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Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you read our Top 100 Power People report,in association with our headline sponsor Sentient Science? This is our definitive rundown of the 100 most influential power-brokers and deal-makers in the global wind power industry.

And this year's report features a bumper crop of analysis, including interviews with Anja-Isabel Dotzenrath, CEO at E.On Climate & Renewables;David Giordano, head of renewable power in the Americas and Asia-Pacific for BlackRock;Jens Tommerup, CEO at MHI Vestas; and Ward Thomas, president and CEO at Sentient Science. We have also included insights into the trends that shaped this year's list, and an unexpected number one.

You can download the report here.

We are looking forward to publishing our sixth annual Top 100 Power People report next week, on Tuesday 14th November, in association with Sentient Science.

This is the definitive ranking of the 100 most influential players in the global wind industry, and this year features 36 new entrants and an unexpected number one. You’ll have to get a copy to find out who that is!

One of the most interesting elements for us in putting together the report each year is how the composition of the final 100 reflects ongoing changes in the market. For example, this year’s list has been heavily influenced by important industry trends, including wind’s reaction to the election of Donald Trump as US president; the move to competitive tenders in markets including Germany and Spain; the plummeting cost of offshore wind power; and the emergence of floating turbine technology.

Ahead of the launch, here are three things we learned from this year’s report:

• This year, growth in the US has been of crucial importance for the industry globally. Over half of the top 100 individuals operate in North America as one of their two main markets and, for the first time, we have an American number one. These individuals and their companies are playing a vital role in driving the market forward despite uncertainty after the election of President Trump. However, with the release of a tax reform bill by Republicans in the US House of Representatives last week, the wind production tax credit is facing a new threat. We will watch closely whether this US momentum continues in 2018.

• More than half of the individuals featured are involved in offshore wind, either exclusively or as part of their role. This reflects continued confidence in offshore wind and how rapidly falling costs this year are making it mainstream.We have also outlined some of the biggest areas of potential for offshore wind globally, particularly in the nascent US and Taiwanese markets.

• New technology trends are changing the face of the industry. Ward Thomas, CEO of our report sponsor Sentient Science, has spoken to us about how combining big data with materials science could make wind 13% cheaper. And we also interviewed Jens Tommerup, CEO of MHI Vestas, about his ambitions for scaling up wind turbines to make them larger, more powerful and efficient.

In addition, we have interviews with Anja-Isabel Dotzenrath, CEO at E.On Climate & Renewables; and David Giordano, head of renewable power in the Americas and Asia-Pacific for BlackRock. These contain key insights into the global wind market.

Existing members will be able to download the report on 14th November. If you are not yet a member, you’ll be able to purchase the report here, or alternately, why not investigate membership options?

It is said there is a grain of truth in every joke. And so, when chat in the first session at A Word About Wind’s sixth-annual Financing Wind conference in London last Thursday included a quip that a crash is needed to bring down the price of wind assets, we have to take notice. But will it actually happen and why?

It started innocently enough with a conversation about the prices that investors have been paying for wind farms. Low interest rates over the last ten years have prompted institutional investors to look more closely at infrastructure assets, which offer steady returns that are more generous than government bonds.

Likewise, in the last five years we have seen more funds set up to specifically target investments in renewables. Annual investment in renewables globally averaged $264.4bn from 2012 to 2016, up 27% from the $208.8bn on average globally from 2007 to 2011, according to figures from Bloomberg New Energy Finance.

Both factors have helped to drive up prices. David Jones, head of renewable energy at Allianz Capital Partners, told attendees at the conference that growing familiarity among institutional investors with wind as an investment class had driven “the escalation of asset prices to what I think is pretty close to bubble pricing levels we see today”. He added that operational projects in Europe were now attracting “crazy” prices based on “ever more aggressive” assumptions on future power prices and project lifespans.

The other three speakers on the session all said similar.

Mortimer Menzel, partner at Augusta & Co., said that the amount of capital chasing wind farms in core European markets, such as France and Scandinavian nations, had “reached almost a level that is hard to handle”. He added that he regularly turns down 10-30 interested investors early in a bidding process, and would still have 10-20 in the bidding process. This is extending bidding processes.

Lorna Shearin, managing director at RBC Capital Markets, said she was seeing a lot of interest from Canadian utilities and Asian buyers, as well as pension funds, which are all “underinvested in infrastructure”. And finally Ray Wood, global head of power and renewables at Bank of America Merrill Lynch, said buyers are paying the highest prices for wind farms he had ever seen, and were getting more bullish on risk.

Interest in wind is huge and prices are high as a result. But, despite Menzel's quip about a crash being needed, they added that it does not follow that this is a bubble in imminent danger of bursting.

Shearin, for example, argued the investors that she works with are being sensible in terms of the downside risks of their deals, and would be happy to accept returns of 4%-5% in certain scenarios: “Compared to their other alternatives to put money into use, they’re still seeing that as a fair bet,” she said.

Menzel argued that, while he saw a problem with some bidders too high, most deals closed at a fair price: “This irrational exuberance shows itself in bidding, but doesn’t show itself in the closed deals.”

Jones was more circumspect, and warned that many valuations now were based on aggressive assumptions on long-term power prices and operating lives of the assets: “I think there could be an adjustment, and I think it’s needed, because the sector is just going to blow up” when projects do not deliver the returns that buyers expect. Investors will only know for sure if they overpaid when they see how their assumptions now play out in two decades' time.

So could there be an imminent crash?

Wood said not: “There’s not necessarily a bubble. There’s certainly a lot of liquidity so, if there was something to happen in the market where liquidity went away, then of course… prices will go down. But what will drive that liquidity out of the market? It’s systemic and it’s global,” he said. “That’s the exogenous risk that would be hurtful to what is such a capital-intensive sector.”

There is not just one factor behind the attraction of wind farms to investors: wind's growing maturity; high levels of institutional cash chasing limited assets; and sexy returns in infrastructure versus government bonds, driven by low interest rates. All have played their part and none of these is set to change imminently.

If prices are to crash then it looks like it would take a global shock to start it. And ten years on from the last one, surely we're due.

The attendees at our sixth Financing Wind conference in London yesterday heard plenty about the growth prospects for the wind industry in the coming years.

But wind professionals should keep a close eye on trends in solar too. The growth of the utility-scale solar market has the potential to hugely increase competition with the wind industry in the coming years, as the sectors compete for investor attention.

This is a trend we have seen again in our sixth-annual Top 100 Power People report, which is due to be published on Tuesday. In this report, our cover interviewee Anja-Isabel Dotzenrath, chief executive of E.On Climate & Renewables, says she expects solar to play “the more dominant role in the energy transition” globally compared to wind. Whereas the battle this decade has been between renewables and fossil fuels, the next decade could be characterised by a major battle between wind and solar.

