What connects iPhones, missile systems and turbine makers?
Answer: they are all affected by Chinese exports of rare-earth metals. This month, China announced it would end a quota system for exports of these metals. This follows a ruling by the World Trade Organisation last year that said restrictions on these exports by China, which controls 97% of the world’s supplies, were illegal.
Officially, the Asian superpower said restrictions on exports of rare-earth metals, which have been in place since 1999, were to protect the environment by controlling illegal mining of those materials. In actual fact, the policy has been used to keep the price of the metals high and give Chinese manufacturers the edge over foreign rivals.
It is easy to talk of a 'shortage of rare-earth metals', but there has never been a shortage of the materials. The only shortage has come from China’s attempts to control this market.
This system now looks to be coming to an end. China is set to cancel the export quotas by May, which should be good news for manufacturers of direct-drive turbines. These firms have faced
constrained supplies of the metals until 2018, according to the ‘Global Wind Supply Chain Update’ from FTI Consulting last week.
Now, wind may not be a big user of these metals compared to other sectors, but the prices of these metals still affect the cost of projects. The potential for lower prices is good news.
Or at least it would, if we thought that changes in China would lead to lower prices. In our view, China will continue to use its dominant position to control the price of these metals.
It is, for example, looking to cut the size of the rare-earth metals market by 40% by closing illegal mines; and put control of this market into a ‘big six’ suppliers. Hardly a rare-earth free-for-all.
Manufacturers must be alive to these risks. Thankfully, FTI also shows that there is only a handful of manufacturers exposed to fluctuations in the costs of these metals.
The turbines that use these metals most are permanent magnet generator (PMG) direct-drive turbines, with China’s Goldwind and XEMC as leading suppliers. Goldwind owns a 34% stake in JLMAG Rare-Earth Co., which has a two-thirds market share for supplying rare-earth magnets to the wind sector, and this means Goldwind is insulated to an extent from price changes. The restrictions also have little impact on China's XEMC and Dongfang.
The other five manufacturers that FTI identifies as using PMG direct-drive systems are Alstom, IMPSA, Leitwind, ReGen Powertech and Siemens.
Of these, Siemens is most exposed to shifts in China due to its use of rare-earth metals across its business. But, as these metals are now priced at a level where manufacturers can accept them, there appears to be little incentive for suppliers to reduce prices even if supply increases — or for manufacturers to push for price cuts.
So we aren’t getting too excited about price falls. This isn’t the end of uncertainty in rare-earth metals. Companies who have been wary of Chinese control in the past should remain so.
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European wind faces a host of challenges: slow eurozone growth, crashing oil prices, and uncertain political support are all worries.
Yet there was a boost for the sector from Sweden yesterday.
The utility Vattenfall revealed a new business and management structure that is set to come into force on 1 April. The change is a clear signal that the state-owned company has identified wind as one of its key strategic priorities for the rest of this decade.
The restructured Vattenfall will have a dedicated wind division as one of its six key business units, with the other five being heat, customers & solutions, distribution, generation and markets.
This is a clear indication that the firm wants to boost the proportion of wind in its portfolio, which accounted for just 2% of the firm's total generation capacity in 2013. The portfolio is currently dominated by fossil fuels (48%), nuclear (29%) and hydro (20%).
With those numbers, it may look strange to establish a dedicated division for wind, but it actually makes a lot of sense. Wind will no longer be lumped into a renewables division with hydro, and will be the sole focus of Gunnar Groebler, who is set to become head of Vattenfall’s wind unit. Groebler is currently the company's head of renewables in continental Europe and the UK.
The establishment of a dedicated wind division may look like a big shift, but is really a continuation of what Vattenfall has been doing in the last three years. Changes in the energy market in continental Europe have forced the firm to move away from fossil fuels.
In July 2012, Vattenfall was the first big European utility to make a significant write down on the value of its fossil fuel assets, which prompted the business to split into two regional units: one focused on Scandinavia and the other focused on continental Europe and the UK. The firm made a significant commitment to maintain its investments in renewables despite this upheaval.
The business has been true to its word and made significant investments in major wind projects, both onshore and onshore.
Its current projects including the 288MW Dan Tysk offshore wind farm in the German North Sea, with Stadtwerke Munchen; the 76-turbine Pen y Cymoedd onshore wind farm in south Wales; and the 63MW repowering of the 21MW Klim wind farm, which is set to become one of Denmark’s biggest wind farms.
The company has built on its position as a wind farm developer and operator with a major presence in Sweden, Denmark, Germany, the Netherlands and the UK.
Since then, the firm has been forced to make further write downs on traditional fossil fuel assets, and in October 2014 it revealed a plan to sell German lignite operations to raise up to €3bn. The German government has appealed to Sweden to keep these plants open, although there is little indication that Vattenfall will change.
And now, this restructuring further shows that the company plans to increase its investment in renewables, including wind, and this must be good news for the wind industry in the UK and Europe.
It's an exciting early boost in the context of an uncertain 2015.
Wind Watch
Wind Watch is published every Monday and Friday. But don't let that get in the way of gaining the latest insights into the industry.
Last week, we kicked off the year by publishing Finance 2015, our first report of 2015. In this 24-page report, we talk to leading experts to get their views on the key trends in financing and the global economy that will shape wind in 2015.
Key report insights include:
• Analysis: The importance of the global wind industry in 2015
• Oil prices: How continued low pricing will affect global wind
• Interest rates: The impact of low interest rates on investment
• Expert comment: Challenges of funding future offshore projects
• US PTC: Why North American wind will live on, post PTC
• Expert comment: Four major trends that will shape UK offshore
To download the report, log in to your account on our website and select 'download'. If you don't have an account yet, contact joe@awordaboutwind.com for a direct download link.
Twelve people were murdered last week in the attack on French satirical magazine Charlie Hebdo. This horrific attack has once more stoked fears about attacks on the west by radical Islamists.
There is no lack of commentators telling us that the best reaction to this kind of attack is defiance. Maybe so, but it should also make businesses think twice about where to invest. Wind resources can never be the only concern for businesses eyeing overseas growth.
The example that currently comes to mind is Egypt.
This north African nation is seeking to add 7.2GW of wind capacity by 2020, including 2.5GW from private firms, and this should be an exciting investment opportunity for western businesses. But, since November, terrorist group Islamic State has been active in Egyptand there has been a rise in threats against western interests.
These threats were enough to force the British and Canadian embassies in Cairo to close their doors, and they will certainly make investors think twice about the country.
That is on top of the uncertainty that investors are already likely to feel about a country still seeing big changes following the ousting of president Hosni Mubarak in the Arab Spring of early 2011. This will make investors think hard about whether to invest in Egypt, and the Charlie Hebdo attack will understandably enter their thoughts.
