Wind Watch
Is it time to grow up? The industry certainly thinks so. And so do some of those ambitious thirty-somethings working within it.
Typically, these individuals started their career ten or more years ago in a fledgling firm in the then-fledgling wind industry. They have spent the time since then experiencing impressive growth.
Over that period, companies have rapidly been built up around them and, as business has flourished, so too have the projects that they’ve played a key part in bringing to bear. That growth - both personal and corporate - remains hugely infectious.
It has made many of these people start to think really big. In doing so, it has lit a multitude of entrepreneurial fires that will, over the coming years, play a key part in the evolution of this global sector.
This brings with it fresh thinking and fresh ideas. It injects a fresh wave of enthusiasm that will soon play a key part in inching new projects over the line.
But not everyone is so enamoured with these new kids in town.
There is a small handful of individuals that view these ambitious upstarts with a growing degree of unease and doubt.
These individuals – who are often more set in their ways than most – feel that such enthusiasm is either plain naïve or, at times, dangerous. They feel that such ambition must be kept in check.
That is a dangerous mindset to have. At best, it is short-sighted job protectionism; and, at worse, it risks holding more than just the individual back. As an industry, many of our most aspiring firms have always made a point of nurturing new talent and in investing heavily in its people - from the very start.
Such forward thinking must continue to praised and encouraged. Everyone has start somewhere, and it helps the industry to have new talent coming in. If this doesn't happen then we will risk skills shortages and the withering of this currently-dynamic industry. It is in nobody's interests to get into that situation.
Therefore, as the industry matures – and as the old guard increasingly rubs shoulders with the new – let’s ensure that focus remains on positive praise.
And in short, let’s be careful not to undermine the confidence, ambition and enthusiasm that such new talent brings with it.
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We have long expected the UK government to weaken its so-called "pollution tax". Now it finally has.
On Wednesday, chancellor George Osborne announced in his Budget that he is freezing the UK’s carbon price floor (CPF) from 2016. The announcement is the latest UK government rollback on green policy, and it will force investors to ask tough questions.
The CPF came into force last April as a tax on fossil fuels used to generate electricity. It is a top-up tax that puts a minimum price on how much power generators in the UK have to pay to pollute.
The idea was that it would rise from around £16 per ton at launch to £70 per ton by 2030, and encourage producers of dirty energy to cut their carbon emissions. The policy was also intended to make investing in renewables more attractive. It won't now.
The government is freezing the CPF at £18 per ton from 2016 in a bid to curb rises in energy bills for businesses and consumers. The freeze is set to cut around £50 from an individual household’s energy bills by 2020, and £50,000 for a mid-sized manufacturer.
Some groups have welcomed Osborne’s announcement and, in many respects, freezing the CPF makes sense. Energy producers are just passing on the extra costs of CPF to customers through their bills, rather than using it as an incentive to become more energy efficient. The freeze helps to protect jobs in energy-intensive industries in the UK.
But freezing the CPF also reduces the incentive for dirty energy producers to change their ways. That is bound to make investors in wind power ask some serious questions.
The first is if the UK government is really serious about moving to cleaner energy. It is hard to believe it is committed to the switch when it tilts the market in favour of coal power.
The second question for investors is whether they should invest in UK wind projects when they see the government is so willing to weaken its own green incentives, and so quickly. It is very difficult for businesses to make long-term spending decisions when policy changes so quickly — although they frequently have to do so.
And the third question is whether investors will take their money elsewhere. The UK is far from the only place for investors in wind to put their money. Trade body Renewable UK warns that £4bn investment in UK wind until 2020 is at risk due to the CPF freeze.
The government clearly doesn't think the CPF is the best way to achieve energy transition, but what is? We must counterbalance the obstacles to onshore wind, including often-hostile locals.
So will there be an incentive to replace the frozen CPF?
We're unlikely to see anything significant in the next 12 months. The general election is a little over a year away. Protecting jobs today -- even those in energy-intensive industries -- will take precedence over greener energy tomorrow.
Wind Watch
We have long expected the UK government to weaken its so-called "pollution tax". Now it finally has.
On Wednesday, chancellor George Osborne announced in his Budget that he is freezing the UK’s carbon price floor (CPF) from 2016. The announcement is the latest UK government rollback on green policy, and it will force investors to ask tough questions.
The CPF came into force last April as a tax on fossil fuels used to generate electricity. It is a top-up tax that puts a minimum price on how much power generators in the UK have to pay to pollute.
The idea was that it would rise from around £16 per ton at launch to £70 per ton by 2030, and encourage producers of dirty energy to cut their carbon emissions. The policy was also intended to make investing in renewables more attractive. It won't now.
The government is freezing the CPF at £19 per ton from 2016 in a bid to curb rises in energy bills for businesses and consumers. The freeze is set to cut around £50 from an individual household’s energy bills by 2020, and £50,000 for a mid-sized manufacturer.
Some groups have welcomed Osborne’s announcement and, in many respects, freezing the CPF makes sense. Energy producers are just passing on the extra costs of CPF to customers through their bills, rather than using it as an incentive to become more energy efficient. The freeze helps to protect jobs in energy-intensive industries in the UK.
But freezing the CPF also reduces the incentive for dirty energy producers to change their ways. That is bound to make investors in wind power ask some serious questions.
The first is if the UK government is really serious about moving to cleaner energy. It is hard to believe it is committed to the switch when it tilts the market in favour of coal power.
The second question for investors is whether they should invest in UK wind projects when they see the government is so willing to weaken its own green incentives, and so quickly. It is very difficult for businesses to make long-term spending decisions when policy changes so quickly — although they frequently have to do so.
And the third question is whether investors will take their money elsewhere. The UK is far from the only place for investors in wind to put their money. Trade body Renewable UK warns that £4bn investment in UK wind until 2020 is at risk due to the CPF freeze.
The government clearly doesn't think the CPF is the best way to achieve energy transition, but what is? We must counterbalance the obstacles to onshore wind, including often-hostile locals.
So will there be an incentive to replace the frozen CPF?
We're unlikely to see anything significant in the next 12 months. The general election is a little over a year away. Protecting jobs today -- even those in energy-intensive industries -- will take precedence over greener energy tomorrow.
No special treatment for solo Scotland
England and Wales would not subsidise Scotland's renewables sector if the country votes for independence in September, energy secretary Ed Davey has warned.
Davey told the Scottish Renewables annual conference in Edinburgh yesterday that an independent Scotland would have to agree a new deal with the UK government on energy exports, in competition with countries from across Europe.
