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European interest returns to onshore wind

EUROPE: The big wind projects announced in Europe in 2011 are largely onshore, a marked change from previous plans, where offshore has brought in major developments.

But the market is not changing immediately, as many of these offshore projects remain incomplete, and half of all the projects in the pipeline are offshore, according to Windpower Intelligence. With 66.4GW, the UK has nearly a third of all European projects being worked on, looking well positioned to be a leader for new wind capacity in coming years, especially offshore. The data indicates that Germany, Spain and France remain important for developers, who are also eyeing emerging markets like Romania. All five countries have strong wind resources and have generally provided solid support for wind.

But how many of the European projects listed by Windpower Intelligence will actually get built depends on a number of factors. The current debt crisis has made project finance difficult and credit could become tighter even in the more resilient markets.

Incentive schemes and permitting regimes have changed or are under review in several countries including Spain, the UK and France. "We'd expect to see investors waiting to be sure that the revenue stream is dependable before going forward with projects," explains Oscar Fitch-Roy, policy adviser for consultant GL Garrad Hassan. Incentives unease saw Italy, which ranked third in Europe for installed capacity at the end of 2010 and seventh in terms of pipeline size, fail to add any significant capacity to its project pipeline in 2011.

Good vibes

Offshore projects in Europe enjoy strong wind resources and are often supported by governments attracted by the jobs and investments they can bring. This helps project financing, while funding from the European Investment Bank (EIB) has been substantial. With hefty investments needed, these projects are often led by consortia, with utilities involved.

Utilities are the most active developers for planned capacity offshore, but the background of investors is more mixed onshore. Many onshore projects will involve companies like Spain's Iberdrola (which also owns Scottish Power), German utilities RWE and E.on, and Scottish & Southern Energy (SSE). All projects announced by Denmark's Dong Energy were offshore. Spanish utility Acciona, with a pipeline of roughly 1.5GW, stands out for its focus on onshore, although it is working on the development of offshore turbine technology.

The largest European project in the pipeline, according to Windpower Intelligence data, the UK's 9GW Dogger Bank offshore project, is also the world's largest planned wind farm. The developer Forewind is a consortium of UK firm SSE Renewables, Norwegian oil & gas company Statoil, Norwegian renewables company Statkraft and RWE Npower Renewables, the UK division of German utility RWE's renewable division unit. "The aim is to get the entire 9GW under construction by 2020, so that's quite a ramp up," notes Gareth Lewis, Forewind's head of offshore development.

Public consultations on the first phase of the project, the Dogger Bank Creyke Beck development comprising two wind farms of up to 1.4GW each, began in December. Lewis says Forewind expects the application to be ready by late 2012 or early 2013. Given the time regulators need to examine the project, construction is unlikely to begin before 2015. Meanwhile, the consortium is "fully engaged with stakeholders" like shipping and fishing companies, and environmental and bird-protection associations.

Turbines for the project have not been procured yet. "We're very much in the development phase, and have to keep our options open," says Lewis. "We are aware of what turbine manufacturers are planning but we must balance this against the track record of existing turbines."

Germany is also a hotspot for wind projects but it has a very short planning cycle, which has resulted in a small offshore pipeline in Windpower Intelligence data. The country gets high marks for rapidly turning around new and favourable legislation for offshore wind in 2011 after deciding to phase out the use of nuclear power.

France is also opening up to offshore wind, with the winners for an initial 3GW tender set to be announced in April. "Campaigning for presidential elections is under way and there is a big stake for the government, which sees the opportunity for large infrastructure projects with lots of potential for domestic investment," notes Jean-Marc Armitano, CEO of Eole-Res. The developer has teamed up with Iberdrola to bid for up to 1.25GW in two offshore projects. The partnership also involves turbine supplier Areva and engineering giant Technip, both French. Consortia led by EDF Energies Nouvelles and GDF Suez are also bidding.

Regardless of the French election results, support for offshore wind is seen as unflagging. Opposition parties have made a big reduction in nuclear power and more renewable energy a key part of their platform. One clear risk, however, is that some projects assigned during the tender process could still be shot down in permitting. Prospects are less rosy for onshore wind in France. "We're concerned because the latest statistics on permit awards show a substantial decrease due to a recent change in the permitting regime," notes Armitano. He fears this could translate into a slowdown in France's onshore market for the next 18 months.

Spain slows

Although Spain still has one of the largest pipelines in Europe with 13.7GW of projects lined up, short-term prospects are less positive with the current feed-in tariff set to expire at the end of 2012 - few pipeline projects were announced in 2011, according to Windpower Intelligence. "In order to be building for 2013, companies should be buying turbines now but no one is doing that because we don't know what's going to happen," says Sonia Franco, communications director for Asociacion Empresarial Eolica, the Spanish wind-energy association. "We know that with the current financial crisis we need to be realistic, but if Spain wants to meet targets there needs to be realism on both sides." The association is asking for a tariff that continues to guarantee sufficient investor returns.

Emerging Europe

Despite stumbling blocks, mature wind markets in Europe are likely to drive growth in the next decade. In addition, emerging markets are on the radar of developers. Romania stands out among these, ranking among the top European countries for project announcements.

Eolica Dobrogea is developing more than 1.5GW of Romanian projects for Spain's Iberdrola and has seen interest from other utilities and investors. "Romania is not an easy market to invest in," says Eolica Dobrogea chairman Christoph Kapp. "But an incentive system with two green certificates through to 2017 gives investors a huge potential to recovery money quickly."

Eolica Dobrogea is now building the first 80MW of projects in the country for Iberdrola and has a grid-connection contract for another 600MW. In November, the developer reached a preliminary grid-connection agreement for a further 600MW, which is dependent on its making investments to upgrade the grid. Romania typically requires such investments of project sponsors.

Because European countries typically have guaranteed purchase prices for wind power, there is less information on power purchase agreements (PPAs) than elsewhere in the world. But PPAs are important in the UK, where utilities purchasing power from wind-farm owners have recently tightened forecasting and electricity-generation requirements, notes GL Garrad Hassan's Fitch-Roy.

Asian suppliers wait in the wings

Windpower Intelligence data provides visibility on more than 42GW of turbine supply agreements for European projects. While developers across the continent point to a strong interest from Asian suppliers to crack the market, Western manufacturers continue to dominate.

There are plans by a Greek renewables firm to use Sinovel turbines on a 200MW project in northern Greece, but the timing of the project is not clear. Mainstream Renewable Power recently put on hold a 1GW supply contract with Sinovel. Developers believe the economic crisis could give Asian suppliers a greater opening for expanding in Europe, perhaps by following the example of Indian manufacturer Suzlon, which acquired German manufacturer Repower in 2009.

Thanks in part to its strong offshore business, Germany's Siemens is a leading manufacturer, with over 8GW of European turbine supply agreements in the Windpower Intelligence database. Details of some 6.2GW in European projects using Vestas turbines have also been captured, along with more than 3GW each for Enercon and Repower. Bard and Gamesa also feature strongly.

Technological advances in turbine manufacturing are making it easier to exploit less windy onshore sites in mature markets. "Some projects that were not viable a few years ago are today, says Amitano of Eole-Res.

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