And yet, there are reasons that wind investors should look seriously about the potential to develop projects in Egypt.
For one thing, western businesses would usually use local partners to help develop their operations in any new emerging market, which gives a degree of protection against the security concerns above.
There is also the protection offered by the size of the country. Cairo is a sprawling city with a population of 7.8m people, just 500m fewer than London. Investors will remain active in London despite ISIS threats, and so we shouldn't rule out Egypt on that basis.
No, terrorism should remain a minor concern for wind businesses.
In Egypt, we should be far more worried about the ongoing political change in the wake of the ousting of Hosni Mubarak four years ago. The potential for legal and policy shifts that damage the energy sector, including wind, is a far bigger threat to those who seek to carry out business in the country.
And yet, for now, government support for wind looks good. Energy demand in the country is growing, and it has a target of 20% energy from renewables by 2020. Installed wind capacity was only 550MW at the end of 2013. Evidently then, there is still room for major growth.
Egypt has also been awarding new projects. The New & Renewable Energy Authority last month revealed that it had awarded tenders to 49 companies to build wind farms in the country — 36 for projects of 20MW-50MW, and 13 under 20MW. And it plans to support local manufacturers to compete with overseas suppliers.
This bodes well. Yes, entering Egypt will require bravery and good local intelligence, but this is true of any emerging market. Terrorist threats should not be used as a sole reason to rule out the country.
No sooner had new year hangovers cleared than UK wind faced another headache.
On 2 January, one of eight Nordex turbines at DW Consulting’s 20MW Screggagh wind farm in Northern Ireland collapsed in medium speeds. This is just one turbine at just one project, but it was fuel to cynics who love to deride wind. Yet again we hear wind is full of subsidy-sucking monsters whose main aim is to kill birds.
Thankfully, nobody was hurt and DW has responded as it should, by closing the project until it and Nordex have worked out why the turbine collapsed. It could even re-start the project today.
Mechanical failure is the most likely cause, but it could also have been caused by somebody tampering with the turbine, as has happened in at least one previous incident. We don’t yet know.
Wind businesses will surely face more questions about whether every turbine is a potential death trap that could fall over with no notice. With this in mind, it is up to everyone in the sector to remind the general public of two points.
The first is that such accidents are very rare; and the second is that wind is still far safer than most energy sources.
It is this second point that we want to pick up on. Yes, turbines will sometimes collapse, just as buildings sometimes collapse. This will continue to be the case regardless of how advanced technology gets, because turbines will always have to contend with gravity.
But the effect of a collapsed turbine is largely gone when the machine hits the ground. This is mainly contained to the people who developed the wind farm, who have to tidy up the mess and get back to business; and the manufacturer, who have to work out what went wrong and address it in order to protect their reputation.
It does not have the same wide-ranging effects that come from problems in other energy sectors.
Let’s look at some disasters that are much larger. The Deepwater Horizon explosion in the US and the Fukushima nuclear disaster in Japan have both had long-lasting effects on the environment and communities around them. While the Screggagh collapse is not in the same league as either of these disasters, we can at least see that wind is better for the environment even when things go wrong.
We also need to accept that wind does not have the same attitude to death as other sectors. Deaths in the coal industry, particularly in emerging markets, are still routine; and that is not to mention the impact on health of the pollution from coal-fired power stations.
Of course, wind must do all it can to reduce the risk of death and injury to workers and the public, through steps including more advanced technology and better maintenance. But we should also not forget how well wind already stacks up compared to its rivals.
No part of the energy sector is 100% problem-free or 100% safe, because no part of life is 100% problem-free or 100% safe. Wind must address the risks posed by its projects, as it does, but we will never get to a situation where nothing ever goes wrong.
Only a wind sceptic would insist on such an unrealistic aim.
Statnett eyes €2bn cable decision in Q1
Statnett is set to make a final decision by the end of March on whether to build a €2bn cable between the UK and Norway.
The Norwegian grid operator is working with UK operator National Grid on a plan to build a 700km-long subsea cable in the North Sea by 2020. The plan would enable Norway to import wind and solar power from the UK, and export hydropower to the UK.
State-owned Statnett won backing for the development from the Norwegian government in October, but said the timing of its final investment decision worth depend on negotiations with contractors.
GDF Suez names Hartmann as CFO
French utility GDF Suez has announced that Judith Hartmann is set to replace CEO-in-waiting Isabelle Kocher as chief financial officer.
The company, which is a leading player in onshore wind in France and at the forefront of the French offshore sector, announced the appointment yesterday. Hartmann was previously chief financial officer at media company Bertlesman, and held senior roles at GE.
The appointment means that GDF Suez is set to be the first leading French firm with women in the top two jobs. Kocher is expected to take over as chief executive officer of GDF Suez when current CEO Gerard Mestrallet’s term expires in May 2016.
DW shuts N.I. scheme after collapse
DW Consulting has closed its 20MW Screggagh project in Northern Ireland after one of its eight 2.5MW Nordex turbines collapsed.
The developer has closed the scheme until it finds out the reason for the collapse of the Nordex N80 turbine at the wind farm, which is located near Fintona in County Tyrone, on 2 January. The £26m project was commissioned in early 2011.
DW said the wind farm would remain offline until it completed a full investigation into the reason for the collapse. Nordex said it is investigating the cause of the turbine failure.
US coop signs 300MW US wind deals
US energy cooperative Basin Electric has signed power purchase agreements totalling 300MW with two schemes in North Dakota.
The cooperative, which is parent of eight subsidiary companies, has signed the deals with NextEra Energy Resources, for power from its 150MW Dickinson Wind Energy Center; and Tradewind Energy, for energy from its 150MW Lindahl Wind Project.
NextEra plans to commission its project by the end of 2015, while Tradewind is due to commission its scheme by the end of 2016.
RWE eyes Galloper resurrection
RWE Innogy is set to clarify the future of its scrapped 340MW Galloper offshore wind farm by the end of April.
The German developer announced in October that it had shelved the 68-turbine scheme off the east coast of England. However, it has now said it is in talks with potential new partners on the project and plans to make an announcement by the end of April.
The developer has been working on Galloper with utility SSE, which announced in March 2014 that it was pulling out of the project. The pair are still working on on the project until its future is clear.
It is the first day back for most people after the festive breaks and, with inboxes bulging, there is plenty of work to be done already.
But that can wait a few moments. First, let's look at what lies ahead for 2015. Here are our ten predictions for the trends that we expect to shape activity in the wind industry over the coming year:
(1) No favours from the world economy: Slowing growth in China and stuttering recoveries in Europe and the US may push the world into another recession. Even if they don’t, there will be little respite for wind firms under financial pressure. Continued low oil prices will pose a further headache if they continue beyond summer. You can read more on this in our Finance 2015 report, out on Thursday.