It is a statement that Dotzenrath is well-placed to make as E.On has interests in both wind and solar – and isn’t especially wedded to either. Currently, 4.3GW of the utility’s 5.3GW operational renewables portfolio is wind farms, both onshore and offshore.

However, the company has an ambition to grow its solar arm to the same size as its wind arm. Wind firms must take solar seriously.

That does not necessarily mean solar is a threat to wind. We see a high level of interest in investing in renewables globally as more firms divest out of fossil fuels, so there should be a larger pool of money chasing deals in both technologies.

There is indeed space for the two to co-exist. A recent analysis from global financial advisor Lazard has shown that unsubsidised levelised cost of energy for utility-scale solar plants ranges between $43/MWh and $53/MWh, compared to unsubsidised LCOE for wind, which ranges between $30/MWh and $60/MWh.

Why should wind watch out for competition, then? Well, because many utilities and investors in renewables are technology-agnostic.

In another interview in the Top 100, we spoke to BlackRock’s head of renewables in the Americas and Asia-Pacific, David Giordano, who explained that the firm’s $1.65bn Global Renewable Power II fund – which reached financial close in July – has a target portfolio of 75% wind and 25% solar. That is fine now. But, if solar returns look much better, our view is that this balance would shift.

The number of large solar projects for investors to back is certainly increasing. The first utility-scale solar plants were installed in the mid-1980s, but over half of currently-operating utility-scale solar projects came online in the past two years as effect of measures implemented by governments in countries including the US and India in order to back the growth of the sector.

In the US for example, the Solar Energy Industries Association has reported that 72% of all solar capacity installed in 2016 was utility-scale and forecast a similar 2017 figure. This exceptional growth is mainly an effect of the solar investment tax credit, implemented by the US government in 2006 and expected to phase down by 2022, which has brought costs of installing solar in the country to drop by more than 70% since 2010.

It is also worth noting that sustained growth in utility-scale solar power plants is not limited to the US. Bloomberg New Energy Finance has reported that, in 2016, 70GW of utility-scale solar projects were installed worldwide, up from 56GW in 2015. This is in contrast to wind, which achieved 56.5GW in 2016, down from 63GW in 2015.

And solar should keep getting stronger, according to some industry onlookers. A Wood Mackenzie report has shown that as oil and gas demand slows, the demand of solar and wind power plants as investment assets is set to grow. The company estimates that at current costs, we could see a $350bn investment in wind and solar to be required by 2035.

It is no surprise that firms like E.On and BlackRock would look to invest in both wind and solar. The difference is that solar is making a shift from rooftop projects to large utility-scale schemes, and that is giving these companies more solar assets to invest in. Wind and solar are not yet battling head-to-head – but they soon could be.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you booked for our final Quarterly Drinksevening of 2017? If not, do it now. There is only a week left.

On Thursday 16th November, we invite our Platinum, Gold and Silver members to join us, our host and headline partner Swiss Re Corporate Solutions, and supporting partner Papertrail, at Swiss Re's new event space in their iconic tower in the heart of the City of London for our exclusive Quarterly Drinks networking event.

Attendees will be able to hear from Piers Guy, UK Country Manager at Swedish utility Vattenfall, who will be our guest speaker of this final Quarterly Drinks networking event of the year.

Piers has 20 years' experience in wind energy and has either led or been integral to the development, financing and construction of more than 1GW of wind energy projects in the UK and overseas.

Reserve your place now! And if you have any questions, feel free to get in touch.

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, we hope you saw our important announcement yesterday about our Financing Wind event on 9th November.

Due to high demand from our fast-growing global membership base, we are expecting significantly more guests than first envisaged. This means we have had to move to a new venue with more capacity.

We will now be hosting our conference, in association with our partners Swiss Re Corporate Solutions, at Landing 42 at the Leadenhall Building, 122 Leadenhall St., London, EC3V 4AB.

If you haven't yet confirmed your attendance, you are in luck. We have a small amount of additional capacity, and are able to offer 25 more members the chance to be a part of what will no doubt be our biggest and best conference yet.

The event will consist of a variety of networking opportunities and finish with an early afternoon lunch. For more about the event, including featured speakers, please visit Financing Wind 2017.

My colleagues know how proud I am to be Italian. Sicilian actually. The weather is glorious, the food is delicious, people’s hospitality is the best. If you are looking for your next holiday destination, I strongly advise Sicily!

If you are a tourist, it’s an amazing place. If you live there, it’s hell.

Sicily’s unemployment rate averages 22%, against a national rate of 12%. Youth unemployment averages 57%, against a national, already ridiculously high, average of 38%. This means that in Sicily, 57% of people who are between 16 and 35 years old are actively looking for a job without finding it. This is a consequence of a GDP growth that in the island has averaged -12.7% in the last decade.

It’s a scary picture. However, there is a sector that has attracted investors: wind farms. We should be happy – but we aren’t.

State-owned agency Gestore Servizi Energetici has reported that Sicily ended 2016 with 1.7GW of installed capacity in 370 wind farms across the island. This means that very small projects have been built, averaging 4.6MW each. A local source reported last year that another 1.3GW of wind capacity is awaiting approval.

But there is a problem. Since 2005, Sicily has been dealing with an oversupply of electricity, which cannot be exported to the rest of Italy because the grid that links Sicily to the peninsula can handle
a maximum capacity of 1.5GW.

This means that there is already too much electricity in Sicily, and wind turbines are often shut down because the grid cannot handle any more power. If you look at the economic situation in Sicily, you will understand why improvement works to the grid haven’t been viable so far. Hardly a strong market to attract investors.

But construction continues. Why? Well, local media has reported that wind farms in Sicily can guarantee returns four times higher than the initial investment, as a result of generous grants from the Italian government and the European Union. This has helped to generate returns totalling €6.6bn for wind farm owners so far.

It is no wonder that Sicily has attracted investors such as Eni, Enel and Endesa – and it is also no surprise that it has attracted the mafia too, the so called ‘eco-mafia’. Anything that generates big returns interests the mafia. The Direzione Investigativa Antimafia, which is Italy’s police dedicated to fight mafia, calculated last year that around €1.3bn of the above mentioned €6.6bn, has gone to mafia organisations.

That is no surprise, and the result is that some wind turbines stand unused or are never built. Others are used to launder profits from other criminal enterprises. It is understandable that wind energy has become very unpopular among regular Sicilians.

