Business cards? Check. Comfortable shoes? Check. Fitness watch to keep track of exactly how many miles you cover? Definitely. Then like many in the European wind industry, you’re ready to pound the floors of WindEnergy Hamburg and WindEurope conference in Hamburg next week. Good luck!
The events were last held concurrently in 2016, which was a good time to immerse yourself among Germany’s wind companies. The country was in a wind construction boom as a result of political stability and the wind-down of the country’s centrally-set feed-in tariff regime. Yes, life was pretty good.
It’s no secret that life in the German onshore wind industry is tougher now. Firms are adapting to slimmer margins and less government appetite for new wind farms after the move to competitive auctions at the start of 2017. Companies are also looking for more clarity on the government’s plans for grid expansion, and new onshore support is set to be limited to 2.8GW a year in 2018 and 2019, and 2.9GW in 2020.
Then there’s the political uncertainty around Chancellor Merkel, which has reduced her ability to push through new programmes for wind and solar development, even as the country looks set to miss its 2020 decarbonisation target. This is important as it has tarnished Germany’s reputation as a green leader.
Yes, the country may have a lot of companies doing great things on renewables, not least in wind. However, while the country’s decision to move away from nuclear after the 2011 Fukushima disaster in Japan has led to growth in wind and solar, it has led to expansion of coal in Germany too. The country has done well to position itself as a green leader, but this growth of coal has tarnished both its reputation and Merkel’s.
Finally, we have seen the prices being paid to developers creep up in onshore wind auctions in 2018. Average winning prices in rose from €47.30/MWh in February to €57.30/MWh in May and €61.60/MWh in August. This is good for investors in one respect as it means less pressure on their margins, but it is also a reflection of the lengthy permitting process for onshore wind and a lack of clarity from Germany’s political leaders on the future for wind up until 2030. Fewer firms are bidding.
This reduced level of activity clearly makes tougher across the value chain, from manufacturers downwards, and for the people who work for them. That will depress the mood in Hamburg. Yes, 2.8GW a year is good compared to most markets, but it is down from annual installations of over 5GW between 2013 and 2017.
And we shouldn’t underestimate the impact that lower activity in Germany is set to have on the rest of Europe. Of the 12.5GW of onshore wind capacity completed in Europe last year, 42% of that was in Germany (5.3GW). Wind companies in Europe can ill afford to lose that capacity, particularly when the UK (2.6GW) and France (1.7GW) are seeing their own markets squeezed too due to political problems. The only region that looks set to fill that gap for European onshore firms is Scandinavia.
Germany has long been one of Europe’s most influential onshore wind markets, as evidenced by the fact that two of its biggest conferences are being held there next week. But now its wind market is catching a cold, will that lead to a pandemic?
Perhaps. Yes, that might seem like journalistic hyperbole, but companies are having to make investment decisions now in a climate of severe uncertainty. Ahead of next week’s events, WindEurope last week published its ‘Wind Energy Outlook Report’ in which it forecast ‘solid growth’ for the next five years, but with the prospect of major uncertainty partly caused by a lack of ambition from national governments after that. Current growth is supported by investment decisions that have already been made.
As WindEurope CEO Giles Dickson put it: “Most governments still haven’t clarified their plans for new wind farms up to 2030. And partly because of this it’s getting harder to secure permits for new wind farms.” Lots to ponder as you’re racking up the steps in the endless conference halls.
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New York, New York. So good we’ve held events there twice.
Last night, we hosted the first of our US Quarterly Drinks evenings in the ‘Big Apple’, in partnership with Totaro & Associates at the offices of Reed Smith. This follows our debut US conference in May. Thanks to everyone who came last night including our guest speaker, BlackRock’s Martin Torres.
But of course, we couldn’t help but take advantage of the hospitality of New Yorkers and ask some tough questions about the market, not least on the future of privately-owned wind developers in North America. We’ve seen plenty of the biggest names in the market acquired in the last year-and-a-half. Does this mean the era of the private developer in US wind is coming to an end?
It’s a provocative question but one we feel justified in asking. We heard back in May from Bank of America Merrill Lynch’s Ray Wood, in our North American Power List, that these firms’ margins are being squeezed as development gets costlier; and as the end of the production tax credit means uncertainty about the prospects for firms after 2020. Selling out now can look like a pragmatic and attractive option.
We are also aware that more regulated utilities are building and owning more wind farms, instead of signing power purchase agreements with other project owners. Developers would be forgiven for asking what the future holds if they don’t have a major utility or institution providing the financial firepower.
It is in this context that developers are signing up to takeovers by utilities – such as European giants Engie, E.On and Ørsted – and investors such as Brookfield. These giants are keen to add developers’ projects to their pipeline, and management teams to unearth new opportunities; and developers are often seeing the sense in teaming up with a large and well-capitalised partner.
Is there still a role for privately-owned developers in North America? We think so, as these firms often find opportunities and act quicker than larger and less nimble rivals.
The first reason we see a continuing role for these types of firms are the characters of the people who found and run them: entrepreneurs that spot new ways of developing projects and act boldly before rivals. Maybe they have in-depth knowledge of a local area or a technology that isn’t commercially viable. Perhaps they are more willing to gamble on a new strategy. Whatever it is, they drive things forward.
Our second reason for optimism is that, while their development margins are being squeezed now, we don’t know what pressure there will be on developers in three years’ time, for example. Perhaps the conditions will be right for an explosion in the number of start-ups, if the downward pressure on margins eases or the storage sector really takes off. It would be crazy to write off the prospects of these firms.
And the third reason? The romance. (The fact I find this romantic should tell you a great deal about the state of my lovelife, but there we go!). Big utilities are good, but there’s nothing like hearing of a new entrant into the market, getting the business plan directly from the CEO in the early days, and then watching to see if they deliver. These dynamic entrants make the market interesting, and the sector would be poorer without them. So no, we don’t think it’s the end of private developers.
The big names today won’t necessarily be the same in five years as they are now – consolidation will see to that – but we expect to see a new generation of bold thinkers spring up in the place of those that have been acquired. That’s life.
If you have a view on this, then we’d love to see you at our next US Quarterly Drinks evening in November and our Financing Wind North America conference next May.
Mainstream mulls sale in 2020 rather than IPO
The owners of emerging markets developer Mainstream Renewable Power are mulling a sale of the firm in 2020 rather than listing on the stock market.
The Irish Times has reported that Mainstream chief executive Andy Kinsella said the owners were more likely to seek a trade buyer, because the range of markets that the company is involved with may make it difficult for stock market investors to understand its model. He added such a sale would be in 2020 at the earliest. Mainstream is also looking to sell joint ventures in Chile and Africa in 2019 and 2020 respectively; and seeking an equity partner in its 1.3GW Chilean platform.
Google signs 190MW PPA trio in Finland
Google has bolstered its renewables capacity in Europe by signing three power purchase agreements at three wind projects totalling 190MW in Finland.
The US tech giant said yesterday that it has agreed deals with CPC, Neoen and WPD at the 50.4MW Lakiakangas, 81MW Hedet and 58.8MW Kuuronkallio wind projects respectively. Neoen is developing Hedet with Prokon in an 80:20 joint venture. Google has signed 14 wind and solar PPAs in Europe totalling 900MW.
Greencoat wins race for €136m Irish assets
Greencoat Renewables has won the race to buy stakes in four wind farms in Ireland from the Irish state-owned forestry company Coillte for €136m.
Coillte confirmed yesterday that it has agreed to sell its stakes in four wind farms for an equity price of €136m, reflecting an enterprise value of €281m. The assets are 50% stakes in joint ventures at Castlepook, Cloosh Valley and Raheenleagh wind farms; and its 25% stake in Sliabh Bawn. In total, the assets represent net operating capacity of 105.1MW, and Coillte will retain ownership of the land.
NBT picks Nordex for 250MW Ukraine scheme
Norwegian wind developer NBT has picked German manufacturer Nordex for its planned €370m 250MW wind farm in Ukraine.
The companies confirmed the deal at a ceremony in Ukrainian capital Kiev last week. Nordex is set to supply 64 of its machines for the scheme, which NBT is due to complete near Syvash Lake in southern Ukraine by the end of 2019. The Norwegian firm has also linked up with construction partner PowerChina. NBT is looking to build an extra 860MW of wind farms in Ukraine in the next three years.
Health giant signs 181MW wind and solar deals
US healthcare giant Kaiser Permanente has agreed a 50MW wind deal as part of a 181MW wind and solar package to power 27 of its 39 hospitals.
The company said on Monday that it has signed the power purchase agreements with NextEra for electricity from 131MW of solar farms and 50MW of wind farms. The deal also supports construction of 110MW of battery storage capacity, and all of the developments are due to come online in 2020 and 2021.
California commits to 100% renewables by 2045
California governor Jerry Brown has signed legislation that commits the state to source all of its energy from renewables by 2045.
Brown has ratified legislation that was passed by California state legislature last month and aims to power all businesses and homes in the state with renewable energy instead of fossil fuels. Forty-four percent of California's electricity need comes from renewables at present, including wind, solar and hydro.
In the latest of our series of member interviews, we caught up with Michael Blazer, Senior Vice-President and Chief Legal Officer at Invenergy. He oversees all corporate legal affairs, and is responsible for developing and implementing the company's legal policy in North America and Europe.
Michael Blazer is Senior Vice-President and Chief Legal Officer at Invenergy. He oversees all corporate legal affairs, and is responsible for developing and implementing the company's legal policy in North America and Europe. He was recently featured in our Legal Power List.
