2 Management website

Last year we saw Chile establish itself as a significant new market.

The South American nation is well positioned to support the wind industry because of its long coastline. And this could be the year the industry takes off in a country in southeast Asia that has a similar geography - and therefore a similarly strong wind resource - Vietnam.

It was almost exactly two years ago to the day that we firstdiscussed the Vietnamese - drawing parallels between its culture (adaptability and resilience) and the needs of the wind market.

The Vietnamese coastline may not be as long as that of its Spanish-speaking counterpart — 3,260km versus 4,270km — but investors are starting to see great potential in Vietnam. In fact, the country has the greatest wind potential for wind energy in Southeast Asia, compared with the likes of Cambodia, Laos and Thailand. But exploiting this resource has not historically been helped by positive policies.

For instance, Vietnam does not have dedicated renewable energy regulation, even though the government has issued decrees on topics including corporate energy reduction. It also set up a feed-in tariff in June 2011 to support the development of wind farms and set a target of 1GW of wind by 2020, and 6.2GW by 2030. But this has not really worked. Currently, Vietnam only has three wind farms, totalling around 50MW.

The problem is that the level of the feed-in tariff is just too low. The government mandated that state utility Vietnam Electricity (EVN) must buy wind energy at a regulated price of 7.8 cents per kWh; and the Vietnam Environment Protection Fund is set to give EVN a subsidy of 1 cent for every kWh it buys.

That should give wind investors certainty, but wind ends up being around $1.50/kWh more expensive than the current market price for electricity. This means it is difficult to make schemes stack up financially if they aren’t in windy areas. The Vietnam Energy Association has been calling on the government to raise the rate to a minimum of 10 cents per kWh, but this has not happened. This is frustrating for investors. Nevertheless, we are now seeing some developers emerge in the Vietnamese market.

Last month Vietnamese firm HBRE Wind started work on the 28MW first phase of its 120MW wind farm in Dak Lak province. The project is set to use 60 turbines from General Electric and is scheduled to be built in three phases by 2020. And late last year we saw manufacturer Vestas agree a deal with developer Phu Cuong to build a 170MW scheme in Soc Trang province.

The Danish firm told a seminar in capital Ho Chi Minh City around the time of this deal that its experience of working in new markets could help to support local developers with the financing of their projects. Such partnerships provide a great opportunity for overseas investors with a track record in new markets to get involved in Southeast Asia.

After all, government officials have said there are 45 registered wind projects with a combined capacity of over 4.8GW, and many of the companies behind those are likely to lack the experience to go it alone.

If the Vietnamese government takes the time to listen to the market's call for a higher feed-in tariff, change will be quick. The past two years have been steady - time now, to pick up the pace.

Forget the challenges associated with government tax credits. Do you want to know the real barrier for future North American wind market growth?

Here’s a clue: it’s not a lack of public support. It’s not the ongoing debate about the PTC either.

It’s actually something far less controversial but all the more important. And it can be summed up in four simple words: transmission and the grid.

Make no mistake: this represents one of the single biggest hurdles for the development of global clean energy. And in the United States, it’s now the biggest challenge that’s holding the development within the market back.

Why? Bluntly, because while the US continues to benefit from favourable wind resource and vast tracts of open land on which to develop project portfolios, the painful truth is that obvious development sites aren’t anywhere close to major conurbations and power-hungry consumers.

That’s because the best projects are located right in the middle – while the power is needed right out on the perimeters, on the East and West coasts.

And for the developers, that presents a growing problem. For while it’s perfectly possible to sell some of the power locally, the ability to transmit power over multiple state borders and over hundreds of miles has proved to be an expensive distraction, both in terms of time and money.

That’s why outfits like Clean Energy Line Partners have opened up shop. And it’s why they’re inevitably over subscribed whenever they engage in an open solicitation process to gauge interest.

As it stands, the firm currently has five major transmission projects under development and in planning. Its latest initiative, known as The Grain Belt Express Clean Line, offers a 780-mile high voltage direct current (HVDC) link from Kansas, Missouri, Illinois and Indiana to key eastern states.

In this particular instance, The Grain Belt Express received requests for more than 20GW of transmission service, more than four-and-a-half times the total capacity of the line.

Those requests were received in just three months.

The business model behind each of the lines is simple: developers bid for access to transmission on the service and in return can guarantee a long-term market to sell their power. In return, owner-operators like Clean Energy Line Partners benefit from long-term stable revenues from developers reliant on the service.

It’s a surprisingly simple model that, by tackling the complex issues of transmitting power interstate, suddenly opens up huge opportunity in the market.

The most interesting element, however, is still to come. For as the phased introduction of these transmission superhighways becomes reality, the revenues that they generate won’t be easily overlooked.

Expect, therefore, for many of these projects to change hands, superseding existing grid and utility infrastructure as they do so.

In the longer term, it’s that bypassing of existing infrastructure that will also have a profound and meaningful impact on the traditional power business. And that, by proxy, will shift the US energy markets in a way that right now, may be difficult to imagine.

As we argued in our 2014 report, Tackling Transmission, the roll out of major renewable energy generating initiatives has had a profound effect on transmission and the grid – the true impact of which may not yet fully be understood.

EGP scores 424MW in South Africa wins

Italy’s Enel Green Power (EGP) has won 425MW of projects in South Africa.

The projects were awarded within the fourth phase of South Africa’s Renewable Energy Independent Power Producer Procurement Programme and cover three wind farms.

Two of these, the 142MW Oyster Bay and 141MW Nxuba projects, will enter service in 2017. Another 142MW plant, Karusa, is due to come online the year after.

Senvion targets low-wind market

Suzlon’s German subsidiary Senvion has unveiled a new turbine designed for low-wind sites.