“The Scottish Government can assert that UK consumers would continue to subsidise the costs of Scottish renewables and buy Scottish electricity to meet renewables targets no matter what the cost. But this goes against all commercial logic,” he said.
Davey added that Scotland alone would have to pay to meet the Scottish government’s ambition of generating 100% of domestic electricity from renewable sources by 2030.
German wind workers in protest walkout
Workers and management at 15 wind companies in north Germany are set to stage a walkout later this morning over planned energy reforms.
The union IG Metall and the German Wind Energy Association are organising the protest against the government’s proposed changes to the Renewable Energy Sources Act, which it claims threaten thousands of jobs and Germany’s energy transition.
Workers from companies including Enercon, Senvion, Siemens and Vestas are expected to take part in the protest.
Longyuan hails wind despite profit drop
China Longyuan Power Group has reported a strong performance by its wind operations in 2013, despite a 21% drop in overall profits to ¥2.05bn (£199m).
The company, which is China’s largest wind developer, said its wind operations accounted for over half (54%) of sales in 2013, up from 46% in 2012. It completed 28 wind projects totalling 1.3GW last year, which took its total installed capacity to 14GW.
It attributed its loss to an impairment on two biomass projects.
DECC awards £4m to cut offshore costs
The UK government’s Department for Energy and Climate Change has given grants totalling £4m to four firms to help lower the cost of generating offshore wind energy.
Energy and climate minister Greg Barker yesterday announced that 2-B Energy has been awarded £2.8m to develop a two-bladed turbine. Manchester firm HVPD and Alstom were awarded £900k, SgurrControl got £667k, and Ocean Resource got £216k.
DECC is seeking to reduce the cost of generating offshore energy from around £135/MWh to less than £100/MWh by 2020.
Falck completes £154m stake sale
Falck Renewables has concluded the £154m sale of minority stakes in six UK wind farms, totalling 273MW, to a fund managed by Danish pension fund PensionDanmark.
The Italy-headquartered company has sold 49% stakes in five Scottish projects - Ben Aketil (27.6MW), Boyndie (16.7MW), Earlsburn (37.5MW), Kilbraur (67.5MW), and Millennium (65MW) - and Welsh scheme Cefn Croes (58.5MW) to CII HoldCo Ltd.
CII HoldCo is a subsidiary of Copenhagen Infrastructure Partners, which is funded by PensionDanmark.
Wind Watch
Utilities across Europe are continuing to tell their tales of woe.
The German firm RWE reported a net loss of €2.8bn earlier this month, which is its first loss in 60 years, because it had to write down the value of its traditional power stations.
Its German counterpart E.On has reported that it had to close 13GW of traditional power stations because it says it is impossible to operate them economically; and Italy’s Enel Group has said it has toshut down 8GW of traditional power stations. These announcements have all come out around the latest round of the utilities’ financial results.
These results have also come with a familiar sound. That is, European utility companies complaining about how renewable energy schemes are making the financial economics of energy, increasingly tough.
In recent years, power generators across Europe have been surprised by the surge in energy produced by renewable sources, mainly solar and wind. This has caused a fall in wholesale power prices and made many traditional power stations redundant.
The utilities have also been criticising EU legislation. They claim that renewable energy subsidies mean that traditional power stations can’t compete on a fair footing with projects such as solar PV and wind farms. They argue that countries like Germany must re-think the rules that give energy from renewable sources priority access to the grid.
So what does this mean for wind power? Should the EU rein in the sector because it is having a detrimental, short term effect on the financial future of the utilities and their fossil fuel power stations? Of course not.
The logic for moving towards energy from renewable sources still makes sense. There is a finite amount of fuel we can get from the ground, but the wind and the sun will carry on. It makes sense to give subsidies to encourage the growth in renewables.
This won’t stop the utilities from howling: “Won’t someone think of the energy security?!”
But, when you’re thinking about energy security, it makes sense to generate energy from a wider ranger of sources. It makes sense to promote renewables in order to bring down the costs of developing these schemes, which has been happening.
Subsidies cannot and should not carry on indefinitely, but the renewable power sector is still at a relatively early stage of its growth. The EU is aiming to generate 20% of its energy from renewable sources by 2020, and most countries are still falling short of this. Let’s not get caught up in the myth that big bad renewables are bullying the fossil fuel producers.
The reason these utilities are suffering is because in part, they haven’t adapted quickly enough to rapid change.
They haven’t coped with the challenges of falling electricity demand in Europe, and with the emergence of renewable energy companies threatening their traditional dominance. They have had the same opportunity as anyone, but they haven’t kept up. They’ve kept investing in traditional power stations when politics and public opinion are moving on.
It’s easy for them to argue that other people are the cause of their problems. They should look harder at their own decisions.
Utilities across Europe are continuing to tell their tales of woe.
The German firm RWE reported a net loss of €2.8bn earlier this month, which is its first loss in 60 years, because it had to write down the value of its traditional power stations.
Its German counterpart E.On has reported that it had to close 13GW of traditional power stations because it says it is impossible to operate them economically; and Italy’s Enel Group has said it has toshut down 8GW of traditional power stations. These announcements have all come out around the latest round of the utilities’ financial results.
These results have also come with a familiar sound. That is, European utility companies complaining about how renewable energy schemes are making the financial economics of energy, increasingly tough.
In recent years, power generators across Europe have been surprised by the surge in energy produced by renewable sources, mainly solar and wind. This has caused a fall in wholesale power prices and made many traditional power stations redundant.
The utilities have also been criticising EU legislation. They claim that renewable energy subsidies mean that traditional power stations can’t compete on a fair footing with projects such as solar PV and wind farms. They argue that countries like Germany must re-think the rules that give energy from renewable sources priority access to the grid.
So what does this mean for wind power? Should the EU rein in the sector because it is having a detrimental, short term effect on the financial future of the utilities and their fossil fuel power stations? Of course not.
The logic for moving towards energy from renewable sources still makes sense. There is a finite amount of fuel we can get from the ground, but the wind and the sun will carry on. It makes sense to give subsidies to encourage the growth in renewables.
This won’t stop the utilities from howling: “Won’t someone think of the energy security?!”
But, when you’re thinking about energy security, it makes sense to generate energy from a wider ranger of sources. It makes sense to promote renewables in order to bring down the costs of developing these schemes, which has been happening.
Subsidies cannot and should not carry on indefinitely, but the renewable power sector is still at a relatively early stage of its growth. The EU is aiming to generate 20% of its energy from renewable sources by 2020, and most countries are still falling short of this. Let’s not get caught up in the myth that big bad renewables are bullying the fossil fuel producers.
The reason these utilities are suffering is because in part, they haven’t adapted quickly enough to rapid change.