In the simplest terms, what does your company do?
Invenergy develops, owns and operates renewable and clean energy projects; including wind, solar, battery storage and a limited number of thermal developments.
Of the cases you’ve worked on personally, which has been your favourite and why?
There’s so many! I don’t have a definitive favourite, but essentially the answer is everything I work on: the development of renewable energy projects overall, including wind, solar and battery storage, with an eye toward the future and the ever-increasing closure of coal plants. So, from the environmental perspective, it’s all a favourite.
Around the world, where do you see the best opportunities right now?
The US obviously, from a renewables perspective, still represents a strong opportunity for us. We’re also looking quite a bit at Mexico, and Central and South America. We’re expanding our scope in East Asia, particularly Japan. Right now, we’re being far more cautious about Europe, because of the situation in Poland, which seems to be an unfortunate trend. As you may know, Spain had a similar situation to Poland, regarding solar energy – a number of treaty arbitrations have arisen out of that. So, we’re looking at where the political winds are blowing before we commit any further resources.
What do you think is the biggest challenge facing wind?
Depends on where. In Europe, clearly, it’s the move to the right politically. It’s not just in Poland, it’s in other places as well. And in Poland, that’s combined with the engrained coal industry and the power it has throughout the country. That makes things quite difficult. Additionally, in the Western hemisphere, there’s a bit of a race to the bottom in terms of cost. The cost of renewables has dropped so dramatically and is continuing to drop. It’s simply a question of being economically viable in the market – though this needn’t be viewed as a challenge. The Production Tax Credit is scheduled to end in 2020 – we view this as an opportunity rather than a challenge, so our plans extend well beyond 2020. It will make it more difficult for some developers to finance projects, but we don’t believe it will for us.
What’s your plan for dealing with the phase-out of the credit?
To continue developing renewable energy projects – the only difference will be the financial structure.
What are the most important lessons you’ve learned in your career?
Always tell the truth; always respect everyone’s opinions; and never give up.
Do you have a mentor?
Yes I do – his name is Harvey Barnett. He gave me my first job out of law school in 1982. My background, before I got into energy, was in litigation and he was a partner at a boutique litigation firm in Chicago. He taught me how to be a litigator and how to practice law. We’ve known each other now for 36 years – the whole time I’ve been practicing. He taught me how to practice law with a sense of honour and decency. One of the highlights of my career was when I went in-house at Invenergy, a little over 2 years ago, I was able to hire Harvey and his firm to work for us – it came full circle.
Car manufacturers across Europe are waking up to the benefits of wind PPAs - which is great news at a time of dwindling government subsidy. Ilaria Valtimora investigates
Car manufacturers across Europe are waking up to the benefits of wind PPAs - which is great news at a time of dwindling government subsidy. Ilaria Valtimora investigates
The types of companies looking to buy electricity from wind farms are changing – and thank goodness for that.
We’ve written so often about how pioneers of corporate power purchase agreements including Amazon, Facebook and Google are buying wind power that, to be honest, it's become a little boring. But thankfully, as the price of wind energy has become more competitive, more firms in a wider range of industries have begun to sign PPAs.
This broadening has been most visible in the US, where we have seen PPAs agreed in sectors including food, beverages, and telecommunications. But European firms have been getting in on the PPA action too. In our Europe’s PPA Revolution report we analysed why Scandinavia has led the growth of wind PPAs across the continent.
The next step for PPAs
However, we think a recent deal in Poland could pave the way for a new wave of corporate PPAs in central and eastern Europe. German carmaker giant Mercedes-Benz agreed in July to buy the entire output produced by the 45MW Taczalin wind farm in Poland, operated by local developer VSB Energie Odnawialne Polska, to power its manufacturing facility in the south-west of the country.
We have a handful of examples of companies in the automotive sector signing wind PPAs, but not many.
The best-known car manufacturer in this regard is General Motors. GM has committed to power its global operations entirely from renewables by 2050 and this has resulted in the car giant being one of the most active buyers of renewable energy in the US in the last decade. This includes over 200MW of wind PPAs signed in the last 12 months alone.
There are other examples too. This month, Argentinian developer YPF Luz signed a ten-year PPA with Toyota. While small in size at only 16MW, the deal is still a positive move and part of a growing trend. German giant Volkswagen signed a deal in 2013 to buy 130MW at the 180MW La Bufa wind farm in Mexico. And, in renewables more widely, BMW signed an agreement with BayWa in May to buy 252MWh of solar power in Mexico to power one of its manufacturing facilities in the country.
This is only a handful of examples, but they show that renewable power can make sense for car makers. And this is particularly relevant in central and eastern Europe, where the heavy presence of car manufacturing facilities could mark the start of a wider and much-needed wave of PPA deals.
In fact, as government subsidies for wind farms dwindle and merchant risk rises, developers and investors in Europe are seeing corporate PPAs as an increasingly attractive way to take projects to financial close. Even so, the support of European governments, and recently-agreed changes to the Renewable Energy Directive, will be key to removing barriers for PPAs.
So, why does wind power make sense for car makers?
First, making cars and car parts requires energy-intensive processes. This makes them an easy target for developers that want to sell electricity from their wind farms.
Also, car manufacturers have numerous decentralised operations and manufacturing plants, and are always on the look-out for convenient energy supply sources. These companies could potentially get involved in the construction of new projects to power their facilities, particularly for plants in remote areas with little or no grid connection. Virtual PPAs are another solution in this scenario.
Finally, there is an advantage in terms of reputation. Producing and running cars is a carbon-intensive industry, and the increase in electric vehicle sales shows that car buyers are getting greener. The VW ‘dieselgate’ scandal of 2015 and the growth of electric vehicles, for example, have made car buyers more aware of sustainability and environmental issues. Green PPAs could offer some redemption for carmakers.
There is still a long way to go, but the potential for renewables PPAs linked to the automotive industry in Europe is huge.
According to the European Automobile Manufacturers Association there are currently around 300 automobile assembly and engine production plants across Europe. This includes well-established wind markets such as Germany, France, and Spain, as well as emerging markets for renewables including Croatia and Romania.
If this was a race, then Mercedes-Benz may be in first position on the grid, but we’d like to see more car manufacturers competing too.
French failures curtail latest onshore auction
The French government only backed five onshore projects of 118MW in its latest wind auction, which is less than a quarter of the 500MW available capacity.
The absence of an environmental authority since December reduced the amount of winning schemes, because projects had to be fully permitted to be eligible for support. Only nine projects totalling 216MW were declared eligible for this round. According to French wind association FEE, more than 170 wind projects totalling 3GW are still awaiting environmental approval. The winning bidders in this latest auction included Boralex, Engie, Elicio and RES.
Carlyle Group enters wind market with 612MW deal
US private equity firm Carlyle Group is poised to enter the wind market by buying a 612MW portfolio of wind farms in the state of New York.
Carlyle is set to buy six operational wind farms totalling 612MW from developer Noble Environmental Power. The portfolio is made up of three wind farms in Clinton County totalling 279MW, two in Wyoming County totalling 227MW, and one in Franklin County of 106MW. The deal is due to close by the end of 2018.
Mainstream seeks investors for 1.3GW Chilean portfolio
Mainstream Renewable Power is seeking investors for a 1.3GW wind portfolio in Chile, which is estimated to be worth up to $1.65bn.
Mainstream is looking to sell a stake in a portfolio of seven wind farms with total capacity of 1.3GW, which are backed by power purchase agreements with the Chilean government. The wind farms are reportedly set to be worth $1.65bn on completion. Mainstream owns a total of 2.3GW renewables projects in Chile, of which 1.8GW is made up of wind farms and 433MW of solar farms.
Engie and J-Power hook up for offshore projects
French utility Engie and Japanese utility J-Power have signed an agreement to co-develop offshore wind projects in Asia and Europe.
The two utilities have signed a memorandum of understanding to collaborate on the development of offshore wind farms, including floating projects, in Europe, Japan and elsewhere. The partners are also set to carry out research to boost the competitiveness of floating schemes and make them commercially viable.
Former GE executive Rannou becomes Senvion CEO
German turbine maker Senvion has appointed former GE Renewable Energy executive Yves Rannou as its chief executive.
Rannou has over 20 years' experience in the renewables industry at General Electric and Alstom, including his most recent role as CEO of GE Renewable Energy’s hydro division since 2015. Rannou will take over from acting CEO and CFO Manav Sharma. Sharma replaced previous CEO Juergen Geissinger, who stepped down in May after two-and-a-half years in the role, on an interim basis.
Electric planes could become a reality soon and open up new opportunities for wind companies.
Yes, they may be at a very early stage of development, but plane makers, engine manufacturers and renewable energy firms have been exploring ways to make electric planes commercially viable.
The interest from industrial players in electric planes is mainly because global aviation now accounts for 2.5% of carbon emissions and this number is set to increase. The International Air Transport Association forecasts that the number of passengers is on track to double in the next 20 years.
This means that industry giants including Boeing, Airbus and Rolls Royce have been feeling the pressure to find new ways to reduce their emissions. For example, Rolls Royce and Siemens are currently developing hybrid-electric aircraft demonstrator Airbus E-Fan X, and they hope to create a model capable of flying in 2020.
While there is still a long way to go to make commercial electric aircrafts viable, the technology has already attracted the attention of renewable energy firms.