The construction of wind farms owned by the mafia does not bring any value to the local economy. For example, in 2014, five people, including a town mayor, were arrested after a DIA investigation
into development of two Iberdrola-owned wind farms, totalling over 100MW. The police found out that the mafia had forced the developer to use its preferred suppliers, and materials of poor quality. It’s the mafia to decide who can work at their wind farms.

And it is only recently that have we seen much evidence of the authorities fighting back, which they have done by confiscating some projects.

For example, in May the Italian police confiscated wind farms owned by one of the biggest developer in Sicily, Eolo Costruzioni, because of an alleged rtnership with a mafia organisation.

The mafia has been a plague upon Sicily for decades – but this official action could still give some hope. Many wind farms are still in legitimate hands; and the ones that have been confiscated from criminal association should be given to more reputable companies, which are obliged to use them to produce wealth for the territory. This is what the law says - but we see little evidence of it yet.

But I try to stay positive. Such action could still be a way to redeem the reputation of wind on my beautiful island.

Never get emotionally attached. This is a mantra I stick to rigidly in my personal life – read into that whatever psychological flaws you like! – and it works professionally too. I write about a lot of businesses and it is dangerous to start liking any in particular.

Still, I must admit a sneaking respect for Global Infrastructure Partners. This investor is headquartered in New York and has $40bn of assets under management. It tends to keep a pretty low profile – and then concludes another blockbuster deal. Stylish.

In August, GIP bought a 50% stake in Dong Energy’s 450MW Borkum Riffgrund 2 for €1.2bn. This followed a €780m deal for a 50% stake in Gode Wind 1 back in 2015.

And, this week, GIP went even bigger than those two by buying the Singapore-based developer Equis Energy for $5bn, including $1.3bn of assumed liabilities. It is buying Equis for its GIP III fund, in conjunction with Canadian pensions giant Public Sector Pension Investment Board (PSP Investments), the Chinese state-backed CIC Capital Corporation, and some other unnamed partners.

This is set to be the largest corporation acquisition ever in renewable energy when it completes, which is due in the first quarter of 2018 if it wins regulatory approval.

But, even though the transaction has been on our radar since the summer, GIP’s win has still taken us by surprise. It was not one of the big names reported to be in the mix.

The size of the deal is even more unexpected given that Equis Energy does not have a global reputation. But it should. Equis is the largest independent power producer in the renewable energy market in the Asia-Pacific region, with a portfolio of more than 180 assets totalling over 11GW in the wind, hydro and solar sectors. This includes completed projects and those in development.

Its low profile is partly due to its age. Equis Energy was set up in 2012 by private equity group Equis, which was itself founded in 2010 by former executives from Macquarie, and has attracted a none-too-shabby $2.7bn in its lifetime. It is active in Australia and Japan, as well as India, Indonesia, the Philippines and Thailand. This means it should be a good platform for GIP to expand in renewables in the region.

GIP chairman and managing partner Adebayo Ogunlesi has said Equis was a “unique success story” in “one of the [world’s] most promising renewable energy markets”.

And, in our view, one of the key strengths of Equis is its diversity in terms of technology – wind, hydro and solar – and geography. This means that it is not over-exposed to one market in case of unwanted political or economic shifts.

This is just as well given what is happening in key markets in the Asia-Pacific region. In Australia, the government this month rejected plans for a clean energy target in favour of a ‘national energy guarantee’ that favours sources the government sees as more reliable. In other words, it is a bung for the coal industry, which politicians including ex-prime minister Tony Abbott regard as more reliable than wind. It has also emboldened Abbott and his coal cronies to seek more cuts to renewables subsidies.

Meanwhile, Japan has given uneven support for renewables, in spite of the Tohoku earthquake and Fukushima nuclear disaster in 2011 that pushed clean energy higher up its agenda. Since then, solar has enjoyed strong support and installed solar capacity grew from 3.6GW at the end of 2011 to 42.8GW at the end of 2016. Wind hasn’t, growing from 2.5GW to 3.2GW in the same period.

And low prices in competitive tenders in India have destabilised renewables there too, with states refusing to sign power purchase deals agreed at far higher prices.

This shows there are promising pockets of activity for investors in the Asia-Pacific region, but also that a canny investor would be wise to go in with a diversified platform that isn’t solely reliant on support for wind. That is what GIP and its partners are getting in this Equis deal – and both getting a higher profile in wind to boot.

If that means fewer 'surprise' deals, so be it.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you checked out the latest posts on our blog? If not, you should!

This week Romax Technology, one of the sponsors of this year's Financing Wind conference, has shared insights into how data analytics can help project owners make wise decisions.

How can big data achieve dramatic cost reductions for wind farms?
By Romax Technology

In the last few years the wind sector has seen a dramatic decrease in worldwide strike prices. These reductions are a testament to the hard work and many innovative ideas implemented across all industry sectors, which enabled the rapid decrease in the levelized cost of energy of onshore and offshore wind farms.

The largest proportion of these anticipated decreases will be achieved through economies of scale, increased turbine sizes, efficiency savings in logistics and supply chains, reducing the cost of capital, and greater use of debt finance.

However, it is worth bearing in mind that the latest auction results – especially in EU offshore wind – are estimates, and the industry still needs to prove that it can sustainably generate at those prices and remain profitable.

The wider adoption of various sensors and significant developments in data processing capabilities mean that ‘big data’ has become a key topic at many wind conferences.

Ironically, traditional power plants have been using the same data sources (SCADA, vibration, maintenance, lubrication etc.) for many years without resorting to digital clones. Drawing from our experience, working with a number of operators across the world, we find the challenge is not in big data, but in making...

Romax, sponsors of this year's Financing Wind conference, provide an exclusive insight for the A Word About Wind blog into how data analytics can help owner operators make wise decisions. Romax is a global leader in software and services for rotating and electric machinery; they work with over 250 organisations around the world, specialising in consulting, process improvement, design, analysis, testing and manufacturing. You can read more about the work Romax do here.

In the last few years the wind sector has seen a dramatic decrease in worldwide strike prices. These reductions are a testament to the hard work and many innovative ideas implemented across all industry sectors, which enabled the rapid decrease in the levelized cost of energy of onshore and offshore wind farms.

The largest proportion of these anticipated decreases will be achieved through economies of scale, increased turbine sizes, efficiency savings in logistics and supply chains, reducing the cost of capital, and greater use of debt finance. However, it is worth bearing in mind that the latest auction results – especially in EU offshore wind – are estimates, and the industry still needs to prove that it can sustainably generate at those prices and remain profitable.

The wider adoption of various sensors and significant developments in data processing capabilities mean that ‘big data’ has become a key topic at many wind conferences.

Ironically, traditional power plants have been using the same data sources (SCADA, vibration, maintenance, lubrication etc.) for many years without resorting to digital clones. Drawing from our experience, working with a number of operators across the world, we find the challenge is not in big data, but in making smart decisions supported by data.