They haven’t coped with the challenges of falling electricity demand in Europe, and with the emergence of renewable energy companies threatening their traditional dominance. They have had the same opportunity as anyone, but they haven’t kept up. They’ve kept investing in traditional power stations when politics and public opinion are moving on.
It’s easy for them to argue that other people are the cause of their problems. They should look harder at their own decisions.
Wind Watch
The global economy may be growing but, when it comes to wind, we are increasingly operating in a two-speed economy.
Need proof? Take a moment to contrast two Spanish-speaking markets that have more than just distance between them.
When it comes to wind energy, the difference between Mexico and Spain provides a perfect illustration of the sharp contrast that now exists between the wind markets in different countries.
As we outlined earlier in the month, Mexico is a stellar example of the sheer speed and pace of growth that can be achieved through the right level of political support, when coupled with a power-hungry, expanding economy.
In Mexico, electricity demand is on the increase. The population is rising and energy intensive industry is booming – bringing new jobs, fresh capital and a seemingly untapped desire for more.
Add to this a transmission and infrastructure network that isn't saddled with ageing, legacy architecture, typically built around a single power source that utilises a radial grid, and the benefits really start to bloom.
In short, new technology and new ideas are attractive – and in turn, they are able to compete on a far more even playing field with the fossil-fueled cousins.
And here's the thing. When they do, they increasingly find that they simply don’t need the support systems, which traditionally exist elsewhere, to help spell out the benefits and put the long-term developer economics into sharp relief.
Indeed, as The Power Transformation Report by the International Energy Agency outlined a couple of weeks back, developers and investors are increasingly faced with a stark choice.
While established economies such as the EU continue to offer room for further development, a threshold will soon be reached.
A number of senior executives outlined at EWEA's conference in Barcelona this week that this threshold doesn’t represent a ceiling. However, it does require many manufacturers, developers and support services firms to make a major strategic decision.
Should they invest in the old markets or invest in the new?
European electricity are prices still perilously low and the utilities have made it clear that removing existing energy generating kit comes at a cost. Tackling the grid issue while at the same time phasing in new kit is not for the faint of heart. Or light of pocket.
However, for those that commit, there are still margins to be made. Recent results from the likes of Nordex – which showed strong Northern European growth – makes this abundantly clear.
There are opportunities in both the old markets and the new; and it's clear that new market entrants are being forced to choose.
Not everyone will want to make that choice and, for them, the message is clear. Think carefully before trying to invest in both.
The global economy may be growing but, when it comes to wind, we are increasingly operating in a two-speed economy.
Need proof? Take a moment to contrast two Spanish-speaking markets that have more than just distance between them.
When it comes to wind energy, the difference between Mexico and Spain provides a perfect illustration of the sharp contrast that now exists between the wind markets in different countries.
As we outlined earlier in the month, Mexico is a stellar example of the sheer speed and pace of growth that can be achieved through the right level of political support, when coupled with a power-hungry, expanding economy.
In Mexico, electricity demand is on the increase. The population is rising and energy intensive industry is booming – bringing new jobs, fresh capital and a seemingly untapped desire for more.
Add to this a transmission and infrastructure network that isn't saddled with ageing, legacy architecture, typically built around a single power source that utilises a radial grid, and the benefits really start to bloom.
In short, new technology and new ideas are attractive – and in turn, they are able to compete on a far more even playing field with the fossil-fueled cousins.
And here's the thing. When they do, they increasingly find that they simply don’t need the support systems, which traditionally exist elsewhere, to help spell out the benefits and put the long-term developer economics into sharp relief.
Indeed, as The Power Transformation Report by the International Energy Agency outlined a couple of weeks back, developers and investors are increasingly faced with a stark choice.
While established economies such as the EU continue to offer room for further development, a threshold will soon be reached.
A number of senior executives outlined at EWEA's conference in Barcelona this week that this threshold doesn’t represent a ceiling. However, it does require many manufacturers, developers and support services firms to make a major strategic decision.
Should they invest in the old markets or invest in the new?
European electricity are prices still perilously low and the utilities have made it clear that removing existing energy generating kit comes at a cost. Tackling the grid issue while at the same time phasing in new kit is not for the faint of heart. Or light of pocket.
However, for those that commit, there are still margins to be made. Recent results from the likes of Nordex – which showed strong Northern European growth – makes this abundantly clear.
There are opportunities in both the old markets and the new; and it's clear that new market entrants are being forced to choose.
Not everyone will want to make that choice and, for them, the message is clear. Think carefully before trying to invest in both.
EWEA: Ukraine crisis a “wake-up call”
The political crisis in Ukraine is a “wake-up call” that shows why European countries must embrace renewables, the European Wind Energy Association’s president has said.
Andrew Garrad said in the opening session of the EWEA conference in Barcelona on Monday that Russia’s invasion of Ukraine shows how reliant Europe is on Russian fossil fuels; and that growing the wind sector would help reduce that dependence.
He said one way to help grow the sector was with tougher 2030 renewable energy targets.
EWEA has criticised the European Commission’s proposed 27% Europe-wide target, and said it instead needs a 30% target that is legally binding for each individual country.
GE reveals 213MW European orders
General Electric has revealed European deals totalling 212MW, including a 110MW order to supply eight German wind farms.
The manufacturer will supply 44 of its 2.5-120 turbines to eight projects in the country. Most of the orders come through framework deals with Juwi and Pfalzweke, but it also agreed smaller deals with Abo-Wind and Max Bogl Wiesner.
GE is also set to supply turbines totalling 77MW to three projects in northern France; 16MW to Scotland’s Langhope Rig; and 9.6MW to Sweden's Erikshester Wind Farm. The firm is targeting growth in Europe to reduce its reliance on the US.
Northland agrees C$600m credit deal
Northland Power has extended its credit facility to C$600m (£324m) in a deal that enables it to complete its investment in the 600MW Gemini offshore project.
The Canadian firm has increased the facility by C$350m (£189m) after reaching an agreement with a syndicate of financial institutions led by Canadian Imperial Bank of Commerce and the Bank of Montreal.
Northland holds a 60% stake in Gemini, which is 85 miles from the Dutch coast and set to complete in 2017. It is is working on the project with Dutch firm Typhoon Offshore.
Dong appoints Andersen as chairman…
Dong Energy has announced that Thomas Thune Andersen will join the company as chairman in July.
Andersen is currently chairman at Lloyd’s Register, and a board director at Scottish & Southern Energy, Petrofac and VKR Holdings. He has to leave SSE before he becomes chairman at Dong because the companies have a wind energy partnership.