(2) Consolidation among manufacturers: Continued pressure on finances will lead to further consolidation in the manufacturing base as businesses decide it is easier to ride out the tough economy by pooling resources. It will also lead to more focus by manufacturers on niche sector specialisms, to open up new markets.
(3) Financial inventiveness: Meanwhile, continued financial pressure will lead to greater developer creativity to fund future projects, particularly onshore. The funding community will be open to this as it gains confidence in wind as an asset class.
(4) Europe continues to go slow: Europe will continue its slow but steady growth in wind, and we are going to see an increase in activity in the secondary market as more governments follow the lead of Germany and Spain in cutting support for wind farms.
(5) UK election uncertainty: There will be no respite for the UK onshore sector after the 2015 general election, with the renewables sector's biggest proponents — the Liberal Democrats and Green Party — unlikely to hold major sway. The likely outcome is another coalition government led by the wind-sceptic Conservatives. Any upheaval also poses big risks to the UK's growing offshore sector.
(6) Firms seek storage to silence critics: Wind developers and investors will seek to counter concerns about wind’s unreliability by looking at integrating energy storage technology into schemes. Within this expect greater engagement with grid operators, too.
(7) Offshore breakthrough outside Europe: Asian nations such as China, India and Japan will talk a good game on offshore wind, and in 2015 we expect to see the first offshore project outside of Europe go live — even if that is a US demonstrator scheme.
(8) Cuts in the USA: US manufacturers and developers will be forced to make job cuts after another short-term extension of the wind production tax credit (PTC). Now the Republicans control the US Senate, any further extension of this tax credit looks unlikely. Firms who previously held back on cuts may soon have to do so.
(9) Asian manufacturers target world: Asian manufacturers and developers will continue to make progress outside of key domestic markets in order to insulate from local market lethargy. This will continue to put pressure on European and North American manufacturer pricing, as margins tighten and the shift towards performance and reliability continues.
(10) Emergence of Africa and Middle East: In 2014, we saw countries in Central and South America become established as exciting new markets. In 2015, we expect Africa and the Middle East to take off, driven by developments including the 310MW Lake Turkana project in Kenya and by expectant investment from the likes of Abu Dhabi’s Masdar.
We’ll check back in on this at the end of 2015 to see how well we did, but that is just our view. If you have any thoughts on what you expect to see during the next 12 months then let us know.
Oh, and don’t forget our first report of the new year, Finance 2015, which we are set to publish this Thursday. Contact our sales & membership manager if you’re looking for your login details.
Best wishes for a prosperous 2015.
It has been a busy year for wind. Don’t believe us? Then cast your eye over our month-by-month guide to the biggest stories of 2014:
January: The year started with howls of dismay among the Danish public over proposals by Goldman Sachs to invest $1.5bn in offshore developer Dong Energy. The plan took the coalition government to the brink of collapse but was, eventually, approved.
February: Spanish energy company Acciona this month shed light on the impact of harsh changes to subsidies on Spain’s wind market as it reported a loss of almost €2bn in 2013. Spanish wind has been paralysed since the government revealed the plan in mid-2013.
March: In other subsidy controversy, Enercon said in March that it planned to freeze all investment in Germany over government plans to reform the country’s Renewable Energy Sources Act. The fears have since subsided and reforms were passed in August.
April: It is no surprise that the UK’s Conservative Party opposes onshore wind, but it was still a shock that the party confirmed plans for an amnesty on new UK onshore wind farms if it wins the general election in May 2015. Wind will play a key role in UK energy debate.
May: On 14th May, the €2.8bn financing closed for the 600MW Gemini project in the Dutch North Sea, becoming the largest ever project-financed offshore wind farm. Canadian firm Northland Power owns a 60% stake in the project, which is scheduled to complete in 2017.
June: The board of directors of French manufacturer Alstom brought an end to the battle for its energy assets by recommending a €12.35bn deal with General Electric. This will include the creation of an offshore wind joint venture between the parties, following in the footsteps of MHI Vestas and the tie-up between Areva and Gamesa.
July: India’s Suzlon, the world’s fifth-largest turbine make, brought an end to long-running debt problems by agreeing a restructuring plan with creditors in July. We followed India with interest this year after the election of pro-wind prime minister Narendra Modi in May.
August: There was further subsidy controversy this year in Australia as the wind industry blasted prime minister Tony Abbott’s plans to hack back the country’s renewable energy target. Infigen managing director Miles George called the plan “economic vandalism”.
September: Pathfinder Renewable and Magum Energy set out plans for one of the year’s most interesting projects, with their $8bn proposal to power 1.2million Los Angeles homes using a 2.1GW wind farm with a 525-mile transmission line. At the moment, the chance of it actually happening look about as realistic as a Hollywood smile.
October: US billionaire Donald Trump claimed victory in his latest battle against a wind farm as Clare Country Council in Ireland rejected plans for a 27MW scheme. Trump said the project would harm his planned €45m investment in his Doonbeg golf resort 4km away.
November: Solar developer Sun Edison announced a $2.4bn acquisition of fellow US firm First Wind to enable it to expand into wind. The deal is set to conclude in early 2015. Sun Edison is also seeking to use First Wind to help it expand in international markets.
December: Exciting news in the emerging African market as the developers of the 310MW Lake Turkana project revealed they plan to start construction in February. KP&P Africa and Aldwych International are leading on what is set to be one of Africa’s largest wind farms.
We look forward to an equally packed 2015.
Russia and the US are going head-to-head in their fight for valuable resources at the North Pole. No, we’re not talking about control of Santa’s toy production operations.
The Arctic circle contains 30% of the world’s untapped natural gas reserves and 15% of the world's untapped oil, according to the US Geological Survey. The area is mean to be politically neutral, but no area with resources like that is going to stay neutral for long.
It is surprising, though, that the first nation to lodge an official claimfor control of the Arctic circle is not Putin’s Russia or Obama’s US. It is not even Canada or Norway, both of whom have strong claims. No, the first country to do so is wind-friendly Denmark.
Danish foreign minister Martin Lidegaard said Danish scientists have proof that the area is part of the continental shelf that links to autonomous territory Greenland. He is now taking the claim to the United Nations, although a decision is likely to take decades.
This should provoke questions among wind power investors.
Denmark has been a big backer of wind technology and spawned some of the world’s most high-profile wind firms, including turbine manufacturer Vestas and offshore developer Dong Energy. Firms such as Envision have also located some operations in Denmark.
It is also aiming to produce 100% of its energy from renewables by 2050. But is this battle for fossil fuels a sign that Denmark is turning away from renewables so it can become an extravagant oil state? Won’t this damage the wind sector Denmark has so lovingly built?