Many operators have now adopted condition monitoring systems and undertake some form of data analysis to reduce the cost of unscheduled maintenance.

However, this is just one piece of the puzzle. The impact of data analytics that is not supported by deep technology and operational knowledge will always be limited. Much greater savings are available from integrating the whole operations and maintenance cycle into digital decision making platform (see figures 1 and 2).

For example, our own system Romax InSight has estimated that 30% reductions in O&M costs can be achieved following the implementation of digital platforms. In a number of benchmarking studies, Romax InSight has focused on the large variability in performance and operational expenditures for sites operating in the same region with the same turbine technology. This is largely due to the fact that while many existing tools can alert the site team to impending turbine failure, they lack inbuilt operational logic that can enable cost effective solutions.

1) Comparison of Annual Capacity Factor:

2) Availability of Wind Farm A:

The wind industry has successfully overcome many challenges over the years. The one we face today is to achieve dramatic cost reduction, which is perhaps the biggest and most important of them all.

If successful, it will enable wind to move away from being a political bargaining chip or financial vehicle to becoming the mainstream affordable and sustainable energy supply. We look forward to playing a role in helping wind overcome this challenge.

If you'd like to learn more about accurately forecasting O&M costs, Romax have provided a white paper on the subject - it's free to download here.

Ice is good in a cocktail. It is not as good on a wind farm. This is why manufacturers have spent years developing machines that
can function well in icy conditions.

The technology is now making its way offshore. In August, Finnish business Suomen Hyötytuuli commissioned its 42MW Tahkoluoto nearshore wind farm, which it called the first ice-resistant offshore wind farm. The project is located in the Gulf of Bothnia, around 9km off the western coast of Finland towards Sweden, and is made up of ten 4.2MW turbines, supplied by Siemens Gamesa.

Tahkoluoto is not the biggest project nor the furthest offshore, but it is a useful study in how offshore wind farms are being built in harsh icy conditions. We spoke to Toni Sulameri, managing director at Suomen Hyötytuuli, about this project and the wider challenges for development of offshore wind farms in Arctic conditions.

Sulameri explains one of the biggest challenges here was coping with frozen seas: “The major risk to build a wind farm in this area was represented by the combination of high winds and drifting ice. This is one of the major reasons why building offshore wind farm in Finland is so difficult. As far as we know, this is the first offshore wind farm with specific foundations for frozen sea areas.”

The project differs from other offshore wind farms because it uses gravity-base steel foundations with conical tops to withstand heavy ice loads. The project must cope with ice ridges, which are formed by compressed drifting ice and high winds, and can measure up to 25 metres each. These foundations each weigh 500 tonnes and were custom-designed by Finnish offshore contractor Technip.

Sulameri says that successfully proving this technology could make these schemes more attractive for investors, and support
the growth of offshore wind in Finland. He adds that nearshore projects are competitive as installation costs are lower.

“We can build offshore wind schemes cheaper than in the North Sea,” he says. “Our difficult weather conditions call for projects to being built near shore, reducing costs and risks and making ideal conditions to attract investors’ interest.”

This has encouraged Hyötytuuli to pursue new schemes, but Sulameri says the sector needs more government support.

Tahkoluoto required total investment of around €120m of which €20m was from the government, which wanted to demonstrate
that offshore wind is feasible in such a technically complex area. It is unclear if Finland’s leaders want continue with this.

For instance, the government is considering plans for a support scheme for non-hydro renewables, and has proposed awarding support for up to 2TWh of green power in technology-neutral auctions by the end of 2019.

The Finnish Wind Power Association said that could translate into support for up to 800MW of onshore wind capacity, but it is unclear whether offshore wind would be eligible to bid.

Wind is currently a small part of Finland’s energy mix. The nation has about 1.5GW of onshore wind capacity, and wind supplies
only 1% of its energy consumption. By contrast, 70% of Finnish energy comes from oil, nuclear and wood fuels. Offshore wind should play a bigger role if included in the government’s plans.

Sulameri says the growth of the sector also depends on turbine manufacturers. The estimated levelised cost of energy at Tahkoluoto is around €60/MWh, and he says the LCOE will need to be halved if developers are to make profits in a market where power prices and government financial support are both falling. If this is to happen, future schemes in Finnish waters could need turbines of 8MW or more.

Firms like Suomen Hyötytuuli are looking to prove the potential for offshore wind in Finland and, by extension, the role of ice-resistant offshore projects. But they need the support from policymakers and turbine makers to turn this project into a market.

If they can do that, investment shouldn’t be a problem. We still see plenty of money chasing wind projects both onshore and offshore, as long as returns match the risks. We’ll raise a glass to that.

This week, US developer Invenergy launched legal action against Poland. The firm is claiming damages of $700m following the government’s damaging treatment of the wind sector. This is on top of $325m damages Invenergy claims it is owed by state utility Tauron Polska. We can sum up our reaction in one word: good.

Now for the longer version. We think the Polish government and its utilities deserve to face international fury for the way they are treating wind businesses. They are destroying a promising market, and its investors, because of their ideological love of coal.

Regular Wind Watch readers will not be surprised. We have written repeatedly about the harm visited on wind ever since the right-wing Law & Justice Party took power in Poland two years ago, almost to the day, with an agenda to promote growth in the coal industry.

Shortly after, it delayed and then cancelled the introduction of a tendering system to support wind; brought in a law that increased the distance wind farms had to be built from homes, and ruled out huge areas from new developments; and brought in higher tax rates. These contributed to a fall in total installations from 1.3GW in 2015 to 682MW in 2016, and 62.5MW in the first quarter of 2017.

Fellow coal-lovers President Trump and Australia’s Tony Abbott can only dream of having such an impact.

We can blithely use the word ‘good’, but none of this is good for Invenergy. It has been in Poland since 2005 and built 11 wind farms, in which it invested an estimated $595m. In 2010, it signed a long-term deal with Tauron and subsidiary PE-PKH but, shortly after, it says the pair tried to back out of these agreements.

This came to a head in 2014 when Tauron liquidated PE-PKH, which effectively scrapped the contracts the firms had in place. As a result, Invenergy filed four lawsuits in the Polish courts in July that said Tauron had committed “unlawful and unethical acts” leading to the termination of the deals. We wrote this in July.

But Tauron was not the only one. Invenergy has also won a legal action against the state-owned utility Energa-Obrot, which has attempted to terminate wind deals, and still is.