He is due to officially resign from SSE at a general meeting on 17 July 2014, and is set to take up the Dong role soon after.
…as subsidiary A2SEA grows profits
The launch of its Sea Installer vessel helped A2Sea boost profits to DKr276.5m (£31m) in 2013, but the company expects this to drop in 2014.
The Danish offshore installation specialist, which is a subsidiary of Dong Energy, reported the profit on 2013 sales of DKr1.2bn (£136m), up from a 2012 profit of DKr92m (£10m) on sales of DKr1.1bn (£127m).
It attributed its profitability to involvement in major projects such as RWE’s 576MW Gwynt y Mor, but expects a drop in 2014 as it is working on fewer projects under construction.
Wind Watch
The wind industry is making final preparations for the annual European Wind Energy Association (EWEA) conference in Barcelona this week.
One topic up for discussion in the Catalonian capital is the warning last Thursday, from a group of UK Members of Parliament, that global stock markets could be inflating a carbon bubble by overvaluing companies with fossil fuel assets.
The MPs, who make up a group called the Environmental Audit Committee, have also stated that less than half the investment in energy infrastructure needed to deliver 2020 emissions reductions in place. That’s a significant shortfall.
This warning was reiterated by Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, ahead of upcoming climate talks in Bonn.
It’s a curious scenario that encapsulates challenges that seem well beyond the control of the renewables industry.
It is perverse that some of the most toxic asset classes draw the biggest interest; and it is a significant concern that, despite all the legislation, policy and lobbying, firms with large balance sheets predicated on coal, oil and gas still dominate investment markets. This also lets carbon-heavy energy providers off the hook.
The most worrying element of this warning is that it is portrayed not as the failure in clean energy policy that it really is, but as a forewarning of the potential for yet more financial armageddon. A sad indictment.
The commission warns that national governments should start to move to reduce the risks of a carbon bubble, but one can’t help but wonder what - if anything - will actually happen. There is a logic to tackling the demand side of the issue, but the mechanisms for doing so aren’t quite there.
In other words, the commission is right to highlight the issue, but the cost of the carbon heavy businesses, stocks and investments is still too attractive.
The carbon floor price is still far too low to tempt any serious investors, and the policy mechanisms for supporting renewable energy still lack long-term certainty worldwide.
Given the dire straits that the Spanish renewable energy market finds itself in, the Barcelona conference must provide a platform for the industry to come out fighting.
The onus is on the European market to prove it is relevant and making a difference.
The wind industry is making final preparations for the annual European Wind Energy Association (EWEA) conference in Barcelona this week.
One topic up for discussion in the Catalonian capital is the warning last Thursday, from a group of UK Members of Parliament, that global stock markets could be inflating a carbon bubble by overvaluing companies with fossil fuel assets.
The MPs, who make up a group called the Environmental Audit Committee, have also stated that less than half the investment in energy infrastructure needed to deliver 2020 emissions reductions in place. That’s a significant shortfall.
This warning was reiterated by Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, ahead of upcoming climate talks in Bonn.
It’s a curious scenario that encapsulates challenges that seem well beyond the control of the renewables industry.
It is perverse that some of the most toxic asset classes draw the biggest interest; and it is a significant concern that, despite all the legislation, policy and lobbying, firms with large balance sheets predicated on coal, oil and gas still dominate investment markets. This also lets carbon-heavy energy providers off the hook.
The most worrying element of this warning is that it is portrayed not as the failure in clean energy policy that it really is, but as a forewarning of the potential for yet more financial armageddon. A sad indictment.
The commission warns that national governments should start to move to reduce the risks of a carbon bubble, but one can’t help but wonder what - if anything - will actually happen. There is a logic to tackling the demand side of the issue, but the mechanisms for doing so aren’t quite there.
In other words, the commission is right to highlight the issue, but the cost of the carbon heavy businesses, stocks and investments is still too attractive.
The carbon floor price is still far too low to tempt any serious investors, and the policy mechanisms for supporting renewable energy still lack long-term certainty worldwide.
Given the dire straits that the Spanish renewable energy market finds itself in, the Barcelona conference must provide a platform for the industry to come out fighting.
The onus is on the European market to prove it is relevant and making a difference.[/private}
Wind Watch
The world’s biggest democratic election is here. Well, almost…
India’s electoral commission this week set the dates for the country’s general election. The voting is due to start on 7 April and finish on 12 May, with votes to be counted on 16 May.
The numbers are mind-boggling. There are over 800million eligible voters in 543 constituencies voting for thousands of candidates from dozens of political parties.
But why should you care? Two words: Narendra Modi.
Modi is one of the leading prime ministerial candidates. He has been chief minister of the region of Gujarat since 2001, is one of India’s most popular politicians, and stands a good chance of winning this election, on behalf of the Bharatiya Janata Party.
His rivals in this election include Rahul Gandhi of the Congress party and Arvind Keiriwal of the Aam Aadmi Party. Politics is notoriously unpredictable, but Modi has a good chance.
The reason this is important is that Modi wants an “energy revolution” in India. He wants to better harness power from sources including wind, solar and hydropower alongside coal, gas, biomass and nuclear. He could start a wind power boom.
Now, India is no slouch when it comes to wind power.
It is the fifth-largest producer of wind power in the world, with more than 19GW currently up-and-running. The wind-rich region of Tamil Nadu is one of the main wind power hubs in South Asia with capacity of over 7.1GW, ahead of Gujarat (3.2GW), Maharashtra (3GW), and Rajasthan (2.7GW).
The country is also looking at how it can take advantage of offshore wind. The Global Wind Energy Council announced in January that it had started a four-year project to develop a plan for the development of offshore wind in India, with a focus on Gujarat and Tamil Nadu. It will work with the Ministry of New & Renewable Energy, state governments, and other parts of the Indian government. The country is making progress.
But on a regional level it remains a very mixed picture. When it comes to backing energy from renewable sources, many of India’s 28 states are currently doing little or nothing.
If Modi became India’s leader he could bring national change. We need only look at how far Gujarat has come with wind power under his leadership. Official data states that wind generation capacity in the state has grown tenfold over the last six years.
Manufacturers will watch the national poll with interest. Not just Indian firms like Suzlon, but global players active in India such as Enercon, Gamesa, General Electric and Vestas. It may also open up more opportunities for global firms to invest in the market.
There are still plenty of variables, of course.
Modi has to win the world’s biggest election; and, if he does, there is no guarantee he could replicate at a national level the major impact he had on wind power in Gujarat.
But he is a fan of renewables. For that reason alone, it couldn’t do any harm having him in India’s top seat.