We see neither of these as risks. If the nation has a legitimate claim on energy resources in the Arctic circle then it should stake a claim regardless of its policy on renewables. It is not an indication that the country is turning away from its support of renewable energy.
In fact, if Denmark raises vast amounts of money from fossil fuels in the Arctic circle then the wind sector is also likely to benefit. We would expect the country to use these funds to help to support its 2050 renewables plan; and enable Danish manufacturers and developers to stay at the cutting edge of wind. In this case, fossil fuels and renewables aren’t necessarily in conflict.
The wider question, though, is whether the Arctic circle should be exploited like this at all.
This is undoubtedly a concern but, at risk of sounding like woolly environmentalists, we still think Danish control over Arctic energy sources could work well.
Russia and the US would have no qualms about setting up major industries in the region; Canada’s government is every bit as sceptical about renewables as Australia’s rightly-maligned leader Tony Abbott; and Norway would surely see this as an opportunity to further bolster its huge sovereign wealth fund.
In contrast, pro-renewables Denmark may rein excessive drilling by fossil fuel prospectors.
It would take a lot of Christmas wishing to secure Denmark a victory in this battle of energy superpowers. But, if it can, that is likely to work best for wind investors and for the world.
Boralex bids €280m for Enel subsidiary
Boralex is seeking to become France’s third largest wind energy operator with a €280m bid for Enel Green Power’s French arm.
The Canadian wind and hydro developer has submitted an offer to buy Enel Green Power France. The deal would add 12 wind farms totalling 186MW to Boralex’s portfolio, and grow its total installed capacity by 25%. Enel’s board is yet to evaluate the deal.
Boralex said around €75m of the proposed deal would be funded by a public offering. It said that the acquisition would make it the largest independent wind power producer in France; and the third largest onshore wind player in France behind EDF and GDF Suez.
Terra Firma eyes Infinis stake sale
Private equity group Terra Firma is considering a sale of its 68.6% stake in UK renewable energy company Infinis.
The investment group bought the stake in Infinis for around £51m in 2003, and its stake is now worth around £450m. Infinis is the third largest renewable energy generator in the UK, with a 610MW portfolio that includes 16 onshore wind farms totalling 274MW.
Terra Firma has not given a reason why it is considering the sale, but it follows an attack by Hands on UK energy policy this month. He wrote that the UK government has been “spooked by opposition from a loud minority who don’t like wind turbines”. He added that
government support for shale gas and offshore wind "owes more to prejudice and wishful thinking than a sensible energy policy".
Chinese nuclear giant buys into UK trio
China’s largest nuclear firm has done its first big deal in European renewables by buying 80% stakes in three UK wind farms.
CGN Europe Energy, a division of state-owned China General Nuclear Power Corporation, has bought the stakes in EDF Energy Renewables projects totalling 73MW. The trio of UK projects are the 36MW Green Rigg, 25MW Rusholme and 12MW Glass Moor 2.
CGN has paid an unknown sum for the stakes. EDF plans to used the funds raised to make further investments in UK renewables.
Ofgem approves £1.1bn Moray funding
Ofgem has backed £1.1bn funding for a link across the Moray Firthin Scotland that is set to lead to 1.2GW of offshore projects.
The UK energy regulator this week approved the funding, which is £105m less than the figure requested by developer Scottish Hydro Electricity Transmission. The subsea link between Caithness and Moray in northern Scotland is due to be completed by 2018.
The developer, a subsidiary of SSE, said the project would open up the area to new renewable energy projects including offshore wind farms. SHE Transmission has said it would study the decision to assess whether the level of funding is adequate.
Hitachi and ABB in Japanese grid link-up
Japanese conglomerate Hitachi and Swiss power transmission firm ABB are poised to set up a joint venture to develop HVDC systems.
The companies have signed an agreement to look at the potential to develop new HVDC (high voltage direct current) systems in Japan, in order to help the Japanese grid cope with challenges including the growing amount of onshore and offshore wind power.
The joint venture is set to start operations in early 2015. Hitachi and ABB will hold 51% and 49% stakes respectively. Demand for HVDC systems is expected to increase as offshore wind grows in Japan.
Do you know about Belgium’s energy island? No, it's not reality TV.
In early 2015, the Belgian government is set to decide whether GDF Suez subsidiary Electrabel and dredging firm DEME can build a ring-shaped North Sea ‘energy island’. The idea of the project is to ‘store’ excess energy generated from offshore wind farms.
The notion of building an ‘energy island’ in the sea may sound like an outlandish project dreamt up by a Middle Eastern sheikh, but the project is not that fanciful. The proposed technology is one of the most cost-effective types of energy storage, and most importantly, it could boost returns for investors in nearby offshore wind farms.
The idea borrows from the hydroelectric sector.
In short, the island would be built from sand 3km off the Belgian coast, and the hole in the middle would be filled with water.
At times of excess offshore wind power generation, electricity would be used to pump the water out; and, when the power supply drops, water would be allowed to flow back in; generating power from hydroelectric turbines as it goes.
So, in actual fact, it isn’t storing anything. Rather, it uses excess energy from wind farms to power a process that can produce more energy when the wind isn’t blowing. The Belgian government has said it would take five years to build, so it could be with us by 2020.
Spending extra money on offshore wind energy storage may look counterintuitive to what offshore wind developers are trying to do: reduce the cost of projects. Indeed, Dong Energy and Vattenfall have both committed to cut 40% of the cost of offshore wind farms by 2020. In the short term, these ‘energy islands’ would add cost.
However, there's a far bigger opportunity here in long-term revenue regeneration. Investing in tech that enables a more consistent and predictable electricity supply from offshore wind means that the long-term viability and value of the projects increase.
That has huge ramifications for prospective power purchasers, whereby greater certainty of supply is often a far more valuable concept than peak power alone. In essence, it’s all pretty positive.
We have just one concern: managing the excitement. Seriously.
This is an exciting development and represents a big opportunity for offshore wind investors. However, to get backing from the Belgian government it will need to look safe, simple and boring. Reliability is more compelling then recklessness or razzmatazz.
If offshore wind investors want to get support for such schemes on their own projects then they will need to emphasis that this is a known technology based on simple mechanical processes. None of your complex battery systems here. That, in turn, should help keep down the costs of maintenance, which can be very costly offshore.
This should give investors confidence to look at similar systems for their own schemes, regardless of what happens in Belgium. The technology is simple, reliable, cost effective and proven.
Just don't make out it's exciting. In this case, boring wins.
This week, European energy ministers gathered in Brussels to talk about the EU energy market and how to boost use of renewables.
Ministers plan to unveil proposals in early 2015 for how to develop a more unified energy network. Forming an 'energy union' is one of the EU’s priorities for the rest of the decade. The idea is to unite national grids and help even out energy prices across Europe.