If that looks coordinated then, according to Invenergy, it is. The company this week told Poland's leaders that it is lodging a claim against the government for $700m under the terms of the US-Poland Bilateral Investment Treaty and Energy Charter Treaty for encouraging this behaviour. If the dispute is not settled within six months, the case would go to international arbitration.

The developer alleges that Poland has taken unlawful and coordinated acts that are “tantamount to an expropriation”, and the country has destroyed the financial viability of several of its investments. It says the government has directed its state-controlled utilities to scrap deals with Invenergy “under various pretexts”, and has driven prices for renewable energy to unsustainably low levels, which has damaged investors.

Michael Blazer, the firm’s chief legal officer, said the “Polish Government’s disregard for the rule of law continues to escalate” and so Invenergy must “secure [its] rights”. He has a point. Poland is facing 11 international arbitration proceedings, and Polish media has predicted that the nation could face a surge of international disputes over the way it has treated international investors.

And the European Commission has raised “grave concerns” that the Polish government is undermining the rule of law.

Are there lessons for investors? Well, clearly avoid Poland like the plague. It does not have the stable legal environment that enshrines respect for companies’ rights. Just last month, Energa-Obrot decided to halt the execution of 22 green certificates and started arbitration proceedings to show the deals are invalid.

This would weaken a renewables support system that has been in place since 2005 and puts many investors at risk of bankruptcy, particularly Polish firms that are solely reliant on their local market and cannot go to international courts. The Polish Wind Energy Association says it is “anxiously watching” Energa’s actions.

We may cheer Invenergy fighting for its rights, but we can still rue the fact that the once-promising Polish market is in an endless downward spiral that only a change of government can reverse.

As part of our latest Finance Quarterly, A Word About Wind interviewed Laura Beane, CEO of Avangrid Renewables. Here are some additional insights from her conversation with us. If you'd like to read the full interview, it's included in our complimentary ebook, 5 Lessons on the North American Wind Market, downloadable here.

Over the decades we have seen plenty of people looking to make it in America. Musicians, actors, businesspeople… hey, even our client services director Matt Rollason has moved to Texas this month to develop our North American operation.

Increasingly, businesses in the offshore wind supply chain are eyeing the US and asking if the time is right to set up in the States. In the last two years, we have seen firms such as Copenhagen Infrastructure Partners, Iberdrola, Ørsted (formerly Dong Energy), RES and Statoil making the leap across the Atlantic Ocean to start developing projects in US waters.

This is where A Word About Wind can help. Through our programme of special reports and networking events, we bring our 2,500-strong community of wind energy professionals the latest insights from those making investment decisions in these markets. For example, we help our members understand how fast to expect the industry to grow and which businesses are best-placed to prosper.

It is with this mission in mind that we spoke to Laura Beane, CEO of Spanish giant Iberdrola’s US arm Avangrid Renewables, for a profile in this month’s Finance Quarterly.

Head-to-head in the water

Avangrid Renewables is working on two early-stage offshore wind projects in US waters that have potential for a combined capacity of up to 2.5GW.

This week, the US Bureau of Ocean Energy Management confirmed that Avangrid’s lease of the 122,405-acre Kitty Hawk zone in waters off North Carolina would come into effect on 1st November. Avangrid won the right to develop up to 1.5GW offshore wind farms in the zone in March after securing the lease for just over $9m, ahead of Statoil, Wind Future and WPD. Beane said the confirmation means the firm can start detailed technical work on Kitty Hawk.

The company is also working on the 1GW Vineyard Wind project in waters off the coast of Massachusetts in a 50:50 joint venture with Copenhagen Infrastructure Partners. Avangrid Renewables bought a 50% stake in the development in May. The next step for this project is to bid for support from the state of Massachusetts in a ‘request for proposals’ where bids are due by the end of 2017, and a decision is expected next spring.

Beane told us in Finance Quarterly that Vineyard could be completed by 2022 but that Kitty Hawk is due in the late 2020s. This is because the two states are developing their offshore wind policies and support schemes at different speeds. Firms looking to get a slice of the US offshore wind action must be aware of the huge differences between states.

Even so, Beane is philosophical about the timescales: “These things take time. They are hugely capital-intensive, there is a lot of work that has to happen, and offshore wind is so new in the US,” she says. Deepwater Wind’s 30MW Block Island is the only project that has been completed in US waters thus far, and there are no others currently in construction.

Developing the supply chain

Beane says that the industry “has to be started from scratch in the US” and this would need a big effort from firms throughout the supply chain. Businesses that are seeking to make an impact in the nascent US offshore wind market will also have to grapple with the provisions in the Jones Act, which says that goods shipped between US ports must be carried on ships built, flagged and crewed in the US. The US does not have ships specialised in transporting and installing offshore wind turbines, and so this does threaten to create barriers.

However, the industry has been working on solutions and so these problems need not be insurmountable. Rather, we can see this as just another challenge for US offshore wind to overcome.

Beane says she is seeing a reduction in the industry’s scepticism towards US offshore wind. She told us: “For many years, I think people were really sceptical about offshore wind in the States, because we have so much land and there’s so much land left with high capacity factors.”

But, for cities like New York and Boston, building offshore wind farms could be easier than doing so onshore: “In these northeast markets all of a sudden it’s making sense. You’ve got all of these huge load centres. They have a lot of demand, they’re growing, and they’ve got renewable targets and they do not have enough land, physically, to put the assets that they would need,” she says. As a result, there is huge potential for offshore wind in the US.

For businesses looking to take advantage of that potential, it is vital to stay informed – and this is where we can help. A Word About Wind regularly features the industry’s top names in our reports and at our events, which can give you the insights you need to stay ahead.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, make sure you have booked your place at our next Quarterly Drinks networking evening, on 16th November.

That is two days after the publication of our sixth-annual Top 100 Power People report so there could be no better time to dissect the list with your industry peers. And, if you missed out, it is the perfect chance to collar our team about the 2018 list.

Following the publication of the UK’s Clean Growth Strategy last week, UK wind industry professionals may well be wondering what these new policies mean for their businesses.

While companies should be bolstered by what is essentially a major pat on the back from the UK Government, especially for offshore wind, those in the industry will need to continue to rely on their entrepreneurial skills to fill the gaps left by the strategy. The fight for backing for onshore wind – or even acknowledgement of the sector’s good points – is not yet over.

Momentum continues for offshore wind

First, the exciting news. The UK Government announced support of £557m for renewables projects including offshore wind farms, and a target of over 10GW of new offshore capacity in the 2020s. This gives offshore companies more certainty to keep investing in their business with confidence that there will be future projects – although exact dates were not included.