One of the most recent examples comes from Finland, where utility Fortum has entered a partnership with the Helsinki Electric Airplane Association to test the Pipistrel Alpha, the first serial produced electric airplane purchased in the country. We spoke to Fortum’s project manager Tapio Poutiainen to find out more.
He said that, for Fortum, e-planes represent the natural evolution of its investment in charging infrastructure for electric vehicles in Scandinavia, including its Charge&Drive programme, with over 1,800 smart chargers across Norway, Sweden and Finland: “We have been a pioneer in the development and expansion of the charging infrastructure for electric vehicles in the Nordic countries. Now we want to apply the experience we’ve gained about the EV charging infrastructure in the development of electric aviation," he said.
Renewables including wind are set to play a key role in the development of technology for e-planes: “Lowering energy consumption is an important motivation for the electrification of aviation”, Poutiainen has argued. “All of Fortum's charging locations for electric vehicles are currently powered by wind energy. I believe we can do the same for electric planes in the future."
The opportunity for renewables developers here is that electric planes would create new demand for wind and solar capacity. In countries like Germany, which is currently experiencing a restriction of activity in its onshore market, electric planes could trigger the need for the construction of new capacity underpinned by corporate power purchase agreements. Meanwhile, countries like Italy, Spain, or China could use the surplus of solar and wind energy they produce, and which currently goes wasted, to power e-planes.
The market is still at its infancy, though.
For example, Pipistrel Alpha is set to be used mainly for flight training. This is because its batteries' capacity can cover only short-hauls flights: “In flight training the short range does not matter as training consists mostly of taking off and landing”, Poutiainen explained.
However, in the near future, there is scope to build small hubs close to cities, and use electric planes to develop an air taxi network that would serve intercity traffic, in countries including Finland: “As electric planes are emission-free and low-noise, this is an attractive option for cities”, Poutiainen argued. Norway committed last month to use electric planes for all short-haul flights within the country by 2040, for example.
There are still many challenges to overcome before this becomes a reality, particularly in terms of design and battery requirements. In this sense, renewables can help. As the wind and solar industries keep expanding, the need increases for battery technology that makes renewable energy stable and reliable. Research on batteries triggered by the use of renewables would also benefit the development of electric aircrafts.
The right balance between weight, reliability, and cost has proven challenging for e-planes. However, a close collaboration between renewables and electric aviation could be highly valuable if this market is to take off.
Let’s face it, global warming is here. The extreme temperatures experienced in the northern hemisphere over the last three months are likely to stay with us until at least 2022, and probably even a lot longer than that.
A study published in the journal Nature Communications by scientists Florian Sevellec from France’s National Centre for Scientific Research, and Sybren Drijfhout from UK’s University of Southampton has shown that there is a high possibility that we will be at the peak of an anomalously-warm phase for the next four years. This does not mean that Europe will definitely have more heatwaves, the US more forest fires, and the Arctic more ice melt. However, it does mean that the likelihood of these events will increase, the scientists have warned.
This is bad news for wind investors, as extreme weather conditions have an impact on energy production and, as a consequence, on wind farms’ profitability.
Weather data analysts at Vaisala have shown in a recent analysis that the heatwave experienced in western Europe in July has harmed wind farm performance in markets including the UK, France, Spain, Germany and much of Scandinavia. In these markets, wind operators saw available resource in July dip by as much as 20% from long-term averages. Imperial College London has shown that wind energy output across the UK has been down 40% year-on-year this summer.
This has already had an impact on wind farm owners. British utility SSE for example, said in July that, in the three months ending on 30 June, the output of its offshore and onshore wind turbines was 15% lower than planned, and this contributed to a quarterly profit £80m lower than expected.
This is a challenging scenario for wind investors. If wind speeds are expected to be lower than seasonal averages for at least the next four years, as a result of extreme temperatures, they will have to deal with low returns for their wind assets.
A study published by the journal Nature Geoscience in December 2017 showed how damaging this phenomenon could be. Changing weather patterns are set to cause an up-to-10% drop in wind across much of the northern hemisphere by 2050, with an up-to-18% drop by the end of the century. However, a small drop in available wind could translate into a bigger drop of wind energy capacity: a 10% drop in wind power could result in a nearly 30% drop in wind farm production. The study argues that this phenomenon would be less significant in east Australia, west Africa and Latin America.
Is there a solution? Well, this scenario calls for investors to adapt and, potentially, to open up to new opportunities.
Data analysed by Vaisala has shown a negative correlation between deviations in wind speeds and deviations in solar irradiance in July. This means that when wind was below average, sunshine was above average.
A very good example of this was in Germany. Wind energy production for July was 20% lower year-on-year. However, this shortfall was more than compensated by a 26% increase in its solar energy production in the same period.
However, Vaisala also points out that not all markets have seen this balancing effect, Portugal for example, experienced both low wind and low irradiance in July.
This does not mean that we shouldn’t invest in wind power. However, such changes must be taken into account in planning investing portfolio decisions.
"Often wind and solar technologies are played against each other, but the reality is that a diverse portfolio, obtained by building out both, to a large scale, will be the solution to long-term variability of this nature”, said Pascal Storck, director of renewable energy at Vaisala.
The past summer has highlighted the need for investing portfolios to become “climate resilient”. A diversified portfolio, both geographically and by technology, would be key for stable revenue flows in a scenario of extreme climate changes.
Triton Knoll secures $1.75bn financial close and PPA deal
A group led by Innogy has reached a £1.75bn financial close on the 860MW Triton Knoll scheme in UK waters and secured a power purchase agreement.
A consortium of 15 banks including Sumitomo, MUFG and KfW IPEX-Bank has provided £1.75bn of debt facilities to build Triton Knoll. In addition, Danish giant Ørsted has agreed to acquire the total output produced by Triton Knoll for 15 years. MHI Vestas is set to provide 90 of its 9.5MW turbines for the project.
Triton Knoll is owned by Innogy (59%), J-Power (25%), and Kansai (16%).
GIP closes $1.35bn deal for three NRG arms
Global Infrastructure Partners has closed a $1.35bn deal for NRG Energy's development and O&M arms, and a 46% stake in NRG Yield.
GIP agreed in February to buy the three parts of NRG's business for $1.35bn and the transaction has now been completed. NRG Yield, which owns 32 wind farms totalling 3GW, is set to change its name to Clearway Energy. The deal also includes NRG's O&M division, which manages 2.4GW of renewables projects in 17 stakes, and its development arm, with a 6.4GW project pipeline.
EDP Renováveis secures support for 429MW in Brazil
EDP Renováveis has secured support for two wind farms with a combined capacity of 429MW in Brazil’s latest 2.1GW renewable energy auction.
EDP Renováveis has secured 20-year power purchase agreements with the Brazilian government for its 253MW Monte Verde wind farm, at a price of BRL87/MWh ($21/MWh), and for its 176MW Jerusalem project at BRL94/MWh ($22.6/MWh). In total, the Brazilian government has agreed to support 48 wind farms totalling 1.2GW at an average price of BRL90.45/MWh ($21.76/MWh).
Statkraft signs first PPA for the German wind market
Norwegian utility Statkraft has agreed to buy the output produced by six wind farms in Germany totalling 46MW, in the first wind PPA deal for the country.
The six wind farms are located in Lower Saxony and are owned by citizen-groups. The agreements are set to start from 2021, when the subsidy support from the German government is due to expire. Statkraft will buy the output produced by the schemes for three to five years, to power industrial companies.
EDPR secures 50MW PPA for 200MW US project
EDP Renewables has secured a 50MW power purchase agreement for its 200MW Broadlands wind farm in Illinois.
An unnamed energy company has agreed to purchase 50MW of output from the wind farm, which is set to be completed in 2019. The entire output of the project is now backed by PPAs, following a 100MW PPA with the Wabash Valley Power Association and a 50MW PPA with an unnamed commercial & industrial entity, both signed in May.
We spoke to Brandon Sack, who leads renewable development at Westar Energy, about his favourite projects and the future of US wind. Interested in taking part in a member Q&A? Email us at editorial@awordaboutwind.com
We spoke to Brandon Sack, who leads renewable development at Westar Energy, about his favourite projects and the future of US wind. Interested in taking part in a member Q&A? Email us at editorial@awordaboutwind.com
In the simplest terms, what does your company do?
We’re an investor owned utility. We serve Kansas homes, business and communities in a regulated retail market and we provide transmission and generation services to wholesale customers across Kansas and the Midwest.
Tell us about one of your favourite projects.
We’ve just launched a renewable tariff, which was really exciting to work on. A team of us started several years ago, trying to find new ways to get renewables to customers. PPAs were just starting, so we worked with our regulators to develop a tariff. The first one used an average of all the wind farms Westar had already contracted for and the price was a little higher than our other tariffs at the time. The regulatory body in Kansas approved the tariff but zero people signed up to it, so we went back to the drawing board. We came up with a new tariff that was approved last month – it’s called Renewables Direct, and it allows our customers to claim a portion of a wind farm. It fixes the price for the term of the entire agreement. Virtual PPAs are not risk averse, but this is not a VPPA; there’s no SPP market risk for our customers in signing up for the tariff and all of our customers benefit from the program.
In which markets do you see the best opportunities right now?
There’s opportunities in every market right now – as tax credits in the US start to expire I think people are really reaching out, getting deals done before the deadline. Once the deadline’s over, that will really open it up and people will start looking at new ways and opportunities outside wind and solar. Even beyond battery storage, there’ll be a new wave of innovation soon.