The world’s biggest democratic election is here. Well, almost…
India’s electoral commission this week set the dates for the country’s general election. The voting is due to start on 7 April and finish on 12 May, with votes to be counted on 16 May.
The numbers are mind-boggling. There are over 800million eligible voters in 543 constituencies voting for thousands of candidates from dozens of political parties.
But why should you care? Two words: Narendra Modi.
Modi is one of the leading prime ministerial candidates. He has been chief minister of the region of Gujarat since 2001, is one of India’s most popular politicians, and stands a good chance of winning this election, on behalf of the Bharatiya Janata Party.
His rivals in this election include Rahul Gandhi of the Congress party and Arvind Keiriwal of the Aam Aadmi Party. Politics is notoriously unpredictable, but Modi has a good chance.
The reason this is important is that Modi wants an “energy revolution” in India. He wants to better harness power from sources including wind, solar and hydropower alongside coal, gas, biomass and nuclear. He could start a wind power boom.
Now, India is no slouch when it comes to wind power.
It is the fifth-largest producer of wind power in the world, with more than 19GW currently up-and-running. The wind-rich region of Tamil Nadu is one of the main wind power hubs in South Asia with capacity of over 7.1GW, ahead of Gujarat (3.2GW), Maharashtra (3GW), and Rajasthan (2.7GW).
The country is also looking at how it can take advantage of offshore wind. The Global Wind Energy Council announced in January that it had started a four-year project to develop a plan for the development of offshore wind in India, with a focus on Gujarat and Tamil Nadu. It will work with the Ministry of New & Renewable Energy, state governments, and other parts of the Indian government. The country is making progress.
But on a regional level it remains a very mixed picture. When it comes to backing energy from renewable sources, many of India’s 28 states are currently doing little or nothing.
If Modi became India’s leader he could bring national change. We need only look at how far Gujarat has come with wind power under his leadership. Official data states that wind generation capacity in the state has grown tenfold over the last six years.
Manufacturers will watch the national poll with interest. Not just Indian firms like Suzlon, but global players active in India such as Enercon, Gamesa, General Electric and Vestas. It may also open up more opportunities for global firms to invest in the market.
There are still plenty of variables, of course.
Modi has to win the world’s biggest election; and, if he does, there is no guarantee he could replicate at a national level the major impact he had on wind power in Gujarat.
But he is a fan of renewables. For that reason alone, it couldn’t do any harm having him in India’s top seat.
Gamesa reveals 500MW Mexico tie-up
Gamesa has signed an agreement with Spanish bank Santander to develop wind farms in Mexico with a total capacity of 500MW.
The Spanish manufacturer announced it will develop projects in the Oaxaca region over the next three years. Santander will put its 200MW El Sauzal project into the partnership.
Last week, Mexico’s president Enrique Pena Nieto announced there would be no limits on inbound renewable investors into Mexico. The country’s energy market is going through its biggest changes since the state took control of generation in 1938.
RWE blames renewables for €2.7bn loss
German utility EWE has reported a net loss of €2.7bn for 2013 due to the impact of wind and solar schemes on conventional power stations.
The firm attributed the loss, its first in 60 years, to the impact of renewable energy schemes on energy prices. RWE said this made it virtually impossible to operate its oil- and gas-fired power plants economically, and had forced it to write down €4.8bn from the value of these plants.
RWE also said it plans to invest €1bn expanding its renewables business until 2016.
Denmark could sink 1GW offshore farms
The Danish climate and energy minister has warned that the Danish government could drop future offshore projects if the cost of power from them doesn’t fall dramatically.
Rasmus Helveg Petersen has said the cost of energy from the country’s only existing offshore scheme, the 400MW Anholt Offshore Wind Farm, is too high at 1.05 Danish kroner per kWh (€0.13/kWh).
He said the Danish government is prepared to drop two large schemes - the 600MW Krieger’s Flak and the 400MW Horns Rev 3 - if the cost of energy remains too high.
STEAG gains €125m Black Sea funding
German power firm STEAG is to receive €125m funding for its 108MW Crucea North Wind Farm in the Black Sea region of Dobruja in Romania.
The company has agreed a €49m loan from the European Bank for Reconstruction and Development; a €49m loan from central and eastern European lender Erste Group; and a €27m loan facility from Romania’s Banca Comerciala Romana.
The total cost of the 36-turbine project is expected to be €200m. Preliminary construction works started late last year and are due to complete by mid-2015.
Four Norwegian firms in 640MW venture
Norwegian energy companies Statkraft, Agder Energi, NTE and TronderEnergi are poised to start a joint venture to develop and run wind farms totalling 640MW.
The firms have agreed to jointly develop the Storheia, Kvenndalsfjellet and Roan onshore wind farms in Norway’s Trondelag region. Statkraft will own 50.1% of the joint venture, with Agder Energi owning 20.9%, and NTE and TronderEnergi owning a 14.5% stake each.
The three projects will require investment worth around £700m. The parties was aiming to make an investment decision on developing the projects in early 2015.
Wind Watch
If the wind industry ran a popularity contest then Mexico’s president, Enrique Pena Nieto, would surely be vying for top spot.
Last week, Nieto publicly confirmed there would be no limits on inbound renewable energy investors. Mexico, it would appear, is open for business.
And, on the face of it, that spells good news.
It has been 76 years since the Mexican state took control of energy generation. But that is due to end this year with a package of energy market reforms, approved in December, that could lead to a wind power boom. The Mexican government says there’s potential for up to 1.5GW to be built each year until 2020.
The government is currently hammering out details of the secondary legislation needed to implement such radical reform. This is due to be finalised next month.
What all this means of course, is that it will be far easier for foreign firms to invest. Indeed, the government hopes that by ending state control of energy generation it will increase electricity generation by 80% by 2030.
As a result, the Mexican Wind Energy Association has already set an ambition to achieve 12GW by 2022; and energy minister Pedro Joaquin Coldwell last week told delegates at the Mexico Wind Power 2014 conference that he wants to grow the country's total wind capacity from around 2GW now to 9.5GW by 2018. He even suggested 20GW would be “economically viable” by 2020.
That is impressive talk. And it’s certainly good news for the likes of Gamesa that said in its 2013 results that it expected most of its growth in 2014 to come in Latin America.
However, whether these ambitions can be achieved will depend to a greater or lesser degree on the final energy policy details – due to be thrashed out in the coming weeks.
And while Nieto’s statement certainly fills many with optimism, the lack of any investor ceiling may not necessarily be a panacea.
While it makes sense for the country to do what it can to attract companies that can help it achieve its renewable energy goals, Mexico should also be wary of making promises that suggest businesses can do whatever they want.