This strategy continues the momentum of last month’s Contracts for Difference auction, which was an important moment in showing that offshore wind can be built cheaply, and comes as an additional boost to the industry’s visibility. A Word About Wind has provided analysis of the impact of the auction for businesses, which members can access here. The auction results have been hailed by commentators as the start of a new era for UK energy: the Guardian described the strategy as a long-awaited acknowledgement that a low-carbon and a prosperous economy are one and the same.

The inclusion of a sector deal for offshore wind indicates, in the words of Matthew Wright, UK managing director for Ørsted (formerly Dong Energy), that wind can be “the backbone of the UK’s energy system”. This positivity is heartening for those working in the supply chain.

Delivers on Conservatives’ election manifesto

The strategy is also encouraging for firms developing onshore wind farms on remote islands in Scotland, as they can enter these projects to receive support in the next CfD auction, due in spring 2019. This is a positive step, both for reducing costs to consumers and potentially boosting the economies of island communities – not to mention the jobs they support.

But it was not all good for onshore wind. The lack of support for onshore wind continues an antipathy towards the sector since the Conservatives took power in 2015, after five years in coalition with the Liberal Democrats. This is unsurprising given that the party appears unwilling to cause controversy in Conservative-voting rural communities.

As Gordon Edge of Inflection Point Energy writes, the support in the Clean Growth Strategy is a small first step in gaining government backing for the sector: “This is the beginning, not the end, of many policy processes, and there will be many consultations and decisions that can get bogged down in trench warfare as incumbents defend their interests.”

This lack of support for UK onshore wind is another disappointment for those working in the sector. We may yet see a change of heart from government, as it is tough to see how the UK will meet its fourth and fifth carbon budgets without more investment in onshore wind. For businesses, it means carrying on as they were. The strategy hasn’t changed much.

In conclusion

The support for offshore wind, where the UK is a world leader, must be good for businesses.

However, the government’s reluctance to embrace onshore wind, or even acknowledge its many benefits, shows that professionals will have to keep arguing the case for the sector. The government needs to realise that the debate about ‘subsidies’ should not be too much of a hindrance: as strike prices for wind farms, both offshore and onshore, move closer to market power prices then the need for financial support falls.

Public finances are stretched and new energy projects are needed. In that context, onshore wind businesses deserve as much recognition as their offshore cousins.

Want to discuss UK wind with your industry peers? Find out about our events by signing up to our mailing list below.

Hurricane Maria caused widespread devastation when it hit US territory Puerto Rico on 20 September. This included the near-total destruction of the island’s electricity grid, which has left its 3.4million people with either limited or no access to power – and now, one month on, things are looking only a little better.

Last week, the US Department of Defense reported that only 16% of the island's residents had access to electricity. The Puerto Rico Electric Power Authority was more pessimistic, saying it was closer to 10% and forecast less than half of people in Puerto Rico would have power at the year’s end. This is not mainly an energy story, it is a humanitarian crisis, but one exacerbated by lack of electricity.

In situations such as this, it is tempting to find someone to blame – and, in this case, fingers are being pointed at PREPA, not least by President Trump. He has said the island’s electric grid was “in terrible shape” before Maria and, on this, he has a point even if we find some of his other comments on the disaster abhorrent.

The grid has suffered a historic lack of investment blamed on PREPA mismanagement and, last November, US consultancy Synapse said the system was “in a state of crisis”. PREPA was in little position to invest in the grid due to its ailing finances, which concluded with its $9bn bankruptcy filing in July. It is therefore no surprise the system was destroyed in Maria’s 155MPH assault.

But this provides an opportunity for the small wind sector, as crass as it is to use the word ‘opportunity’ in the context of this disaster. The Distributed Wind Energy Association said two weeks ago that its members wanted to help with the relief effort, and firms such as Primus Wind Power, Tesla and United Wind have been shipping wind-powered microgrids to help Puerto Rico residents get power and some measure of relief.

There is a precedent for this action. The use of microgrids in the wake of Hurricane Harvey in Texas and Illinois has been hailed as a success as they helped to keep essential services running; and distributed renewables helped people in India cope after huge floods too. We should not only see wind and solar as helping to curb climate change, but as a vital part of recovery efforts after disasters worsened by climate change.

This is also a chance to highlight that distributed wind is portable and valuable. It is not just about homeowners that can afford to put turbines on the roofs, but taking power to those in need.

This follows in a proud wind tradition. We may increasingly think of turbines as the skyscraper-sized giants that are used offshore or the technically-sophisticated machines that manufacturers can tailor to particular countries. However, at its heart, wind is still a relatively simple technology and turbines can be transported to remote areas and set up on a microgrid. They have been used this way in remote parts of the rural US since the 1930s.

Puerto Rico may also end up as a valuable case study for how renewables firms can help set up a distributed and flexible electricity system in remote places, as opposed to centralised systems of the type Puerto Rico relied on before Maria. It could help those in wind and solar to educate politicians and others
about how to develop resilient power grids. The time and money invested in Puerto Rico could be highly valuable.

There is no guarantee that small wind turbines can cope much better than the previous system in an onslaught like Maria’s, but they can help get things up and running quicker afterwards. There is a question over how such change can be funded in places where utilities may have little time or money to answer such questions, but we would expect entrepreneurs to find a way if they wanted.

Finally, at A Word About Wind we focus more on how people can make money out of wind power and less on ‘saving the world’. The former supports the latter.

That said, we are also well aware that a great many people work in wind because they do want to make the world better. We respect that and, if those working in wind can help the people of Puerto Rico in this time of need, they have our great respect.

We have heard plenty of talk in recent years about the need to develop an offshore wind sector off the coast of the Republic of Ireland. But while countries including the UK and Germany have gone from strength to strength, Ireland has never got going.

That could be about to change. Last week, a development deal shined the spotlight on Irish offshore wind once more. Belgian developer Parkwind, which is part of the Colruyt Group, agreed to become a strategic partner on the development and construction of the planned 330MW Oriel Wind Farm in the Irish Sea.

Parkwind is a well-known player in Belgium. It has developed and built three offshore wind farms, totalling 550MW, in the Belgian North Sea, and is also planning a further 224MW offshore scheme in Belgian waters to be commissioned by the end of 2020.

However, Oriel is Parkwind's first investment outside of its home nation, and seems to fit with its aim to become an international player and extend its expertise outside Belgium.

As for Oriel, it is a project that has been in the making for 12 years – but has only gained any serious attention in the last week. The 55-turbine development is owned by Oriel Windfarm Limited, an Irish company founded in 2005 by Brian Britton to develop offshore wind farms in Irish waters. Before expanding into offshore wind, Britton was a private equity adviser, and Oriel is his first project.

Therefore, it makes sense that he has called on a development partner. Still, we cannot help but question why Parkwind is moving into a market that has not gone anywhere, and has no government support scheme in place to help the market get started. What does Parkwind know that nobody else in the market does?