So will the end of the tax credit change how people are investing?
It depends on how quickly manufacturers adjust to the pricing difference. Right now, a lot of renewable investments are attainable for different investors but once the credits go away and different technologies can compete, a different technology may overtake it.
What do you think the biggest challenge is for the industry?
Getting all the projects in the pipeline built and being able to realise positive returns for all parties involved in the transaction.
Which trends do you think will affect the industry most in the near future?
Changes in transmission. I think congestion and getting wind to the right areas will be a transit a lot of people are going to have to figure out. More expensive projects may get ahead of others just because they’re on the right part of the grid.
What have been the most important lessons in your career?
Patience. It’s key, and it takes a long time to put some of these deals together, working together with all the different parties internally and externally. It takes a lot of patience, time and work – that’s been the biggest lesson.
Tell us about Westar Energy’s new merger.
We just merged with Kansas City Power and Light, in the Kansas City area. Our new company name is Evergy. It was an opportunity for both companies to realize economies of scale to save our customers money, and for companies to grow together in the future – now we’re an S&P 500 company, which will help us grow in many ways as well.
Interested in talking in more depth about the US wind market? Join us at our next New York networking drinks:
A market is only as strong as its weakest link, says Dr. Carolyn Heeps, Head of Renewables, North America, at Lloyd’s Register. That's why US offshore will need significant development in infrastructure, engineering and investment before it can compete with Europe.
A market is only as strong as its weakest link, says Dr. Carolyn Heeps, Head of Renewables, North America, at Lloyd’s Register. Want to talk in more depth about the North American market? Join us at one of our New York networking events.
A rapidly developing market
Over the past few years, momentum has been gathering for offshore wind in the USA.
Despite some well-publicised political ambivalence several years ago, the sector is now seeing rapid advances and government support; the east coast now has a project pipeline of over 8GW, with the earliest projects likely to be operational by the early 2020s, whilst in the west – and with a longer-term view – there is increasing interest in utility scale floating offshore wind technology.
However, the outlook for the sector can only be as strong as the skills and supply chain that are available and, currently, the lack of a US domestic supply chain is very much a challenge, and a tremendous opportunity.
What can we learn from Europe?
Often, the common assumption within a nascent industry is that experienced professionals and technicians from mature markets (e.g., in Europe) will support the evolving US market – and indeed, that will go a long way towards transplanting the skills and expertise that are needed. Furthermore, there is great potential for technology and skills to cross over from well-established domestic industries, such as oil and gas – where asset management and performance optimisation, monitoring and subsea inspection disciplines address many shared challenges and solutions.
But imported knowledge from more mature markets will only go so far. Different business cultures and the different layers of legislation, administration and permitting at federal, state and local level are unfamiliar territory to most professionals who have cut their teeth in Europe, where systems may be no less complex, but are set within different legislative and regulatory regimes.
For example, in European markets there is no equivalent to the Jones Act, which requires any vessel transporting cargo between US ports to be carried on US-built and flagged vessels, and therefore limited precedent for the logistical and supply chain issues it precipitates. In the absence of a Jones Act installation vessel in the US, early projects will currently have to rely on foreign flagged vessels combined with Jones Act compliant feeder barges to transport components to the construction site offshore.
In Europe significant cost reductions have been achieved through more efficient installation methods. Consequently, the US market needs a pipeline of large scale projects to give confidence for the investment required to build Jones Act installation vessels to achieve similar cost efficiencies.
Just as site availability and political appetite are vital to developers and investors, greater visibility of a pipeline of industrial scale projects is critical for potential supply chain partners to invest in the necessary manufacturing sites, processes and workforce training - and that relates to all tiers of the supply chain, from the OEMs to the smallest suppliers at a more local level.
Key areas for investment
Investment in engineering, science, and research will accelerate innovation and expand the pool of local talent whilst stimulating economies, particularly in those coastal communities that are, or will become, the hubs of manufacturing, construction, transportation and operation that will drive the industry towards maturity.
Investment in infrastructure is equally vital, such as port development and upgrades that will be needed to support the construction and installation, and then the long-term operation and maintenance of very large projects. The USA has decades of experience supporting the oil and gas industries and there are significant and exciting opportunities to transfer learning from this energy sector into offshore wind. The offshore wind industry is already reaching out to the oil and gas industry to explore these synergies.
Whilst the under-developed domestic supply chain is an issue right now, some of the building blocks are starting to move into place. But there is no room for complacency, and timing of investment is critical. The market must remember that if you build it, they will come – but only when there is evidence of long-term viability.
The USA needs to tackle the challenges and opportunities of developing a robust and sustainable supply chain head-on, as the rewards will be significant: cost reductions through domestic manufacturing and technological innovation, an experienced and diverse workforce and vibrant coastal communities.
Lowcarbon@lr.org
For more insights from Carolyn Heeps (including a series of short videos) visit lr.org/offshorewind.
Want to talk further about the US market? Join us for one of our regular New York networking events:
By Dr. Carolyn Heeps, Head of Renewables, North America, Lloyd’s Register
Over the past few years, momentum has been gathering for offshore wind in the USA.
Despite some well-publicised political ambivalence several years ago, the sector is now seeing rapid advances and government support; the east coast now has a project pipeline of over 8GW, with the earliest projects likely to be operational by the early 2020s, whilst in the west – and with a longer-term view – there is increasing interest in utility scale floating offshore wind technology.
However, the outlook for the sector can only be as strong as the skills and supply chain that are available and, currently, the lack of a US domestic supply chain is very much a challenge, and a tremendous opportunity.
Often, the common assumption within a nascent industry is that experienced professionals and technicians from mature markets (e.g., in Europe) will support the evolving US market – and indeed, that will go a long way towards transplanting the skills and expertise that are needed. Furthermore, there is great potential for technology and skills to cross over from well-established domestic industries, such as oil and gas – where asset management and performance optimisation, monitoring and subsea inspection disciplines address many shared challenges and solutions.
But imported knowledge from more mature markets will only go so far. Different business cultures and the different layers of legislation, administration and permitting at federal, state and local level are unfamiliar territory to most professionals who have cut their teeth in Europe, where systems may be no less complex, but are set within different legislative and regulatory regimes.
For example, in European markets there is no equivalent to the Jones Act, which requires any vessel transporting cargo between US ports to be carried on US-built and flagged vessels, and therefore limited precedent for the logistical and supply chain issues it precipitates. In the absence of a Jones Act installation vessel in the US, early projects will currently have to rely on foreign flagged vessels combined with Jones Act compliant feeder barges to transport components to the construction site offshore.
In Europe significant cost reductions have been achieved through more efficient installation methods. Consequently, the US market needs a pipeline of large scale projects to give confidence for the investment required to build Jones Act installation vessels to achieve similar cost efficiencies.
Just as site availability and political appetite are vital to developers and investors, greater visibility of a pipeline of industrial scale projects is critical for potential supply chain partners to invest in the necessary manufacturing sites, processes and workforce training - and that relates to all tiers of the supply chain, from the OEMs to the smallest suppliers at a more local level.
Investment in engineering, science, and research will accelerate innovation and expand the pool of local talent whilst stimulating economies, particularly in those coastal communities that are, or will become, the hubs of manufacturing, construction, transportation and operation that will drive the industry towards maturity.
Investment in infrastructure is equally vital, such as port development and upgrades that will be needed to support the construction and installation, and then the long-term operation and maintenance of very large projects. The USA has decades of experience supporting the oil and gas industries and there are significant and exciting opportunities to transfer learning from this energy sector into offshore wind. The offshore wind industry is already reaching out to the oil and gas industry to explore these synergies.
Whilst the under-developed domestic supply chain is an issue right now, some of the building blocks are starting to move into place. But there is no room for complacency, and timing of investment is critical. The market must remember that if you build it, they will come – but only when there is evidence of long-term viability.
The USA needs to tackle the challenges and opportunities of developing a robust and sustainable supply chain head-on, as the rewards will be significant: cost reductions through domestic manufacturing and technological innovation, an experienced and diverse workforce and vibrant coastal communities.
Lowcarbon@lr.org
For more insights from Carolyn Heeps (including a series of short videos) visit lr.org/offshorewind.
Investment trends were one of the key themes of our upcoming European conference on 1st November 2018 - alongside the PPA boom, the future of offshore and technological advances. In this blog post, we've taken a look at three of the questions we addressed during our panel on investment.
Investment trends were one of the key themes of our 2018 conferences- alongside the PPA boom, the future of offshore and technological advances. You can download the full agenda here.
For details of upcoming conferences, click here.
Should we be concerned about the impact of Brexit on wind deals?
As we wrote in a recent blog, the impact on wind power is one of many areas of uncertainty related to Britain’s exit from the European Union.
However, there’s some cause for optimism. The government’s commitment to building new renewable energy projects is unlikely to change, even one Britain leaves the Renewable Energy Directive, which requires that the UK generate 15% of its energy from renewables by 2020.
The country is already on track to meet this commitment – and in any case, the Climate Change Act 2008 is stricter than the RED, so plans to increase reliance on renewables are already enshrined in UK law.
In terms of investment in British wind projects coming from outside the UK, the future looks less rosy.