It is also intended to help energy security, by reducing dependence on Russian fossil fuels; and enable nations to make use of excess power generated by sources including wind farms. It’s a big brief.
New EU energy commissioner Miguel Arias Cañete is leading on this plan and, in theory, it sounds positive for wind farm investors.
A unified energy system would vastly increase the area in which they could sell excess power from their schemes; and support new projects. This is why the European Wind Energy Association has been such a keen backer.
But it is highly complex to iron out disparities in energy prices, regulations and subsidies in 28 countries with competing priorities.
Added to this, the European Commission has already admitted that the €5.8bn in EU funds dedicated to connecting networks is only 3% of what is required. So we are still a long way off the EU being able to realise its aim of an energy union.
This is why EWEA this week spelled out five steps the EU needed to take to turn this vision into reality. These included backing stable national energy policies in member nations, which EWEA says is vital if European nations are to attract the €1trn they need by 2020 to upgrade transmission interconnections between countries.
It has also called on the EU to grow investment in wind technology by European firms through using grants, loans and risk guarantees to facilitate wind investment. Establishing an accelerator scheme to prioritise renewable energy’s technological growth is also key.
And encompassing all of this, in EWEA’s view, is the need for the EU to establish an energy supply and diversification action plan.
That last point is among the most important.
Such a plan would ensure that future interconnectivity goals are met by 2020; would enable a tougher line to be taken on carbon pricing and perhaps most important; and would ensure that wind energy plays a more central role in planning for the future.
While it’s easy to dismiss the Brussels debate and while there is no guarantee that EU policymakers will commit to it, the discussions this week cannot afford to be ignored.
For investors too, increasing efforts to achieve a European energy union should provide some reassurance. With half of the EU's nuclear capacity set to expire within a decade, the race to become the future energy generation kingpins has only just begun.
Time then, for the wind industry to step up and take the stage.
Wind Watch
Wind Watch is published every Monday and Friday.
With just three weeks of this year left, we are now looking ahead to how we can improve the services we offer you in 2015 and beyond.
This is why we're keen to hear your thoughts and opinions on A Word About Wind and our services in our annual members' survey.
The survey takes no more than two minutes to complete and is invaluable in helping us to ensure we're giving you what you want. We'll put names of everyone who completes it into a hat and send one of a you a bottle of Champagne to thank you for your time.
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Leading physicist Stephen Hawking last week warned that artificial intelligence could lead to the end of the human race. Scary stuff.
The idea of super-intelligent and self-aware machines may sound the stuff of nightmarish science fiction, but some businesses are already concerned. Earlier this year, tech giant Google paid $400m for a company called DeepMind, which plans to use its knowledge of neuroscience and computing to build learning machines.
Since then, Google has formed an ethics committee on artificial
intelligence to head off the sorts of risks Hawking has raised.
The wind industry should take note because these concerns will start to affect investment decisions in the sector. We aren’t worried that the human race will be destroyed by an army of sentient wind turbines. No, the real worry is about elements that look mundane.
‘Artificial intelligence’ isn’t a new concept for companies in this sector. Turbines are now being equipped with sensors in order to monitor changing wind patterns around them and respond to these changes. This helps investors maximise production from their sites.
There is also plenty of talk about how the electricity grid needs to get ‘smarter’, in order to smooth fluctuations in production from renewable energy sources including wind. The use of storage technology will enable wind farms to store energy so the grid can then access it when it is required, and direct it to those who need it.
And we are also aware that hackers now have the power to target turbines if they want to. Turbines are already getting smart.
There are plenty of ways this could grow in the coming years, not all of them desirable. Manufacturers, for example, could use ‘artificial intelligence’ to do the jobs of research teams in designing and honing turbine concepts. This could rapidly speed up the process of designing new technology, but would likely lead to the loss of huge swathes of jobs carried out by human beings.
Of course, that is hypothetical but it shows we should not dismiss artificial intelligence as something that only happens in Hollywood. Technological change will affect future investment decisions and will require many more firms to set up Google-style ethics boards.
The other reason firms should take note now is that soon it will be a source of public debate. That means governments will eventually look to introduce new laws about the sort of work that firms in all sectors can carry out. Wind must be aware of this possibility now.
But why would regulators be interested in something like wind?
Well, let's do some science fiction of our own. Let's say intelligent computers have been created, and that they control both the means of energy production — the wind turbines — and the grid. In that case, there would be a risk of artificially intelligent machines directing energy towards activities that suited them, and away from wasteful humans. That would be to the detriment of people.
Of course, we are not saying that this is an immediate danger, but it is the sort of scenario that is starting to exercise to minds of tech pioneers, and will soon start to concern governments. The result will be new laws and more protocols for firms to grapple with.
It's much better to start thinking about these things now than be hit by unexpected laws later.
The ambitious German shift away from fossil fuels has claimed its first major victim. E.On, in the form we know it, is no more…
Germany’s largest utility this week revealed plans for a restructuring that may show how other utilities could react to the country’s move to renewables, including wind. German utilities have long moaned about low demand and priority grid access for renewables.
Now, we don’t have much sympathy. Utilities may occupy a vital position given they sell us the fuel we need for light, heat and cooking, but they are also businesses that need to respond to market changes. Most German utilities haven’t been quick enough.
This is why E.On’s strategy is so interesting.
The firm plans to split into a renewables-only business retaining the E.On name, with a main focus on wind and a lesser focus on solar; and a fossil fuels operation that will become a separate publicly-listed company. The two arms will employ 40,000 people and 20,000 people respectively. These are all clear signs that the utility is putting wind at the very heart of its future plans. It is big news.
The firm will spend the next year-and-a-half setting up this new structure, and is planning to spin off the new fossil fuels company after the 2016 shareholders meeting in April 2016.
It is partly funding the change with the €2.5bn of energy assets in Spain and Portugal to Australia’s Macquarie Group and Wren House, which is part of Kuwait’s sovereign wealth fund. This gives E.On the added benefit of being able to exit the paralysed Spanish wind market; and it is also considering the sale of assets in Italy.
But let’s not think this is all about E.On being progressive. It is protecting its business.
With this announcement, E.On also announced that it expected to incur an additional €4.5bn of impairment charges in 2014 due to changes in the European energy market. This refers to pressure from renewables on traditional sources. It makes sense to split the firm to insulate the renewables arm from the losses in fossil fuels.
It also means the main business can focus on wind, solar and distribution networks; and the fossil fuels arm can focus on making E.On a major player in natural gas. In such a fast-changing energy market it is tough to have one management team focused on both.
The new structure enables E.On to increase investments in 2015 by some €500m, up to €4.8bn. Johannes Teyssen, chief executive at E.On, has said creating two companies with distinct profiles and missions was “the best way to secure our employees’ jobs”.