Here’s the background. The Republic of Ireland ended 2016 with 2.8GW of installed wind capacity. Of this, only 25MW is offshore wind, comprised of the pilot phase of the planned 500MW Arklow Bank project. The remainder has not yet materialised, despite receiving development consent.

Similar fates befell other Irish offshore projects totalling 2.6GW.

The reason for this goes back ten years. Ireland was hit hard by the financial crisis in 2008, which resulted in severe austerity cuts. Against this backdrop, firms in the renewables sector abandoned the idea of pursuing offshore wind, which was seen as too costly, and focused onshore. As a result, over 250 wind farms have been built across Ireland – but offshore developments have stalled.

That still does not tell us why Parkwind has chosen Ireland, though we have a couple of theories.

First, the Irish offshore wind market is not developed. In one sense that is a problem: there is no track record.

However, smaller developers like Parkwind face a slim chance of picking up new projects in established countries including Germany, the UK, Denmark and the Netherlands, where the big players have established supply chains and can dominate. By contrast, Ireland still offers opportunities for the smaller developers to break through. Ireland could become a big market for Parkwind.

Second, there is an argument that Ireland has become too heavily reliant on onshore wind to reach its 2020 target to get 40% of electricity demand from renewables. This has sparked a backlash from local opponents of onshore wind, and the Irish Independent has reported that around two-thirds of new wind projects are involved in legal battles. Offshore wind farms far out at sea do not face the same hostility and would still allow Ireland to hit its targets.

They are the two factors that Parkwind would appear to be betting on, but we do not expect an imminent boom. We have not seen much indication from Ireland’s leaders that they plan to go big supporting offshore wind.

But perhaps they just need the right project could kick them into action – and Oriel and Parkwind will hope that theirs is the one.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you downloaded our latest Finance Quarterly report, published in association with leading energy advisor DNV GL? If you haven't, get on with it!

In this series of reports, published shortly after the end of each calendar quarter, we give readers a quick and focused rundown of the wind market. This includes a mix of interviews, economic analysis and information on recent deals.

In this second edition, we have tackled two angles on Spain's growth in the wind sector.

We have an interview with LauraBeane, CEO of Avangrid Renewables, which is the US arm of Spanish utility Iberdrola;
and we have also looked at Spain in our analysis piece on the country's recent renewable energy auctions, and whether they
will help it to rebuild confidence with investors.

The report also includes insights from our sponsor DNV GLinto growth of the floating wind sector; and we have interviewed Alla Weinstein, founder of developer Trident Winds and formerly of floating foundations firm Principle Power, for our member Q&A.

Finally, the report brings you useful information on project M&A, corporate M&A and power purchase agreements completed in wind between July and September; and the latest developments on a host of large offshore wind projects in Europe, Asia, North America and beyond. Don't miss out!

Falling oil prices and global climate action have forced more oil companies to look at investments in renewables over the last decade. For the wind sector, this has meant new players coming in for a piece of the action, such as Engie, Statoil and Shell.

Last month, another oil company joined them. French oil giant Total acquired a 23% interest in wind and solar company Eren Renewable Energy for €238m. French developer Eren owns a portfolio of 650MW of operating or under construction renewable energy assets, including around 120MW of onshore wind farms, and it plans to achieve 3GW of installed renewable energy capacity by 2023. Under the agreement, Total would have the option to take over Eren after five years.

This buyout is part of Total’s wider renewables investment strategy, which started in 2011, when it invested $1.4bn in a 60% stake of US solar firm SunPower. At that time oil prices averaged $120 a barrel, and Total said it saw renewables as a useful hedge.

Following that, Total also focused on energy efficiency and battery storage systems. In 2015, it invested $12m in a Silicon-Valley start-up that manufactures batteries, and last year it acquired French battery maker Saft for $1bn. Last month, it bought GreenFlex, a French company specialised in energy efficiency.

The acquired companies have been integrated into Total’s gas, renewables and power segment, which was created last year, while this year the utility has set up Total Solar to develop large solar power plants as well as solar systems for industrial and commercial use.

Total already has some experience in the wind sector. Last year it invested in United Wind, which leases small wind turbines to businesses and homes in the US, but the Eren deal is the first time it has expressed an interest in large wind solutions.

That does not mean we expect it go big on wind, though.

For one thing, its renewable energy targets remain cautious. In 2015, the company announced its intention to invest up to $500m in renewables annually, with the aim to raise the share of green energy source in its portfolio up to 20% by 2035. Its core business remains oil, and its biggest recent deal was a $7.5bn buyout of Maersk Oil & Gas. That overshadows any of its green deals.

But it might come under pressure to do more, and do it quickly. Many oil giants have been facing pressure from shareholders to do more about climate change and invest in renewables. For example, this year 62% of ExxonMobil shareholders voted to be more open about the impact of climate change on its business. This is a clear signal that sentiment of oil's backers has been changing.

In addition, a recent report from UK oil giant BP forecast that renewables would be the fastest-growing fuel sources in coming years, at 7.6% annually, compared to only 0.7% for oil. The risk for oil companies that delay diversification is they will be left behind.

There are a couple of reasons to believe that Total is setting a solid base for wind.

First, it has entered utility-scale wind through a company buyout, which should give it the in-house resources and expertise to develop its own projects. This is already happening with the creation of Total Solar, and we might see in future a Total Wind arm that covers both larger and distributed schemes.

Second, the acquisition of Eren shows that Total sees a benefit in diversifying, so it is not just focused on solar. It has the financial clout to get involved in offshore wind too – and its Maersk acquisition has bolstered its expertise in shipping – but it will also find it tough to grow offshore in the face of strong competition from players that have, in some cases, over a decade’s experience. It is not an easy play.

Last week we saw Dong Energy change its name to reflect its green shift, but we do not expect anything similar from Total soon. Its Maersk Oil & Gas buyout shows where its priorities remain.

Ding Dong! The name is dead. This week started with news that Danish utility Dong Energy is changing its name – and not just because of those below-the-waist jokes.

Dong is short for ‘Danish Oil and Natural Gas’, and this no longer makes sense after the sale of its oil and gas operations to Ineos for £1bn. It couldn’t call itself D Energy and so, after mulling hundreds of names, it has chosen Ørsted as a nod to Danish physicist Hans Christian Ørsted. I like it. I’m sure I can live without Dong.

Even without the re-branding, it has been another busy period for the company. Our Finance Quarterly report, due out on Tuesday, shows that the-artist-formerly-known-as-Dong was involved in the largest project M&A deal of the last three months, as it sold 50% stake of its 450MW Borkum Riffgrund 2 to Global Infrastructure Partners for €1.2bn. It is selling the stake to recycle capital.