At present, the UK receives significant sums for energy infrastructure projects from the EU, including billions of euros a year from the European Investment Bank. The EIB has warned repeatedly of the risk of Brexit over the last 18 months, and it is no surprise that the Luxembourg-based bank’s new contracts with the UK totalled just £1.89bn last year, down from £5.54bn in 2016. Of that £1.89bn figure last year, £377m came in the nine months after Theresa May triggered the Article 50 process that set in motion the UK’s exit from the EU.
Exactly how individual projects will be affected depends on the terms of their investment agreements: projects that have already been granted funding may need to be repaid, if it becomes unlawful for the EU to fund them.
For projects that have been proposed but not yet funded, the impact will depend on the timing of changes to investment criteria, and how desirable the EU funding bodies deem them to be. There will be uncertainty, too, for energy research: funding from the European Research Council and Eight Framework Programme may also be withheld.
In terms of private investment in wind projects in the UK, credit agencies in member states won’t necessarily be put off backing investments – including in the UK’s offshore wind sector – but it does entail extra risk.
How do strategies need to change in an era of subsidy-free projects?
As we’ve seen in Poland, changes to government subsidy can pose a major risk to investors.
The Law & Justice Party made punitive changes for wind investors in 2016, significantly reducing Poland’s status as an emerging market.
The $700m legal action by US developer Invenergy against the Polish government brought the situation to international attention. The company took its fight to the United Nations in April after claiming the government and state utilities had been “blatantly disregarding” decisions in the Polish courts. This also highlighted the risks for other overseas investors when looking to invest in the countries.
In recent months, we’ve seen the Polish government soften its approach to the wind industry by reversing punitive tax changes introduced in 2016 – which gives cause for hope that pushback from investors can influence government attitudes.
It’s not just Poland that’s seen disruptive changes to subsidies. Firms in Australia, Canada, Poland, South Africa and Spain will have cautionary tales, while even the established markets in Germany, the UK and US are in the grip of major political upheaval.
We’ve written about the major political risks to wind investors, including subsidy cuts, in our new ebook: 7 Growing Political Risks for Investors in Wind.
Will corporate M&A deals reshape the European wind market?
2018 has already seen significant M&A activity within European wind – as we explored in our Finance Quarterly Q2 report.
This includes M&A activity involving non-European firms. For example, a subsidiary of Japanese conglomerate Mitsubishi last month bought a 33.4% stake of the 950MW Moray East in UK waters.
Big Japanese corporations have continued to show interest in the European offshore market as slow growth of the sector in their home market, falling costs and Japanese interest rates at a record low of -0.1% have pushed them to look at offshore wind investments in Europe for long-term returns. Mitsubishi is also reportedly looking to invest in the 370MW Norther off the Belgian coast and the 130MW Luchterduinen off the Dutch coast.
For a run-down of the 5 most significant European M&A deals this year, take a look at this blog post.
For details of the next Financing Wind Europe conference, click below...
Wind Watch
Have you booked your ticket to Q3 Quarterly Drinks in London?
By Frances Salter
Have you booked your ticket for our next Quarterly Drinks evening? If not, do so now. There is only a week left.
We will be running this event on Thursday 6th September with our partners Foresight Group, at their iconic event space in the Shard; our gold sponsor Totaro & Associates; and our silver sponsor Ionic Consulting. The evening will start at 5.30pm.
This time, we will be joined by Emma Tinker, co-founder and CIO of Asper Investment Management, for our 20-minute Q&A session. We look to start this by 7.30pm.
Emma currently leads origination and strategic planning for Asper, which specialises in investments in sustainable real assets. She's managed investments, financings and exits across the UK, Ireland, Germany and Italy, so we'll be quizzing her about European investment trends.
So, if you'd like to join us, please click here.
See you there!
The decision by American Electric Power to cancel its 2GW Wind Catcher project has been a big talking point in US onshore wind. The scheme met its demise after being rejected by Texas regulators, who said it didn’t offer enough value for ratepayers.
The deal has shown how state regulators can affect and influence the shape of the wind sector in the US. This is set to become an increasingly prominent issue as growth in onshore wind relies more on cost and less on states’ need to hit renewable energy targets, while regulators are set to judge projects more on economics than in previous years.
In the last couple of years, we have seen state regulators assume key roles in other major transactions – and not just schemes like Wind Catcher, but on M&A deals too.
One of the most recent and relevant examples is the merger between US utilities Westar Energy and Great Plains Energy. In this case, the intervention of Kansas and Missouri regulators was key to shaping a new player in the US market, with an equity value of around $15bn and over 1.6 million customers.
We spoke to Brandon Sack, clean energy development manager at Westar Energy and now at Evergy, to find out more about the deal.
Westar has 700,000 customers in Kansas and owns 7GW of generation capacity, of which 1.8GW is wind farms, in both owned projects and power purchase agreements. Great Plains has a total of 900,000 customers in Missouri and Kansas, with 6GW of total capacity, of which 1.3 GW is wind farms. Sack said that a tie-up was the best way for both firms to grow.
“The merger just made a lot of sense. We have been neighbours for 100 years. We co-own several power plants. We are in the same region, with the same type of customers. A merger was the most cost-effective solution to grow and allow our customers to realise cost savings through synergies,” he said.
But the process that has brought these companies together was far from smooth.
In 2016, Great Plains first proposed a $12.2bn acquisition of Westar. However, in 2017, Kansas regulators rejected the proposed takeover deal because it could have exposed ratepayers to “undue financial risk”.
In particular, regulators argued that the acquisition included “an excessive purchase price” that would have required Great Plains to take on up to $8bn of debt. Instead, they proposed that, because the firms operated similar services and in similar areas, a ‘merger of equals’ would have made the most sense.
As a result, Westar and Great Plains last year revised their agreement to meet the regulators’ recommendations, and proposed to merge and create a new company – Evergy – with an equity value of $15bn. In February, the Federal Energy Regulatory Commission approved the deal, with consent from Kansas regulators arriving in May.
Evergy is now operating as a holding company for both Westar and Great Plains. It will hold a joint portfolio of about 13GW of generation, of which 3.1GW is wind farms.
Sack said the new utility had plans to become a significant player in the renewable energy market, with a focus on wind: “We plan to add 444MW of wind in 2019 and 300MW more in 2020, for a total of 744 MW of wind by the end of 2020,” he said. “Kansas wind has proved to be a great source of reliable, affordable clean energy and the state has room for more.”
The utility is also working with regulators on ways to make renewables, including wind and solar, an even larger part of its mix: “We are in the early stages with our regulatory bodies in both Kansas and Missouri to add Renewable Tariffs for Great Plains customers that would to allow them to sign up directly for renewables, including wind. Two of these have already been approved in Kansas for our Westar customers,” he explained. If approved, Evergy would have the opportunity to grow the proportion of wind in its portfolio based on customer demand, which could provide an interesting model for other utilities.
With widespread support for wind and solar, such a model could open development opportunities for firms across the US. It is easy to bemoan the impact of regulators when they give decisions that developers and investors don’t like – but agreeing to a model like this could give us reason to praise them too.
The types of companies looking to buy electricity from wind farms are changing – and thank goodness for that.
We’ve written so often about how pioneers of corporate power purchase agreements including Amazon, Facebook and Google are buying wind power that, to be honest, it's become a little boring. But thankfully, as the price of wind energy has become more competitive, more firms in a wider range of industries have begun to sign PPAs.
This broadening has been most visible in the US, where we have seen PPAs agreed in sectors including food, beverages, and telecommunications. But European firms have been getting in on the PPA action too. In our Europe’s PPA Revolution report we analysed why Scandinavia has led the growth of wind PPAs across the continent.
However, we think a recent deal in Poland could pave the way for a new wave of corporate PPAs in central and eastern Europe. German carmaker giant Mercedes-Benz agreed in July to buy the entire output produced by the 45MW Taczalin wind farm in Poland, operated by local developer VSB Energie Odnawialne Polska, to power its manufacturing facility in the south-west of the country.
We have a handful of examples of companies in the automotive sector signing wind PPAs, but not many.
The best-known car manufacturer in this regard is General Motors. GM has committed to power its global operations entirely from renewables by 2050 and this has resulted in the car giant being one of the most active buyers of renewable energy in the US in the last decade. This includes over 200MW of wind PPAs signed in the last 12 months alone.
There are other examples too. This month, Argentinian developer YPF Luz signed a ten-year PPA with Toyota.While small in size at only 16MW, the deal is still a positive move and part of a growing trend. German giant Volkswagen signed a deal in 2013 to buy 130MW at the 180MW La Bufa wind farm in Mexico. And, in renewables more widely, BMW signed an agreement with BayWa in May to buy 252MWh of solar power in Mexico to power one of its manufacturing facilities in the country.
This is only a handful of examples, but they show that renewable power can make sense for car makers. And this is particularly relevant in central and eastern Europe, where the heavy presence of car manufacturing facilities could mark the start of a wider and much-needed wave of PPA deals.
In fact, as government subsidies for wind farms dwindle and merchant risk rises, developers and investors in Europe are seeing corporate PPAs as an increasingly attractive way to take projects to financial close. Even so, the support of European governments, and recently-agreed changes to the Renewable Energy Directive, will be key to removing barriers for PPAs.
So, why does wind power make sense for car makers?
First, making cars and car parts requires energy-intensive processes. This makes them an easy target for developers that want to sell electricity from their wind farms.
Also, car manufacturers have numerous decentralised operations and manufacturing plants, and are always on the look-out for convenient energy supply sources. These companies could potentially get involved in the construction of new projects to power their facilities, particularly for plants in remote areas with little or no grid connection. Virtual PPAs are another solution in this scenario.