This may attract applause from the industry in the short-term; but investors, manufacturers and developers must also ensure that they enter the Mexican market with their eyes open and with a clear understanding of the long-term benefits and the risks.
It’s easy for Nieto to suggest that there will no investment limits, but such a bullish stance suggests little thought has gone into the long-term strategy.
Yes, limits can be restrictive. However, when implemented effectively, they can become the foundations for genuine market certainty and future growth.
If the wind industry ran a popularity contest then Mexico’s president, Enrique Pena Nieto, would surely be vying for top spot.
Last week, Nieto publicly confirmed there would be no limits on inbound renewable energy investors. Mexico, it would appear, is open for business.
And, on the face of it, that spells good news.
It has been 76 years since the Mexican state took control of energy generation. But that is due to end this year with a package of energy market reforms, approved in December, that could lead to a wind power boom. The Mexican government says there’s potential for up to 1.5GW to be built each year until 2020.
The government is currently hammering out details of the secondary legislation needed to implement such radical reform. This is due to be finalised next month.
What all this means of course, is that it will be far easier for foreign firms to invest. Indeed, the government hopes that by ending state control of energy generation it will increase electricity generation by 80% by 2030.
As a result, the Mexican Wind Energy Association has already set an ambition to achieve 12GW by 2022; and energy minister Pedro Joaquin Coldwell last week told delegates at the Mexico Wind Power 2014 conference that he wants to grow the country's total wind capacity from around 2GW now to 9.5GW by 2018. He even suggested 20GW would be “economically viable” by 2020.
That is impressive talk. And it’s certainly good news for the likes of Gamesa that said in its 2013 results that it expected most of its growth in 2014 to come in Latin America.
However, whether these ambitions can be achieved will depend to a greater or lesser degree on the final energy policy details – due to be thrashed out in the coming weeks.
And while Nieto’s statement certainly fills many with optimism, the lack of any investor ceiling may not necessarily be a panacea.
While it makes sense for the country to do what it can to attract companies that can help it achieve its renewable energy goals, Mexico should also be wary of making promises that suggest businesses can do whatever they want.
This may attract applause from the industry in the short-term; but investors, manufacturers and developers must also ensure that they enter the Mexican market with their eyes open and with a clear understanding of the long-term benefits and the risks.
It’s easy for Nieto to suggest that there will no investment limits, but such a bullish stance suggests little thought has gone into the long-term strategy.
Yes, limits can be restrictive. However, when implemented effectively, they can become the foundations for genuine market certainty and future growth.
Wind Watch
It’s easy to blame others when you lose a lot of money. But Acciona has a better case than most.
This week, the Spanish energy and infrastructure company has reported a loss of almost €2bn in its 2013 reports, which the company blames squarely on Spanish reforms to energy subsidies. The loss marks a big turnaround from the €189m profit that Acciona made in 2012.
We can trace this back to the mid-2000s, when the Spanish government gave generous subsidies to renewable energy companies to develop wind and solar projects. Developments popped up all over the country, Spain became a leader in this sector, and companies including Acciona thrived.
The problem for the Spanish government is that these generous incentives were too popular.
The result was a ‘tariff deficit’. This means that there has been gap between the cost of generating energy and the price being paid by consumers, with the Spanish government footing the bill for the difference. The tariff deficit is currently around €30bn, and growing at a rate of about €5bn a year.
The deficit wouldn’t look as bad if the economy was booming, but Spain’s economy is still getting on its feet after the five year stop-start recession caused by its 2008 property crash. The Spanish government is now under pressure to balance its books.
This is why it announced swingeing cuts to renewable energy subsidies last July, and revealed the exact details earlier this month. AEE, the country’s wind energy association, said the cuts meant that 37% of built wind farms would get no more subsidies and the rest would see subsidies halved.
This takes us back to Acciona’s 2013 annual results.
The company reported that changes to subsidies had directly hit it by €257m; and forced goodwill write-offs and impairment charges totalling €1.7bn on its renewable energy assets. Its energy division’s sales remained flat at €2.1bn year-on-year, but pre-tax profits shrank 95.9% to €6.7m.
It said it had partly mitigated the €257m hit by adding 105MW of new capacity with developments in the wind and hydropower sectors. Its total production in 2013 was 22,404GWh from an installed capacity of 8,480MW, of which 5,974MW is in Spain.
But the most interesting element is where Acciona goes from here. The company has said it is moving away from developing wind farms to own them, and towards building for others.
It is also looking to bring in partners to help shore up its finances. Earlier this week, it was revealed that Acciona has hired Lazard to find buyers for up to 49% of its wind farms outside Spain in a bid to raise capital; and the firm is also considering bringing in partners for its Spanish operations.
It will not be the only company to suffer at the hands of the subsidy changes, but it is one of the most high profile. And the tone of its results is unequivocal: the government is to blame.
This €2bn loss shows the Spanish fallout is only just beginning.
It’s easy to blame others when you lose a lot of money. But Acciona has a better case than most.
This week, the Spanish energy and infrastructure company has reported a loss of almost €2bn in its 2013 reports, which the company blames squarely on Spanish reforms to energy subsidies. The loss marks a big turnaround from the €189m profit that Acciona made in 2012.
We can trace this back to the mid-2000s, when the Spanish government gave generous subsidies to renewable energy companies to develop wind and solar projects. Developments popped up all over the country, Spain became a leader in this sector, and companies including Acciona thrived.
The problem for the Spanish government is that these generous incentives were too popular.
The result was a ‘tariff deficit’. This means that there has been gap between the cost of generating energy and the price being paid by consumers, with the Spanish government footing the bill for the difference. The tariff deficit is currently around €30bn, and growing at a rate of about €5bn a year.
The deficit wouldn’t look as bad if the economy was booming, but Spain’s economy is still getting on its feet after the five year stop-start recession caused by its 2008 property crash. The Spanish government is now under pressure to balance its books.
This is why it announced swingeing cuts to renewable energy subsidies last July, and revealed the exact details earlier this month. AEE, the country’s wind energy association, said the cuts meant that 37% of built wind farms would get no more subsidies and the rest would see subsidies halved.
This takes us back to Acciona’s 2013 annual results.
The company reported that changes to subsidies had directly hit it by €257m; and forced goodwill write-offs and impairment charges totalling €1.7bn on its renewable energy assets. Its energy division’s sales remained flat at €2.1bn year-on-year, but pre-tax profits shrank 95.9% to €6.7m.
It said it had partly mitigated the €257m hit by adding 105MW of new capacity with developments in the wind and hydropower sectors. Its total production in 2013 was 22,404GWh from an installed capacity of 8,480MW, of which 5,974MW is in Spain.