And herein lies the point. The company is seeking to mitigate the impact of the problems it is experiencing due to energy shifts in Germany, and this should protect its planned investments in wind.
E.On as we know it may not exist after 2016, but a greener version will be taking its place.
E.On plans green restructuring in 2016
E.On has announced plans to focus on wind and solar from 2016by splitting its fossil fuels arm into a separate publicly-listed firm.
The German utility has revealed a restructuring that would see it split into two companies. The larger company would retain the E.On name and focus on renewables, primarily wind but with some solar, and employ 40,000 people. The smaller company would focus on the firm’s natural gas operations and employ 20,000 people.
E.On is making the change because of ongoing uncertainty in the energy market in continental Europe. The restructuring plan is likely to happen in 2016 and requires approval from E.On backers at a shareholders’ meeting, which is likely to happen in April 2016.
Johannes Teyssen, chief executive at E.On, said this was “the best way to secure our employees’ jobs”.
Dong and RES scrap 600MW First Flight
The First Flight consortium has scrapped plans for a 600MW wind farm off the coast of County Down in Northern Ireland.
The group, which is made up of B9 Energy Offshore, Dong Energy and RES Offshore, has ditched the £1bn 100-turbine project due to problems with subsidy regimes. Northern Ireland lags behind the rest of the UK in financial incentives for renewable energy projects.
First Flight has also raised concerns about delays in establishing a single electricity market across Ireland. Plans for a cross-border interconnector between Northern Ireland and the Republic Ireland have also been pushed back until 2019.
Alstom opens pair in Saint-Nazaire…
Alstom has opened two factories in Saint-Nazaire to make nacelles and generators for its Haliade 150-6MW offshore wind turbines.
The French manufacturer yesterday inaugurated the factories in the northwest of the country. They are expected to reach a production capacity of 100 turbines a year.
Production is due to start in 2015 to manufacture 240 turbines for three projects off the coast of France; and five for the Block Island offshore pilot project in the US.
…as France plans third offshore tender
The French government is set to launch a third offshore wind tendernext year in addition to the 3GW it has already awarded.
The government did not disclose how much capacity would be on offer in the 2015 tender. In 2012, it awarded the right to develop projects totalling 2GW to groups led by utility EDF and Iberdrola. It followed this in May 2014 by awarding the tender for two projects totalling 1GW to a group led by GDF Suez.
The country is aiming for offshore wind capacity of 6GW by 2020, but does not currently have any offshore turbines installed.
MIT: Turbines don’t harm human health
The Massachusetts Institute of Technology has confirmed that “properly sited wind turbines are not harmful to human health”.
The Canadian Wind Energy Association appointed the US university in early 2014 to carry out a comprehensive review of scientific literature on wind turbines and human health.
MIT has now published its review in the Journal of Environmental and Occupational Medicine. The report concluded there is no clear link between turbine noise and human health; and that noise played a minor role in people reporting annoyance about turbines.
Illegal drone flights over French nuclear sites have raised fresh concerns about the sector.
Over the last couple of months there have been sightings of more than a dozen drones at the country’s 19 nuclear sites. French authorities haven’t yet been able to establish if they are the work of civilians or something more sinister. Either way, they have raised a security concern about a sector already facing reduced demand after the 2011 Fukushima disaster.
These difficulties are further pushing France’s large energy firms away from nuclear and towards renewables, including wind farms.
This move to renewables is being underpinned by legislation, which includes new laws being put in place by energy minister Segolene Royal. It is an important shift that will have a big impact on wind outside of France’s borders.
In October, a majority of the lower house of the French parliament adopted a version of an energy transition bill that will cut bureaucracy for renewable energy schemes. It plans to cut renewable energy red tape, while putting a cap on nuclear power.
The government is also seeking change in French developers’ approaches. It has proposed Areva should appoint former Peugeot chief Philippe Varin as chairman; and has ousted Henri Proglio as EDF chief executive, replacing him with Thales boss Jean-Bernard Levy. These are big changes at the top of two of the world’s most influential nuclear companies.
And we need hardly mention the government fight earlier this year to avoid all of Alstom’s wind energy assets falling into GE’s hands. So where does leave French energy?
Inside France, this shift towards wind rather than nuclear looks like good news. The nation is famous for taking significant steps to protect its industry — even at the expense of its economic health —and it is good that the government is looking to pin its hopes on wind. In turn, we would expect strong policies that enable France to grow its supply chain.
The shift towards wind, rather than nuclear, should also force the likes of Areva and EDF to increase their global wind influence, especially in key emerging markets.
We’ve seen Spanish firms like Gamesa and Iberdrola pushed to expand overseas due to the problems in their home market. To
date, French firms have not shared that same international drive.
And there’s another thing. If French manufacturers are pushed to expand their global influence then it will increase pressure on the likes of GE, Siemens and Vestas – three global heavyweights. The increased competition may also force these giants to become more specialised – whether that is by market or technology type.
GE is only just starting to move beyond its very successful strategy of focusing on a niche product portfolio. Siemens has been heavily focused offshore and is now seeking to redress the balance. And Vestas has relied heavily on the strength of its market legacy and technological prowess, to lead the global market.
As French energy policy shifts and wind really takes flight, there will be significant impacts domestically. However, the ripples in the global market are set to be more significant still.
That much – like a drone over a nuclear site – is plain to see.
The Incas worshipped sun god, Inti. But Peru’s modern leaders are not quite so keen on recognising the power of the sun and wind.
Next month, the government of Peru is set to announce plans for an auction to procure more renewable energy. It is no coincidence that this announcement is due at the same time as a United Nations climate change conference in its capital city, Lima.
And yet, this looks set to disappoint. The government had been expected to seek 500MW of renewable energy capacity in this auction, but it is likely to be far smaller. The National Energy Plan 2014-2025 published this month suggested that the government saw the potential for only an extra 200MW of renewables over the next decade, including wind and solar. This is a great shame.
In theory, there is much in Peru to interest wind investors.
Peru is the third largest country in South America by land mass, and it has neighbours that are making great progress on wind energy. It is next to Brazil, which has a fast-growing market; and it shares the wind-rich Pacific coastline with neighbour Chile. It has the natural wind resources in place to build a significant industry.
Meanwhile, renewables — excluding hydro — still make up a tiny proportion of Peru’s energy mix. Over half of the country’s power comes from fossil fuels (3.9GW), and Peru has one of the cheapest sources of natural gas in the world. Most of the rest comes from hydro (3.5GW). Wind is not the only resource it has in abundance.
Renewables excluding hydro only account for around 2.7% of the country’s energy mix, and this would only grow to 5% even under the Peruvian government’s most ambitious plans. And, on top if that, it just isn't recognising the potential of wind farms.