Finally, there is an advantage in terms of reputation. Producing and running cars is a carbon-intensive industry, and the increase in electric vehicle sales shows that car buyers are getting greener. The VW ‘dieselgate’ scandal of 2015 and the growth of electric vehicles, for example, have made car buyers more aware of sustainability and environmental issues. Green PPAs could offer some redemption for carmakers.
There is still a long way to go, but the potential for renewables PPAs linked to the automotive industry in Europe is huge.
According to the European Automobile Manufacturers Association there are currently around 300 automobile assembly and engine production plants across Europe. This includes well-established wind markets such as Germany, France, and Spain, as well as emerging markets for renewables including Croatia and Romania.
If this was a race, then Mercedes-Benz may be in first position on the grid, but we’d like to see more car manufacturers competing too.
On 1st November, we're hosting our annual European conference, Financing Wind. We've booked a top line-up of speakers to discuss European investment trends, the PPA boom and changes to the offshore market, plus plenty more. We'll be announcing further speakers over the coming weeks.
Each year, we hold conferences discussing the biggest issues in European and North American wind. Here's a run-down of some of the top speakers from our 2018 European conference...
Philippe Kavafyan, CEO at MHI Vestas
Under Philippe's leadership, MHI Vestas has recently closed a major offshore deal in Taiwan, providing turbines for a 9MW turbine platform. During the past six years in offshore wind energy, Philippe has successfully worked with offshore wind tenders in France, the first commercial projects in Germany and held the position as Chair of the Board of Adwen Offshore.
Stephen Bull, SVP Wind at Equinor
Stephen is also the new chairman of Renewable UK. He manages Equinor's developments in wind, carbon capture and storage, hydrogen, and energy storage.
Nathalie Oosterlinck, CEO, Otary RS
Nathalie led the merger of the Mermaid and Seastar projects, which together represent a quarter of Belgium's offshore wind capacity. Her M&A experience includes renewable energy transactions, structuring project finance, corporate lending and leveraged finance deals.
João Metelo, CEO, Principle Power
João is leading Principle Power's provision of floating offshore wind solutions to the first commercial-scale project in the US. He has over 16 years' experience in the energy sector, with leading roles in the areas of management, M&A, financing, FP&A, accounting and tax.
Duncan Berry, CEO, LM Wind Power
Lindsay McQuade, CEO, Scottish Power Renewables
Lindsay oversees an operational portfolio of more than 40 wind farm sites, which generate over 2GW of renewable energy, and is also responsible for developing new projects.
Scott Mackenzie, CEO, Ventient Energy
Scott has 13 years wind industry experience with a further 16 years engineering and management experience in the chemical and nuclear sectors. Ventient Energy currently has ~690MW of installed capacity on 34 wind farms across the UK, and is the country's third largest wind farm owner-operator.
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Justin Fitzhugh, Partner at Augusta & Co
Justin joined Augusta & Co in 2008, coming from a background in Industrials M&A, plus management and economic consulting in the power sector.
Michael Hannibal, Partner at Copenhagen Infrastructure Partners
Michael takes the lead on CIP's investment activities within offshore wind, having previously worked with Siemens Gamesa, helping them to become a globally leading offshore wind turbine supplier. We're looking forward to hear him speak on our panel, on the topic of key investment trends in Europe.
Mike O'Neill, CEO, Element Power
Mike is a founding member of Element Power, with over 20 years' experience in the renewable energy sector. He previously directed RES Group's financial activities, and has extensive experience both in North American and European wind.
Marc Groves-Raines, Managing Director at Allianz Capital Partners
Marc has been with Allianz Capital Partners since 2005, and took over as Managing Director in 2018. He'll be sharing his views on established vs emerging markets, and how companies should balance their investments in the two.
To find out more about our 2019 conferences, click below...
Wind Watch
Who are the 100 most influential lawyers in wind?
By Frances Salter
Whether you're a developer, investor, or owner-operator, excellent legal support is vital to ensure your deals and developments run smoothly. But who are the best in the business? We're going to tell you!
Last week, we published our Legal Power List report, in which we have analysed the 100 most influential lawyers in global wind. The report includes:
- Profiles of the top 100: Find out who made the cut and why.
- Analysis of wind's biggest political risks: Lawyers are playing a key role when government changes hit wind investors.
- Interview with DNV-GL on how technical escrow agreements can help to protect against investment risks.
- Mayer Brown's David Burton on the rapid growth in US offshore wind and tax planning.
Click here to find out more about our Legal Power List and download your copy of the report. And, if there is anyone you think we've missed, please let us know. It's never too early to start planning for the next edition.
Thanks for reading.
“This is a high-profile project, and one that’s gotten a lot of attention. A lot of people want to see it happen, and I think it would be a good thing for the industry.”
That’s what I told US website Icons of Infrastructure in June for an article about the planned 2GW Wind Catcher project in US state Oklahoma by Invenergy and utility American Electric Power. The first thing to note is that, yes, we’ve gone ‘meta’. I’m quoting myself in one of my own comment pieces. Forgive me that indulgence.
But there’s a good reason for my display of self-gratification. The project would have been good for the industry. At 2GW, it would have been one of the largest single-site wind farms globally, and delivered 350 miles of transmission lines across state lines. It would have been inspirational if the developers had been able to pull it off.
Not everyone was so inspired. Wind Catcher has also provoked anger among people in Oklahoma, Texas and beyond. I know this because my comment in support of the development gained me a crop of indignant missives from Texas, of the ‘I don’t know how things work in your country’ variety.
Complaints against the scheme included how ratepayers would have to shoulder the financial risk for the $4.5bn project in an era of cheap natural gas; fears from land owners that transmission lines would need to be built across their land; and the lack of competitive bidding in the planning process or demonstration of sufficient need.
There was also strong opposition from wealthy oil and gas industrialists, including the Koch brothers’ Americans for Prosperity group, and the Windfall Coalition.
Well, life comes at you fast and, just a month after that initial interview, Wind Catcher was dead. The ambitious and inspiration 2GW development was not to be.
On 26th July, the Texas Public Utility Commission unanimously rejected the project because it said it didn’t offer enough benefits for ratepayers. This prompted AEP to say one day later that it was cancelling the project as a result of the Texas decision. AEP was always going to be racing to secure all of the necessary permits so that it could finish the scheme in late 2020 and qualify for the full production tax credit.
In my view, there are three things we can learn from Wind Catcher.
The first is the often-insoluble problem of transmission. This is another reminder that developers will always face hostility when they want to build vast transmission lines across state borders and on the land of numerous landowners. It’s bloody tough to build these schemes and it only takes a handful of objectors to delay the project for so long that the developer either gives up, or that it is no longer financially viable.
It is also a reminder that the model of huge centralised generation projects pushing electricity out to surrounding areas is not appropriate for a flexible and renewables-focused system. This is a reminder why the industry should double-down on finding solutions to electricity grid problems that minimise battles with landowners.
The second learning point relates to wider concerns about the project. In February, Oklahoma judge Mary Candler advised against awarding support for the scheme as the lack of competitive bids was a serious problem. Invenergy and AEP pushed back saying that there wasn’t time to go through the process and gain the full production tax credit. However, Candler’s comments resonated, and it will always be tougher for developers when local communities feel wind farms are being foisted upon them.
And the third is the increasing scrutiny of wind developers. It has been great to see the cost of wind energy fall in recent years, but this means that projects will come up against more scrutiny from regulators on how they will affect consumer bills. This will put more pressure on developers to prove the economics for their scheme, in an era of low natural gas prices and unpredictable energy price changes in future.
Wind Catcher could have shown developers how to overcome all of these problems. It could have been exceptional, but was scuppered by issues that are all too familiar.
Giant project and turbine sizes are exposing wind investors to larger risks than ever. How can technical escrow agreements help manage them? Richard Heap reports
Giant project and turbine sizes are exposing wind investors to larger risks than ever. How can technical escrow agreements help manage them? Richard Heap reports
The giants are coming. In Europe and the US, work is underway on multi-gigawatt onshore wind projects that would have been unthinkable to all but a handful of industry visionaries.
Records will be broken offshore too. Danish utility Ørsted is building its 1.2GW Hornsea 1 in UK waters, and is set to follow this with the 1.8GW Hornsea 2 and 2.4GW Hornsea 3.
And some of these projects will use turbines as tall as skyscrapers. General Electric’s 12MW Haliade-X will be taller than New York’s 30 Rockefeller Plaza, and its rivals are eyeing 10MW.
Giant schemes, giant turbines – and also giant financial risks. These investments can run into the billions of pounds, euros or dollars, which puts investors under pressure to protect their investments:
“The business is becoming so big, the risks have increased and, therefore, the bigger the investment then the more assurances you want for your investment,” says Lone Wigh, global product manager in the DNV GL Energy, Renewables Certification team.
One potential solution to the fiscal challenges posed by industry gigantism is technical escrow.
Technical escrow agreements have been a factor in the larger contracts in the wind industry for the last 20 years, according to Wigh. She says they are standard in all European offshore schemes and in large onshore schemes where bank lenders are involved.
In this article, we’ll look at how these contracts work, how they can help investors, and how manufacturers can ensure that any data they share about their technology remains safe.
What are technical escrow agreements?
The most common use of the term ‘escrow’ is in the real estate industry. It refers to a type of account used in a large transaction where a third party holds the money for that deal.