The utility also attracted headlines last month as it won UK Government backing for its 1.4GW Hornsea 2 project under the Contracts for Difference regime. In doing so, it is helping re-shape the debate about the cost of backing offshore and onshore wind.

These are both significant stories. But, in our view, there are two smaller Dong deals from the last three months that are the most interesting of all. Dong signed a letter of intent with developer NaiKun Wind Energy Group to partner on the 2GW Haida wind farm in Canadian waters; and agreed to partner with Dominion on its stalled 12MW scheme off the coast of US state Virginia.

To us, this is important because it indicates there is an exciting new dynamic in offshore wind, and a return to something of the pioneering spirit that we saw in the sector's early days in Europe. Back then, smaller developers had a chance to work on schemes and make it big – or lose a lot of money and go bust. Emerging markets are bringing this spirit back.

This has been lost in Europe as the market has grown. The emergence of utility-scale players including Dong, Iberdrola, Shell, Statoil and Vattenfall has squeezed out the smaller developers, which cannot compete as hard as on price in subsidy auctions of the type we see in Germany and the UK. Mainstream Renewable Power has worked on successful projects, including its long-awaited 450MW Neart na Gaoithe, but has now put its offshore plans on hold because it does not feel in a position to compete.

This is also why Statkraft is cutting its exposure to offshore wind. These developments are now only for the utilities with the biggest balance sheets. There is nothing wrong with that. Offshore wind farms had to get bigger and more efficient if the industry was to be taken seriously as the mainstream source of power it now is.

Even so, we have missed the diversity of those smaller names.
And this is one reason why we find the offshore market in North America and Taiwan so exciting.

In North America, we are seeing new developers emerge, most notably Deepwater Wind in the US with its 30MW Block Island project, but others too. NaiKun did its deal with Dong, and we see other players like Beothuk Energy and Trident Winds.

There is a similar trend in Taiwan. Established Canadian firm Northland Power is working with Enterprize Energy subsidiary Yushan on two projects, of 700MW and 500MW each; and Macquarie and Dong are working with Swancor on the 130MW Formosa 1. These new markets are giving new players the chance to bring forward schemes and partner with big firms, from who they can gain knowledge and returns.

That is not to say Europe is a totally closed shop. This week, we saw Parkwind partner with Oriel Windfarm Ltd – which is led by Brian Britton – on the development of the planned 330MW Oriel wind farm in waters off the coast of the Republic of Ireland.

And, for the most part, we would not go back. Offshore wind is now a reliable and serious industry thanks to work done by firms such as Dong – sorry, Ørsted. We wouldn’t change that. But it is fun to see emerging markets bringing back a bit of that Wild West spirit.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, you can book now for our final Quarterly Drinks evening of 2017.

On Thursday 16th November, we invite our Platinum, Gold and Silver members to join us, our host and headline partner Swiss Re Corporate Solutions, and supporting partner Papertrail, at Swiss Re's new event space in their iconic tower in the heart of the City of London for our exclusive Quarterly Drinks networking event.

Attendees will be able to hear from Piers Guy, UK Country Manager at Swedish utility Vattenfall, who will be our guest speaker of this final Quarterly Drinks networking event of the year.

Piers has 20 years' experience in wind energy and has either led
or been integral to the development, financing and construction of more than 1GW of wind energy projects in the UK and overseas.

You can reserve your place now! And if you have any questions, feel free to get in touch.

Wind Watch
By Richard Heap

The invitation is out. There are a few celebrities who have come out in recent weeks to rave about wind farms – Dr. Who and Emma Thompson to name just two – but there is one big name we really want at our Quarterly Drinks next year: Red M&M.

Yes, Red M&M. He’s be perfect. He’s chocolatey; he’s been on TV; he’s redder than the button in the White House over which Donald Trump’s tiny hand is constantly hovering; and he likes wind farms. Later this year and in 2018, M&Ms owner Mars is to run a global campaign to raise awareness of a $1bn sustainability drive, which includes buying wind power – and Red M&M is its star.

Mars is also notable in the world of corporate power purchase agreements (PPAs) with wind farms, as it has done deals in the US and Europe. Corporates use these deals because they enable them to hit their green targets while giving certainty over the cost of their electricity. Even so, they are still very much a North American phenomenon and Europe is struggling to catch up. Why so?

That is a question WindEurope, SolarPower Europe and others will discuss at a two-day conference in Brussels next week, Re-Source 2017. It will look at why firms have been slow to sign renewables PPAs in Europe; whether project developers and owners are losing out as a result; and what can be done to address this.

There are a couple of significant reasons for this slow take-up.

One reason we have seen less of these PPAs in Europe than the US is because the incentives for renewables are so different. In Europe, governments have historically backed projects including wind farms with centrally-set feed-in tariffs. This has given owners guaranteed income, and little reason to go to corporate buyers.

The Contracts for Difference regime used for UK offshore wind farms poses a similar challenge. With CfDs, the government pays a subsidy on top of the market price of electricity to ensure that the project owner gets a guaranteed income that can make their scheme viable. Helpful, but also a disincentive to go elsewhere.

In contrast, the US has been more supportive for PPAs. The production tax credit has helped the wind industry to bring the cost of electricity below the project cost of traditional energy in many areas, and made renewables attractive to large firms.

But change is coming. In 2016, renewables PPAs totalling over 1GW were signed in Europe, and governments are ditching centrally-set FITs in favour of auctions where they can pay less in the way of subsidies. We expect more project owners to look at PPAs as a way to mitigate the risks of fluctuating power prices.

A second obstacle to the growth of PPAs in Europe is that there has been no clear framework from the European Union to support corporates that want to sign PPAs – although, with FITs in place, there has been little demand for such a framework. The European Commission’s Clean Energy Package should help remove some barriers for would-be buyers – but this is still a work in progress.

These two factors have enabled US companies to make more progress on signing PPAs than European counterparts, and we have seen a mix of technology giants (Amazon, Google, Microsoft) and others (Ikea, Mars, Wal-Mart) entering the fray.

And a third reason for the slow take-up in Europe is, arguably, cultural. Over many decades we have seen a tension in countries like Germany over whether the growth of renewables should be led by top-down government targets or the bottom-up work of activists. Corporates would inevitably get some people's backs up.

Even so, we expect PPA activity in Europe to pick up with the move away from FITs and changes in the Clean Energy Package. And this should help investors in wind. These PPAs give developers and their financial backers the security of income they need to start work on new schemes; and that certainty is also attractive for investors that might buy the development post-completion.

But we’ll let Red M&M go into more detail on that.