For instance, the government last year started a programme to roll out solar panels to provide power to more than 2 million of the country’s poorest residents. This is not direct competition for large-scale wind farms, but it shows that the leaders of the South American nation have latched onto the potential of solar in a way that they haven’t with wind. Maybe Inti is still powerful after all!
And yet, we have seen wind gaining some traction in the country.
In March, Cobra Energia completed work on the 32MW Marcona, which is the first large-scale wind farm in Peru. It is also currently building a 97MW wind farm, Tres Hermanas, which is due to complete in September 2015. Cobra is part of Spain's ACS Group.
The other big player in the Peruvian market is ContourGlobal, which has invested $250m in two wind farms that completed in August. Its schemes Cupisnique (83MW) and Talara (31MW) are part of the Inka development that completed in September. The firm plans to invest a further $250m in wind and hydro in Peru.
But these are only four projects, not an industry, and we see little evidence that Peru is keen to attract major wind investment. Maybe it will surprise us next month.
Wind Watch
When the US and China agree something, the world takes note.
This month, the countries hailed an agreement to lower greenhouse gas emissions. The American Wind Energy Association (AWEA) is among organisations that welcomed the deal as a good sign for investors in wind that the industry enjoys strong support.
The message is good. The US and China may be the world’s two wind superpowers, but they are also the world’s two most polluting nations. Any commitment from these giants to bring in policies that will step up their renewable energy efforts must be a positive thing.
But, as often happens, the details of the deal leave more questions than they answer. This is true for both nations.
From the US perspective the biggest question is: can President Obama deliver? The US has committed to levels of emissions in 2025 around 28% lower than in 2005. However, Republicans in Congress wasted little time in saying they would look to frustrate the plan, just as their Senate colleagues have held up extension of the wind production tax credit.
The Republicans will feel further emboldened by the Senate majority they won earlier this month, and the perception that Obama is now a ‘lame duck president’ ahead of the 2016 presidential election. This will only encourage those who oppose renewable energy, and it means that Obama will face a tough battle to bring in any policies that are pro-wind.
Against these headwinds, we aren’t confident that Obama will be able to deliver policies that are helpful for investors in wind.
The bright point for US wind investors is that at least the industry is getting to a point where it is not slavishly reliant on favourable policies. Wind has reached price parity with fossil fuels in some parts of the country; and US wind is now looking at how it will function without support from the troubled production tax credit.
Investors can't always be at the mercy of US senators who have a problem with wind.
And, as for China, we can only ask: is this the best they could do?
The nation has committed to curbing its carbon emissions after 2030, although by that point they will have risen by one-third from their current levels — which are already the highest in the world. Investors in Chinese wind will hardly feel that a target for 15 years' time demonstrates that climate change is a government priority.
Yes, China has big targets for wind, and by far the most installed
wind capacity in the world: 91GW at the end of 2013 compared to the 61GW of its nearest rival the US, although the US is actually the biggest producer of power from wind (167billion kWh in 2013 against China’s 138billion kWh). But this deal doesn't address the challenges that investors in Chinese wind face day-to-day.
For instance, this doesn't solve immediate challenges with making sure that wind farms can be connected to the grid. This new deal doesn't add anything to China's existing renewable energy policies.
Of course, those in the wind sector should welcome high profile on the issue of climate change. But let's not fool ourselves that they will have much impact on day-to-day business.
This week a renewable energy giant was born.
US solar developer SunEdison and its yieldco TerraForm Powerannounced an agreement on Monday to buy US wind firm First Wind for $2.4bn. The deal is due to complete in early 2015 and
would create the world’s largest renewable energy developer.
The deal involves an upfront payment of $1.9bn, and a further $510m to follow later on. Now, to some the timing might look odd. Surely it’s crazy to buy into a wind developer when US wind is facing huge uncertainty over subsidies post-2016, right?
Wrong. There are reasons why this makes sense — although it also highlights the dangers of the US yieldcos. More on that later.
But positives first. This deal means SunEdison can scale back its reliance on US solar, which is facing its own regulatory difficulties. The solar investment tax credit, which reimburses 30% of the development cost for solar projects, has driven an installation boom but is due to drop to 10% at the end of 2016.
This will cause problems for many established players. SunEdison says it won’t be unduly affected by the change, with chief executive Ahmad Chatila vowing to plough on through the ITC problems and build far more solar in 2017 than it is planning in 2016. But the First Wind deal diversification must also help.
Again, it may look strange that one company facing regulatory uncertainty in its own sector is spending $2.4bn for a company facing regulatory uncertainty in another. Doesn’t this deal mean SunEdison is doubly exposed to uncertainty in US renewables?
No, it doesn’t. This isn’t just about the US. SunEdison sees First Wind as a way to help it make its presence felt overseas. It wants to use First Wind as a platform to help it push into international markets as a developer of both wind and solar projects.
The solar giant is targeting expansion in markets including China, Europe, India and Latin America; and it feels that bringing in First Wind's experience in wind will extend its offer. That added diversity should give SunEdison a more compelling offer overseas.
That's the main thrust, but there's one other party to consider here: TerraForm Power, the yieldco that SunEdison launched in June.
US yieldcos rely on acquiring new projects to fuel their growth, and the First Wind acquisition will undoubtedly be good for Terraform as it adds an extra 521MW of projects to the Terraform portfolio. It is also good for First Wind as it is a guaranteed buyer for its projects.
And yet, we can’t shake the nagging feeling that it again highlights the inherent instability of the US yieldco structure.
To fuel growth they need to keep buying projects — and, as they need to keep making acquisitions to chase that growth, the result will be that at some point they end up paying too much for assets, or become over-exposed to wind farms that perform averagely.
We aren't saying that is the case with the First Wind projects, but it does again highlight our concern with US yieldcos. It is one aspect of the deal that won't be much talked about.
Wind Watch
Who are the most powerful people in global wind? If you don't know the answer to this question then wonder no longer.
Last week, we published our third annual Top 100 Power Peoplereport, which rounds up the most influential financiers, developers, manufacturers and consultancies in the industry.
Developed in association with an independent panel of experts, this far-reaching report is the only global insight into the movers and shakers across industry and the investment community.
This year's league table includes 44 individuals who are completely new to the top 100, including the number one. This demonstrates once again that wind is a dynamic industry with a great capacity to attract and retain talented individuals, including from other sectors.
So what are you waiting for? Click here to read it now.
It is six months since the people of India elected Narendra Modi as prime minister. When he was elected he became arguably the most pro-renewables leader of any large nation.
This is no idle statement. Modi was chief minister of the region of Gujarat from 2001 until May 2014 — when he became prime minister — and during that time he led a renewables revolution. Official data shows that wind generation capacity grew by more then tenfold in the final six years of his tenure; and, in his pre-election campaigning, he promised an “energy revolution” for India.