For example, one company agrees to buy products from another company. The buyer doesn’t want to give the seller all of the money up front, in case the seller reneges on the deal, and so they put the money in an escrow account run by a third party. The cash is then released to the seller when the buyer confirms that they’ve received the products.
Technical escrow agreements in the wind industry use a similar principle, but there’s data in that third-party account rather than money. Specifically, a wind farm owner enlists a third party to set up an escrow account to hold technical documents from the manufacturer about the technology used at their wind farm.
This means that the wind farm owner can still access sensitive data about the turbines in their project if the manufacturer cannot help – for example, if the company has gone out of business – or refuses to do so; or if the owner has lost original copies of the information.
For investors, this is important because they rely on a certain level of electricity production at their wind farms to make the financial returns they’re targeting. If a turbine breaks down and the manufacturer is unable or unwilling to help, this can severely harm project returns.
“The key interest is the need for help or spare parts, or in the case of bankruptcy, because an investor cannot really afford turbines to stand idle for very long,” says Wigh. “Many spare parts will require the specifications so that another manufacturer can produce them, to match the existing components and fulfil the technical requirements. Nowadays, securing access to such information is among the main concerns of the wind farm owners, whereas the risk of bankruptcy drove the earlier contracts.”
It is up to the owner and turbine maker to agree on the documents that go into escrow, and typically they include information such as turbine specifications, parts lists, manufacturing drawings, purchasing specifications, manuals, software, and as-built documentations.
Wigh says DNV GL has been offering these services for around 20 years, as it is an extension of its turbine certification work. The cost for simply storing information for around 20 years is typically in the region of €10,000, while it is between €20,000 and €40,000 to review it at point of storage as well.
Typically, the service includes a confirmation letter of deposit at point of initial storage and on optional basis a status letter at end of the first five years of contract, where warranty periods may run out reflecting the amendments that have been done in the escrow account. There are extra costs at any stage an engineer or administrator has to get involved in checking the data, which can include thousands of documents.
“All this with the escrow agreements is done at the contracting phase, when the wind farm owner’s deciding what turbines to buy, and normally it’s the lawyers that are involved in the whole process,” she says.
For turbine makers, the designs are sensitive intellectual property (IP). As such, they need to ensure that the documents are held securely and only released if the release requirements are met.
When would this information be released?
While a company like DNV GL would hold the technical information in escrow, it would not make the final decision when to release it.
If an owner got in touch to notify the escrow manager of a dispute and request the release of the information, the escrow manager would start by talking to the IP owner. If the IP owner objected to the release, the escrow manager would then need to appoint a ‘release committee’. This would typically be made up of three experts that look at the dispute before deciding on whether the technical documentation should be released.
In that respect, Wigh says it is similar to arbitration and can help prevent IP disputes in the wind sector going to court:
“Normally, it’s in everyone’s interests to find a solution,” she says. “Nobody wants turbines not producing power. That’s not good for the manufacturer, it’s not good for the wind farm owner, it’s not good for anyone.”
Releasing information at the wrong time is one problem that the technical escrow manager has to avoid. However, another risk of this service is that sensitive turbine information could be released as a result of a cybersecurity breach.
How is this information protected?
IP protection is a big issue for the wind sector, as losing control of sensitive data can mean a manufacturer loses a competitive edge. Information in escrow must be held securely.
In these escrow agreements, files are delivered through a secure upload and onto a secure server. This is typically done by using a File Transfer Protocol server; or a USB or hard drive. The data is then encrypted and held on a system with very restricted access.
Wigh says that the protocols differ for different clients and agreements. However, she says that one customer’s information is stored in a system with three different password ‘gates’. All of the information is classed as ‘secret’, which means it is seen as sensitive even if it is seen by unapproved DNV GL employees. Only a limited number of people is able to access the information and all have security training.
The company also has processes in place including malware detection software, to protect it from external attacks; and other restrictions to protect the information from accidents.
Matt Freeman, global director of cybersecurity at DNV GL, says that all operators of escrow services need to have good cybersecurity policies and principles in place. He says there are broadly three types of cybersecurity risks for businesses – processes, people and systems – and so any technical escrow operator needs to operate to agreed processes, store data in a safe way, and make sure those who can access the documents are properly screened:
“The landscape changes all the time. You can’t just do it once and assume it’s all good,” he says.
More generally, he adds that wind farm owners should be more aware of cybersecurity risks as wind plays a bigger role in the global energy mix. This includes looking at procedures for managing access to and from wind farms; regular risk assessments; and vulnerability testing.
In technical escrow, that focus on security means continually monitoring data and updating systems so that information can still be accessed when it’s needed. There’s no point holding the technical documents if they’re in a format that can’t be accessed when it’s needed.
As projects keep growing and wind farm owners keep buying larger machines, the industry is approaching the future with excitement. But change is rapid. Companies change, people move on, projects are sold, and new owners come on board. In this context, it is important that project owners can access technical information through the lifespan of their projects.
The industry is moving fast – and, wherever it goes, technical escrow can help to protect owners and investors on the journey.
Over 550GW of wind turbines are spinning globally. Corporates are signing deals for wind power at an unprecedented rate. The economics of wind are getting stronger.
However, investors in the wind sector would be wrong to think that continued strong growth is guaranteed. In the last few years, we have repeatedly seen how politicians at national and regional levels can destabilise investors. Firms in Australia, Canada, Poland, South Africa and Spain will have cautionary tales, while even the established markets in Germany, the UK and US are in the grip of major political upheaval.
In fact, it is often areas that were once most positive about wind that end up making the most high-profile cuts. The most recent example is Ontario, which started ripping up renewable energy deals last month after the election of a new government led by the Progressive Conservative Party. The province has the most wind capacity of all the Canadian provinces – but the strength of this past support has been matched by the viciousness of the backlash. We wrote about ongoing upheaval in Ontario here.
We have now built on the theme in our Legal Power List report, which we published on Tuesday 14th August, and will look more at the topic of investment risk in the wind industry in Europe at our Financing Wind Europe event in London on 1st November.
The main focus of the Legal Power List is our list of the 100 most influential lawyers in the global wind industry, with a focus on their activities in the last two years. But we have also looked at seven of the biggest political risks we see for wind investors in countries around the world. The wind industry may be growing, but it is wrong to assume that wind’s favourable economics make it immune from hostile politicians.
These political risks put pressure on investors to make sure they have the best team in place to help them avoid or mitigate these risks – or to fight them when the worst happens. This includes consultants, insurers, local experts and, of course, lawyers. Our 100 focuses most on the transactional and development sides of the market, but lawyers are also vital when the industry needs to fight against controversial changes.
Let’s take the example of Poland. The election of the coal-loving Law & Justice Party in October 2015 was never going to auger well for the wind industry, and so it turned out with punitive changes for wind investors in 2016. These turned Poland from one of the most promising emerging wind markets in Europe to one of its worst.
However, it is the $700m legal action by US developer Invenergy against the Polish government that has helped put the plight of wind investors in Poland in focus. It took its fight to the United Nations in April after claiming the government and state utilities had been “blatantly disregarding” decisions in the Polish courts. This also highlighted the risks for other overseas investors when looking to invest in the countries.
In recent months, we’ve seen the Polish government soften its approach to the wind industry by reversing punitive tax changes introduced in 2016. We wouldn’t claim the decision is solely because of the Invenergy challenge, but it helped to build pressure.
This highlights two of the seven key political risks we cover in the Legal Power List: the impact of new governments reversing policies favourable to wind – which is also the case in Ontario – and countries with unreliable legal systems. We have also seen examples of countries making retroactive changes to cut subsidy bills and revoking project permits; and battles for investors with both land owners and state utilities.
And there are the even more headline-grabbing political risks for investors, including corruption, expropriation, terrorism and war.
Investors may not be able to eliminate risk, but continuing to make the case for wind with politicians and the public can help to mitigate some of them. In addition, lawyers can play an important role when a fightback is needed. The figures look good now – but growth in the wind sector depends in part on its willingness to stand up to critics.
Read the full 2018 Legal Power List here.
Our second Legal Power List is the ultimate guide to the wind industry’s biggest legal names, featuring lawyers from around the globe – mainly Europe and North America. In this blog, we’ve taken a special look at the North American lawyers that are having the greatest impact on wind.
Our second Legal Power List is the ultimate guide to the wind industry’s biggest legal names, featuring lawyers from around the globe – mainly Europe and North America. In this blog, we’ve taken a special look at the North American lawyers that are having the greatest impact on wind.
A lot has changed since we published our first Legal Power List in 2016. For one thing, we’ve increased our focus on North American wind – including our first ever New York conference in May 2018, which coincided with the publication of our North American Power List.
So, when it came to researching this year’s Legal Power List, we were especially aware of new names in the North American legal sector.
This means that, out of 100 lawyers featured in our list, one-third are based in North America. We’ve canvassed views from across the industry, as well as undertaking our own research, to assess which lawyers are the best in the business.
It’s been a challenging couple of years for the industry, which is why we’re glad to acknowledge the role which lawyers play in helping investors and utilities navigate political hurdles both at home and overseas.