But the most interesting element is where Acciona goes from here. The company has said it is moving away from developing wind farms to own them, and towards building for others.
It is also looking to bring in partners to help shore up its finances. Earlier this week, it was revealed that Acciona has hired Lazard to find buyers for up to 49% of its wind farms outside Spain in a bid to raise capital; and the firm is also considering bringing in partners for its Spanish operations.
It will not be the only company to suffer at the hands of the subsidy changes, but it is one of the most high profile. And the tone of its results is unequivocal: the government is to blame.
This €2bn loss shows the Spanish fallout is only just beginning.
Northland in £149m Gemini share issue
Northland Power has launched a C$275m (£149m) share issue to help fund its 600MW Gemini wind farm project in the Dutch part of the North Sea.
The Canadian developer holds a 60% stake in Gemini, which is 85 miles from the Dutch coast and set to complete in 2017. Northland is working with Dutch firm Typhoon Offshore.
Northland said its total investment in the €2.8bn (£2.3bn) scheme is set to be around C$550m (£298m), which would be satisfied by this share issue. Last month, Typhoon Offshore reported it has secured the €2bn (£1.7bn) senior debt it needs for the project.
The developers aim to conclude financing by the end of June.
Report: “Wind farms don’t harm health"
There is “no reliable evidence” that wind farms damage human health, the Australian Government’s National Health and Medical Research Council has reported.
The NHMRC started public consultation yesterday on a draft version of its research paper “Evidence on Wind Farms and Human Health”, which looks in detail at evidence in 161 scientific papers on the topic. The consultation is due to close on 11 April.
The report provides support to developers and investors battling against objections to wind projects. For example, it quoted one study that showed people reported more sleep disruption if they did not benefit economically from a wind farm.
General Electric buys into Irish wind
General Electric’s energy investment arm has bought into the Irish wind market for the first time by acquiring two schemes totalling 51MW from Element Power.
GE Energy Financial Services has bought, for an undisclosed sum, the 34MW Barranadaffock project near Ballyduff in County Waterford and the 17MW Acres project near Ballyshannon in County Donegal.
Element Power is overseeing construction of the wind farms and will manage them after completion. Both schemes are due to complete during the first half of 2015.
EverPower agrees 240MW Big Sky deal
EverPower Wind Holdings has agreed to buy the 240MW Big Sky wind farm in US state Illinois in a two-part deal involving Edison Mission Energy and Suzlon.
Indian firm Suzlon loaned $228m to Big Sky’s owner Edison Mission in 2009 to finance a deal for the turbines, but is unable to recover this from Edison Mission, which filed for bankruptcy in 2012. Suzlon would take control of Big Sky in lieu of its debt.
Suzlon would then sell on Big Sky to EverPower for an undisclosed sum. The three firms submitted a filing to the Federal Energy Regulatory Commission earlier this month with details of the deal, and want FERC to approve it by 5 March.
Sinovel cuts factory funding by $430m
Chinese wind turbine manufacturer Sinovel is seeking to save $430m by cancelling plans to build four new factories and reducing investment at three others.
The company reported to the Shanghai Stock Exchange on Monday that it is cancelling planned factories in China’s Hebei, Yunnan, Shanxi and Jiangsu provinces; and is cutting funding for a Beijing R&D plant, and expansion plans at factories in cities Yancheng and Jiuquan.
Sinovel reported last month that it expects to make a loss of $495m in 2013.
The race to own and operate offshore transmission links starts again this week.
On Wednesday, energy regulator Ofgem is due to start the third round of tendering under its offshore transmission regime. The regulator is keen to talk to investors keen to become Offshore Transmission Owner’s (OFTO) to own and operate two new transmission links.
The links will connect the 220MW E.On Climate & Renewables offshore wind farm Humber Gateway and Dong Energy’s 205MW offshore project Westermost Rough into the grid. Both projects are located in the North Sea off the East Yorkshire coast.
Ofgem is making it easier for bidders by merging the Pre-Qualification and Qualification to Tender stages. It will talk more about the technicalities of this at its 26th February launch.
The regulator is also trying to attract more investors by embracing innovative funding mechanisms.
Traditionally, OFTOs have been backed by bank debt, but bonds are set to come more to the fore. Ofgem wants to increase competition as it hopes to reduce the cost to energy customers of connecting offshore wind farms into the energy grid.
It showed its keenness for bonds last November in the Greater Gabbard OFTO deal.
On 26th November, Ofgem granted the £317m OFTO licence to operate the transmission assets for Greater Gabbard Offshore Wind Farm to a consortium of Balfour Beatty, Equitix, and AMP Capital Investors. The 500MW Greater Gabbard Offshore project is in the North Sea off the Suffolk Coast, and it is owned by SSE and RWE npower.
The European Investment Bank reported that bonds with a value of £305m were issued to finance the link for the 140-turbine project. These bonds reach maturity in 2032.
The bank provided a £45.8m guarantee under its Project Bond Credit Enhancement product, which reduces the risk for bond investors and allows the OFTO to attract cheaper funding from institutional investors like insurance companies and pension funds. This is the first project in the UK where this EIB mechanism has been used, and only the second in Europe.
The upshot of all of this is that the aim of attracting a wider range of investors to these offshore transmission projects sounds like a good one. But something doesn’t sit right.
Ofgem wants to attract a wider range of investors to these projects, including institutions looking for stable income. It remains to be seen whether these mechanisms remain attractive as projects move further offshore and the level of risk increases.
Take a look at the activity that took place throughout round one and two, for a case in point.
Here, all sites were within 40km of the shore, and both Humber Gateway and Westermost Rough are too: 8km and 9km respectively.
However, round three projects will be pushed further out, into deeper water, which increases the development risk. There is also a concern that current AC technology won’t be appropriate for such schemes, and the move to new cabling technology is far from plain sailing.
Institutional investors, like pension funds and insurance companies, want steady long-term, low-risk income. Developers and regulators want investment stability and would rightly resist the temptation for a quick fix.
Innovative financial modelling can go some way to marrying the two but regulators should be careful not to risk losing the trust of prospective investors in the process.
Wind Watch
The race to own and operate offshore transmission links starts again this week.
On Wednesday, energy regulator Ofgem is due to start the third round of tendering under its offshore transmission regime. The regulator is keen to talk to investors keen to become Offshore Transmission Owner’s (OFTO) to own and operate two new transmission links.
The links will connect the 220MW E.On Climate & Renewables offshore wind farm Humber Gateway and Dong Energy’s 205MW offshore project Westermost Rough into the grid. Both projects are located in the North Sea off the East Yorkshire coast.