That means more wind and solar. So, six months on, has he delivered? Is he opening up new opportunities for investors and developers to get involved in wind projects in India?
It is, of course, too early to judge on results. He is only six months in to leading a country of 1.3billion people, but the early indications are that he is delivering on his promise.
The Indian government has identified that India’s energy network needs huge investment. The government says that the power generation and transmission network is set to require $250bn over the next five years, of which $100bn is set to be in renewables.
So far, it has brought in German development bank KfW to support an $8bn upgrade of the grid to handle a more than doubling of renewables capacity by 2022. The idea is to help the country to cope with the intermittent supply from wind and solar farms.
It has also backed wind as a way to achieve its goal of a secure and sustainable energy network. The government has set a target of 100GW of new capacity in India in the next decade. This would be a fivefold increase on capacity of 20GW at the end of 2013.
And it is currently drawing up a National Offshore Wind Energy Policy. This did not stop it committing last month to building the country’s first offshore wind project, of 100MW.
All of this bodes well for developers, investors and consultants who are looking to get more involved in the Indian market. Modi is delivering what the market expected him to.
Then there are the technical changes. For example, in July the government reinstated the Indian accelerated depreciation schemefor wind, which was withdrawn two years ago.
This provides subsidies for setting up wind-generated power plants. Investors canwrite down 80% of a project cost as depreciation when calculating taxable profits. Wind experts have estimated that this would boost annual wind farm installations by 1GW.
It is this last element that we find most heartening. It is easy for politicians to talk in grand targets about how much more capacity they want, but often they fail when it comes to putting in place the legislative framework needed to achieve those targets.
That doesn’t appear to be the case with Modi. He seems to have both a vision and a plan to realise it. We cannot yet judge his full impact — but so far, so good.
There are some parts of the world where many investors fear to go.
Take South America, which is unfairly tarnished as being rife with social problems and corruption. However, firms like private equity investor Actis are making a success of expanding in these areas.
We heard more about this at our Quarterly Drinks networking evening in London last week, which featured a Q&A with energy director, Lucy Heintz. She explained some of the company’s key considerations when expanding into emerging markets.
Actis was founded in 2004, but its pedigree in emerging markets is much longer. It was spun out of CDC Group, which was set up in 1948 as the Commonwealth Development Corporation to invest in markets including Africa, Asia and the Caribbean.
So far, Actis has invested $4bn in emerging markets, with around 13% of this in energy. So what lessons are there for others in how Actis has approached South America? In short, quite a few. Sure, none of them are brand new, but they are important nevertheless.
Lesson one: focus on market fundamentals. Actis moved into central America in 2009 by buying Globeleq, which builds power projects in Africa and central America, from CDC.
Heintz said Actis was particularly interested in Chile around this time because the capital costs of developing wind farms had fallen sharply; the cost of fuel in Chile was high because it had problems sourcing cheap gas from Argentina; and the country benefited from attractive wind resource. In short, a compelling investment case.
Lesson two: work with those who know the country, whether that is established businesses or recruiting local people. It has done this as it has built up businesses in the region. It is tough to build a project from scratch without the knowledge that locals can provide.
The aim for Actis has been to build self-sustaining companies in overseas markets, rather than portfolios that it needs to manage centrally. In Chile, it has done this through Aela Energia, which it first backed in 2013.
It also invested $169m last year in Brazilian firm Atlantic Energias Renovaveis; and has this year backed Mexico’s Zuma Energia.
This approach means that these businesses can subsequently develop other projects, which creates a pipeline of future initiatives without Actis having to do all of the legwork.
And lesson three: have an exit strategy. Heintz said the aim for its investee firms is to build them and sell them on to a larger financial investor. It looks viable, but it will only be possible to tell whether its current investments have been a success when it sells out.
These ideas don’t just apply to South America, but to all emerging markets. And investors would do well to bear them in mind, given that 85% of the growth in global energy demand between now and 2035 is set to come from emerging markets.
Simple principles like this can take some of the risk out of new markets — and help get beyond over-reliance on cliches.
Germany urges Vattenfall green re-think
The German government is seeking to persuade Swedish utility Vattenfall to reconsider its plans to restructure its energy assets.
The firm last month said it planned to increase the proportion of renewables in its portfolio after reporting a €2.1bn third quarter loss. The utility was forced to take impairment charges of €2.5bn after past acquisitions, and said it planned to restructure including selling its lignite power plants and mines in Germany for up to €3bn. This would involve increasing the proportion of wind in its portfolio.
However, Reuters has reported that the German government said this would threaten jobs in the country, and said it was unrealistic to quickly abandon traditional energy sources in favour of renewables.
Utilities eye increases in wind M&A
Mergers and acquisitions activity in the renewables sector by utilities reached $7.3bn in the third quarter of 2014.
Ernst & Young yesterday published its annual ‘Power & Utilities Global Capital confidence barometer’, which said the quarterly figure for M&A activity by utilities in renewables had reached a three-year high. This was driven by the growth of wind in the US.
It also reported that 40% of firms in the power sector said they expected to conclude an M&A deal in the next year; and were demonstrating a growing appetite for non-hydro renewables deals in the Middle East and sub-Saharan Africa.
Isle of Man favours Dong deal
The Isle of Man government has named Dong Energy as preferred development partner for a 700MW wind farm in the Irish Sea.
The government yesterday announced that the Danish developer was preferred bidder for a wind farm in Isle of Man territorial waters off the island’s east coast. The project is due to complete by 2023.
The Isle of Man hopes that leasing parts of the seabed for renewable energy schemes in its territorial waters would help to boost the island’s public funds by an estimated £5m a year.
Studies: Red tape raises offshore costs
Developers have seen the cost of gaining consent for UK offshore wind farms rise despite growth in the sector.
Trade association Renewable UK and offshore wind consultancy TÜV SÜD PMSS jointly released reports yesterday that said the process to approve UK offshore wind farms was too complex, and that had led to increased consenting costs. These costs rose 15% per MW between the UK’s Round 1 and Round 2 projects.
Public spending cuts and conflicting messages from central government on UK renewable energy policy have both added complexity and cost to the job done by consenting bodies. This has resulted in the higher costs for developers.
Mainstream co-founder Whelan quits
Mainstream Renewable Power co-founder and corporate finance director Fintan Whelan is set to leave the company.
Whelan set up developer Mainstream in 2008 with chief executive Eddie O’Connor, after the sale of O’Connor’s Airtricity. Mainstream now has offices in nine countries and 334MW of operational wind and solar projects, with a development pipeline of over 19GW.
Whelan announced that he was leaving to pursue other interests. He will be replaced as head of corporate finance by Paul Corrigan.
Where does O’Connor feature in this year’s Top 100 Power People report? Find out now.