If you’d like to read the report in full, it’s exclusively available for members – or to purchase for non-members – here. As a taster, here’s our run-down of eleven of North American wind’s most influential lawyers:
Alyson Clark, General Counsel, GE Renewable Energy
Alyson held a number of positions at General Electric before settling into her current role as general counsel for GE Renewable Energy in 2015. Her previous roles include legal general manager for the planning of the Alstrom integration in 2015; and acting as general counsel to GE Power Conversion. GE Renewable Energy has recently exceeded 40GW of installed onshore wind capacity in North America, with over 25,000 turbines running. The company also supplied 6MW Haliade offshore turbines for the 30MW Block Island.
Charles Sieving, EVP and General Counsel, NextEra Energy
NextEra Energy is the largest owner of wind farms in the US, with total capacity of 13.9GW. In this capacity, Charles heads all legal affairs at the company as well as its environmental services and corporate compliance groups. Sieving has served as EVP and general counsel since joining NextEra in December 2008.
Clyde E. Rankin III, Partner, Baker & McKenzie
Based in New York, Clyde ‘Skip’ Rankin is a member of Baker McKenzie’s banking, finance and major projects group in North America; and chair of the firm’s global renewables and clean technology practice. He joined the practice in 2008 after 28 years at Coudert Brothers, and remains one of North America’s most experienced wind lawyers. His recent transactions span project finance, tax equity and corporate power purchase agreements; and he also gets involved with US clients on investments in eastern and central Europe, and Russia.
Daniel Elkort, EVP, Chief Legal Officer & General Counsel, Pattern Energy
Daniel co-founded Pattern Energy in 2009, and has a total of 20 years’ experience in the renewable energy industry. As executive vice president and chief legal officer, Elkort is responsible for managing all aspects of the company’s in-house legal team and co-manages the project finance team. This means he played a key role as Pattern bought an ownership stake in its associated company, Pattern Development 2.0, in 2017; and has helped to lead the company into new markets, including Japan, where it completed its first wind farm in March: the 33MW Ohorayama Wind facility.
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Ed Zaelke, Partner, Akin Gump Strauss Hauer & Feld
Ed has 30 years of experience in the US wind sector, where he is a former president of the American Wind Energy Association; and a founding board member of the American Wind Energy Foundation. His most significant deals in the last two years include advising Northleaf Capital Partners on the acquisition of a majority stake in a 217MW mostly-wind portfolio in Texas from Apex Clean Energy. The projects in this portfolio are significant as they are supplying the US Army’s Fort Hood garrison in Texas in the army’s largest wind power deal to date.
James Tynion III, Partner, Morgan, Lewis & Bockius
James has been at Morgan Lewis for four years since joining from Foley & Lardner, and specialises in the energy and infrastructure industries. He represents firms in project financing, greenfield development, mergers and acquisitions, and equipment leasing and finance deals. With more than 25 years’ experience in the wind sector, Tynion is a pioneer in the evolving wind and solar tax equity, finance and acquisitions markets.
Keith Martin, Partner and Co-Head of Projects, Norton Rose Fulbright
Keith is one of the world’s top project finance lawyers and spent 34 years at US law firm Chadbourne & Parke until it combined forces with Norton Rose Fulbright in June 2017. Martin is now co-head of projects for Norton Rose Fulbright, specialising in tax and project finance, and he acted for over 140 companies in the US and five other countries last year. As well as his transactional activity, Martin has published numerous articles on renewable energy and finance law and is editor of the Project Finance Newswire.
Michael Blazer, SVP & Chief Legal Officer, Invenergy
Michael Blazer is senior vice president and chief legal officer at Invenergy. In this capacity he oversees all corporate legal affairs in the company’s operations in the US and Europe. Blazer has 34 years’ experience in law, and has received more attention this year than previously as Invenergy has launched a $700m damages claim against the Polish government over the country’s treatment of wind investors. Blazer joined Invenergy in 2016 after seven years as outside counsel where he represented Invenergy on multiple energy development projects.
Michael Shadbolt, Vice President & General Counsel, Northland Power
As general counsel at Canadian developer Northland Power, Michael Shadbolt is responsible for providing legal advice and guidance on all aspects of the business and its activities. His arrival at Northland in 2011 coincided with the firm’s move into European offshore wind via its 600MW Gemini, 332MW Nordsee One and 252 Deutsche Bucht schemes. The firm is now among the pioneers in the emerging Taiwanese market, where it won support for the 300MW Hai Long 2 scheme in April.
Natalie Hocken, Senior Vice President and General Counsel, Berkshire Hathaway Energy
Natalie has been in this role for three years, overseeing activities at subsidiaries including MidAmerican Energy, NV Energy and PacifiCorp. Before this, she served in various SVP roles including transmission and systems operations at PacifiCorp. Hocken joined PacifiCorp in 2002 after working for law firms Heller Ehrman and LeBouf Lamb Greene & MacRae. Berkshire Hathaway Energy is the largest US utility owner of wind farms.
Scott Wilensky, EVP and General Counsel, Xcel Energy
Scott has more than 25 years’ experience in utility regulation. Xcel is one of the largest wind-using utilities in the US, with a portfolio of 6.7GW – most of which is procured through power purchase agreements – of which it owns 850MW. The company is now looking to expand its portfolio by 3.7GW of wind capacity by 2021, of which it plans to build 2.7 GW and procure a further 1GW through PPAs. Wilensky’s work will be important as the firm negotiates this growth.
Wind Watch
Who are the 100 most influential lawyers in wind?
By Frances Salter
Whether you're a developer, investor, or owner-operator, excellent legal support is vital to ensure your deals and developments run smoothly. But who are the best in the business? We're going to tell you!
Yesterday, we published our Legal Power List report, in which we have analysed the 100 most influential lawyers in global wind. The report includes:
- Profiles of the top 100: Find out who made the cut and why.
- Analysis of wind's biggest political risks: Lawyers are playing a key role when government changes hit wind investors.
- Interview with DNV-GL on how technical escrow agreements can help to protect against investment risks.
- Mayer Brown's David Burton on the rapid growth in US offshore wind and tax planning.
Click here to find out more about our Legal Power List and download your copy of the report. And, if there is anyone you think we've missed, please let us know. It's never too early to start planning for the next edition.
Thanks for reading.
Wondering whether Financing Wind Europe is worth the money and time out of the office? It depends what you're looking to get out of a conference - here's our guide to who's best suited to coming.
Wondering whether to join us for our annual conference? Here's our guide to who would benefit most from it. For more details of upcoming conferences, visit our conference site.
If you haven't been to Financing Wind before, then I bet you’re asking yourself whether this is worth the money and the time out of the office. Quite right too. It’s what I’d be doing! And so, in this post, I’ll share some key information to help you decide either way.
Have you read our other posts?
My first piece of advice in trying to come to this decision is looking at two other posts that we’ve published on the blog recently. The first is a basic introduction to the ‘who what when where why’ of Financing Wind Europe and us at A Word About Wind; and the second answers the most common questions that people ask before signing up.
Read: What is Financing Wind Europe? http://membership.awordaboutwind.com/blog/what-is-financing-wind-europe
Read: 7 Most Common Questions About Financing Wind Europe
If you’ve read these then you know the conference is set to focus on what we see as the biggest topics about the financial side of Europe’s wind industry; and how they’re relevant to the strategies to a wide range of firms on the financial and technical sides of the industry. You’ll also know that we’re aiming to attract around 250-300 people a day, which ensures that networking is more focused than at a large trade show.
But should you be one of those 250-300 people? Here are some questions for you.
1) Do you want to hear about the financial side of the industry?
We set up A Word About Wind because we felt that the financial side of the industry was underserved in the conference agendas of the large trade associations, and we wanted to change that. Like any sector, the wind industry needs money to grow.
We’re going to be sharing information on key investment trends and risks; emerging markets in which we think our members should be looking to grow, both onshore and offshore; and also the important trends that are shaping the offshore industry. In our view, this is important for whichever part of the wind world you work in.
If you want to learn about the financial side of the wind industry then this could be for you, but how about you check out the latest version of our agenda to find out more.
Read the latest agenda for Financing Wind Europe here. The 2019 agenda will be released soon.
Do you want to speak to a lot of widget manufacturers?
We’re going to be perfectly honest with you. If you want to go into a huge conference hall and spend three days talking to a load of widget manufacturers, this isn’t for you. We work with a select number of sponsors and are open to our members only. We’re not interested in filling a room with stands from a huge number of widget makers.
That said, manufacturers are very welcome. We are confident that there’ll be a load of great insights from our speakers that can help you to get a deeper appreciation of how the market is changing, and in which markets you should be investing.
We want to bridge the gap between the financial and technical sides of the market. But don’t expect to leave clutching the business cards of 100 component makers.
3) Are you looking to raise funds or considering doing so?
Over the years, we’ve learnt a few of the reasons that people come to our events – and one is that they are looking to raise funds for their expansion. These individuals come to our events to learn about who’s investing in what and why, and to network with those on the financial side of the industry.
If this is a focus for you right now then we think Financing Wind Europe should be a step on your journey. But we would say that, wouldn’t we?
4) Are you struggling to make strong industry connections?
If you’re looking to make connections across the sector but are struggling to do so, then Financing Wind Europe could be for you. We attract attendees from across our 2,500-strong community as well as our high-level speakers, which means that there will be interesting people in the room for you to network with.
Don’t just take our word for it, though. Here are some recent testimonials:
The final decision is up to you, of course, and we hope this has helped a bit. If you want to talk to one of our team to find out whether Financing Wind Europe is a good fit for you and your business, please get in touch with my colleague Zoe Wicker (membership@awordaboutwind.com) who would be delighted to help.
For more details of upcoming conferences, click below...