Ofgem is making it easier for bidders by merging the Pre-Qualification and Qualification to Tender stages. It will talk more about the technicalities of this at its 26th February launch.
The regulator is also trying to attract more investors by embracing innovative funding mechanisms.
Traditionally, OFTOs have been backed by bank debt, but bonds are set to come more to the fore. Ofgem wants to increase competition as it hopes to reduce the cost to energy customers of connecting offshore wind farms into the energy grid.
It showed its keenness for bonds last November in the Greater Gabbard OFTO deal.
On 26th November, Ofgem granted the £317m OFTO licence to operate the transmission assets for Greater Gabbard Offshore Wind Farm to a consortium of Balfour Beatty, Equitix, and AMP Capital Investors. The 500MW Greater Gabbard Offshore project is in the North Sea off the Suffolk Coast, and it is owned by SSE and RWE npower.
The European Investment Bank reported that bonds with a value of £305m were issued to finance the link for the 140-turbine project. These bonds reach maturity in 2032.
The bank provided a £45.8m guarantee under its Project Bond Credit Enhancement product, which reduces the risk for bond investors and allows the OFTO to attract cheaper funding from institutional investors like insurance companies and pension funds. This is the first project in the UK where this EIB mechanism has been used, and only the second in Europe.
The upshot of all of this is that the aim of attracting a wider range of investors to these offshore transmission projects sounds like a good one. But something doesn’t sit right.
Ofgem wants to attract a wider range of investors to these projects, including institutions looking for stable income. It remains to be seen whether these mechanisms remain attractive as projects move further offshore and the level of risk increases.
Take a look at the activity that took place throughout round one and two, for a case in point.
Here, all sites were within 40km of the shore, and both Humber Gateway and Westermost Rough are too: 8km and 9km respectively.
However, round three projects will be pushed further out, into deeper water, which increases the development risk. There is also a concern that current AC technology won’t be appropriate for such schemes, and the move to new cabling technology is far from plain sailing.
Institutional investors, like pension funds and insurance companies, want steady long-term, low-risk income. Developers and regulators want investment stability and would rightly resist the temptation for a quick fix.
Innovative financial modelling can go some way to marrying the two but regulators should be careful not to risk losing the trust of prospective investors in the process.
Wind Watch
“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”
So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.
The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.
Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.
If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.
This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.
It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.
There are then two questions that we have to ask.
Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?
After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.
So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.
However, it should add some impetus into the way that developers seek to secure capital.
It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.
“We are all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for ‘lose’.”
So said Joseph Dear, Chief Investment Officer at private equity fund, Calpers, in an article in the fund management section of Monday’s Financial Times. It was a wry, if not damning, indictment of how the private equity community regards investing in clean energy.
The article was sparked by a survey report by fellow PE firm, Altius Investments, in which it warned that in 2014 “the bloom [would] finally fall from the rose of renewable energy”.
Funds such as Terra Firma (Infinis), Greencoat and the Renewables Infrastructure Group may have had success in fundraising in this sector, but it appears that some of their colleagues in the fund community believe that this may soon come to an end.
If we want to strike a more optimistic note then we can argue that this would not happen because the renewable energy markets of a determined exit by the private equity community. Rather, there may be more competition from other energy sources and asset classes that draw more capital.
This is, of course, exacerbated by policy decisions in recent years that have seen support subsidies in Europe retroactively reduced or, in the UK, the building of political support for gas fracking.
It’s perhaps why renewable energy assets, and wind energy in particular, have seen more interest from the pension fund community. These are investors who can afford to take more risk on policy as they look to the longer term.
There are then two questions that we have to ask.
Will alternative investors be able to pick up the slack if interest slows from private equity funds? And will firms in the renewable energy sector be able to innovate in the way they seek to attract investors; or in the way they provide assets for investment?
After all, it’s not that renewable energy assets can’t generate favourable returns at the 6% or 7% mark. But they do have to compete with more mature assets that have longer track records.
So is this something that should vex developers and utilities who have half a mind on offloading some of their assets? In our view, not yet. Their efforts should be focused on persuading the policy makers to increase political support for renewables.
However, it should add some impetus into the way that developers seek to secure capital.
It’s too early to tell whether 2014 is indeed a slow year for wind energy investments. But, while the cost of energy remains a tricky issue for politicians and markets to navigate, it won’t be easy to keep wind energy on the minds of investors.
Vestas 8MW unit in 258MW Dong deal
Dong Energy has chosen the Vestas V164-8.0MW as its preferred turbine for the 258MW extension of the Burbo Bank Offshore Wind Farm in Liverpool Bay.
The deal relies on the project in the Irish Sea gaining support from the UK government under the Contract for Difference subsidies regime. The final decision on this is due in April.
It also depends on Dong and Vestas signing a supply agreement, which is due later this year.
Australia reviews 2020 renewables goal
The Australian government is reviewing the target of generating 20% of the country’s electricity from renewable sources by 2020.
Australia adopted the 20% target in 2001, but prime minister Tony Abbott is reviewing it because of its impact on electricity prices. Weakening this target would shift focus away from wind projects.
A ministerial review panel is due to report to government by the middle of this year.
Danish fund invests €384m in North Sea
PensionDanmark is to invest €384m in a 900MW offshore grid connection for wind farms in the German part of the North Sea.
Copenhagen Infrastructure Partners, which is funded by PensionDanmark, has agreed a deal with TenneT, which is developing the DoIWin3 connection. The deal gives CIP a 67% financial stake in the project and a 49% voting interest.
The estimated construction cost of the project is €1.9bn, and it is due to complete in 2017. TenneT awarded the construction contract to French conglomerate Alstom last February.
Nordex wins 66MW Inverness project
Eneco has ordered 20 turbines from German manufacturer Nordex for its 66MW Moy Wind Farm project in Scotland.
Dutch energy company Eneco has ordered the N100/3300 3.3MW turbines for the project in Moy, near Inverness. The Scottish government gave the Moy project planning permission last month. It is due to complete by autumn 2016.
Eneco has also signed a 15-year service contract with Nordex.
Hyundai eyes Europe for 5.5MW turbine
Hyundai Heavy Industries has installed a prototype 5.5MW turbine in Kimnyeong Wind Farm on Jeju Island in South Korea and will start testing next month.
The South Korean company, which is the world’s largest shipbuilder, is testing the turbine with a view to gaining certification from UL/DEWI-OCC by the end of 2014.
If successful, the turbine is set to be used in a 2.5GW wind farm in Jeolla province; and the company would also look to sell it into other countries in Asia and in Europe.