The 3.2MW, 122-metre rotor diameter 3.2M122 should deliver a 2% to 3% extra yield increase compared to the company’s 3MW 3.0M122 model, the company said.

The machine comes with Senvion’s Next Electrical System (NES), which was unveiled this week at the Hannover Messe 2015 industrial technology fair.

Enercon and Saft in energy storage first

German turbine maker Enercon is partnering in an energy storage first for Europe, battery firm Saft has claimed.

The two companies are working on the commercial deployment of lithium-ion battery storage for a wind farm on the Faroe Islands.

The project will see two Saft Intensium Max containerised battery systems storing up to 2.3MW to enhance grid stability for the output from a 12MW wind farm at Húsahagi with 13 Enercon machines.

Mainstream: cheapest UK offshore power

Mainstream Renewable Power says it will “produce the cheapest electricity ever generated from a UK offshore wind farm.”

The claim relates to Mainstream's 448MW Neart na Gaoitheproject, which earlier this year won a UK government contract for difference with a strike price of £114.39/MWh.

Mainstream says the project’s low costs are thanks to the use of a new Offshore Transmission Module design from Siemens and a High Wind Boom Lock system that will let engineering partner GeoSea install turbine components at sea.

Tories to cut onshore wind subsidies

UK Prime Minister David Cameron has unveiled plans to scrap onshore wind subsidies if he wins next month’s general election.

The pledge is part of a UK Conservative party manifesto designed to woo votes in what promises to be a photo-finish election result at the polls on 7th May.

Among other proposals that could affect the wind industry are a promise to continue backing shale-gas fracking and a commitment to hold a referendum on leaving the European Union before 2018.

There is no shortage of hyperbole in the US offshore wind market. It seems like every development, however minor, is hailed as a huge leap forward.

Indeed, anyone entering the wind energy market afresh would be forgiven for thinking that US offshore wind is already a fully-fledged market. It isn’t.

In fact, back in October, after attending a somewhat lacklustre AWEA Offshore 2014 conference, we argued that the development of demonstrator projects, while hugely important, did not necessarily mark the start of major market movements –and that despite best intentions, the future was far from certain.

And so it was. Over the last six months there have been some seismic shifts.

Cape Wind –the US offshore industry’s flagship project for the past 14 years –is now dead in the water. But Deepwater Wind, which started at the same time, has secured funding of $290m for its 30MW Block Island project.

But the really big news is that a new developer has entered the race for US offshore wind: Dong Energy. The Danish utility, which has arguably more experience than any other developer in the offshore wind market, has taken over the development rights of a large area offshore from RES Americas.

And by large, we really do mean large: 187,523 acres to be precise.

Indeed, best estimates suggest that there is the potential to build over 1GW of capacity in the area, which is around 55 miles south of Martha’s Vineyard.

For an industry that’s already gearing up to service the initial 30MW Block Island project, that is good news and helps create a compelling commercial case for the accompanying construction and operations and maintenance supply chain, too.

Knowing Dong Energy as we do, we have no doubt that a major market move like this will have been carefully executed and planned, with senior industry executives having been in private discussion about development opportunities for well over 12 months already.

For US offshore wind, injecting that level of long-term thinking can only ever be a good thing. For too long this area of the offshore market has been filled with clichés and plenty of talk, but little action. Dong could change that.

The utility’s relatively quiet entry into North American fits neatly with its global expansion strategy but most important of all, should inject a healthy dose of commercial realism into US offshore development.

Wind companies may be canny, but they are also missing out on opportunities worth $13.5bn.

The Global Wind Energy Council last week published its ‘Global Wind 2014 Report’, which includes commentary by Sean Kidney, chief executive of the Climate Bonds Initiative. This organisation is seeking to mobilise debt capital for investment in climate change. In this article he looks at bonds issued last year by wind firms.

Specifically, he argues that most wind companies are missing out by not labelling their bonds as ‘green bonds’. This is narrowing their appeal to investors and is, he says, the reason that $13.5bn of bonds from wind firms were outstanding globally in 2014. They should have been labelled ‘green’.

In theory, there should be no reason why it makes a difference if a pure wind company calls its bond a ‘bond’ or a ‘green bond’. They would be secured against the same projects and used for the same corporate purposes. So why is the distinction important?

The reason is that the green bonds market is expanding to meet the increased demand for these types of bonds from institutional investors. Ratings firm Standard & Poor’s forecast that $100bn of green bonds could be issued this year, including $30bn by companies. This is up from $19bn of green bonds issued by companies in 2014 in a total market of $37bn.

If wind companies label their bonds as ‘green’ then they can access this growing market, broaden their investor base, and lower their cost of capital as a result. The ‘green’ label may also help ethically-minded investors to find the bond in the first place.

Now, we’re not so naive to think the ‘green’ label alone is enough to convince institutions to invest in any bond. They're smarter than that. These investors want to know they are going to get the returns they want over the period they want, and for a level of risk they find acceptable. But, if all other things are equal, we would expect an investor to go for something eco-friendly over something not. After all, it helps them to meet corporate 'green' goals at no extra cost.

The benefit for wind companies is that green bonds enable them to attract investors they may not have been able to previously. Many institutions have been reticent about investing in wind because they do not want their money tied up in illiquid wind farms, but green bonds give them a more liquid option to get into wind.

Wind companies may have been slow to get on board with green bonds, but we expect that to change this year.

Indeed, we are already seeing evidence. Last month, Vestas became the first pure wind company to issue corporate green bonds, worth €500m. It said somewhat vaguely that it plans to use the proceeds to support its corporate purposes, but investors can still invest confident they are putting money in wind.

The green bonds market is developing. Tougher standards are needed on what is meant by ‘green’, and these will come. But wind companies should get involved now or miss out.