"Diversified and united we must stand," said EWEA's new president, Klaus Rave, in a reference to the bitter dispute within the association over future policy, and the need to quickly close ranks on the issue. "Without diversity, no creative debate will arise. Without fighting on common grounds, we won't be able to survive," he said.
With more than 930 delegates and exhibitors, the conference was the largest wind gathering ever. Three main themes dominated the week: financing, technical development (particularly offshore), and the acrimonious policy dispute over the best way of ensuring a fair market for renewables in a deregulated electricity business (story page 43). It was this debate that became the instant focus of the opening sessions in the large auditorium of the Nice Acropolis, prompted mud slinging at the following press conference, was returned to in an unscheduled session on the second day of the event, and created bubbles of explosive tension which burst at frequent intervals throughout the week in the bars, restaurants and cafes of the sunny Mediterranean city.
The 1999 European Wind Energy Conference and Exhibition (EWEC) began on a positive note as the host country's Pierre Radanne, chairman of the French agency for environment and energy management (ADEME), announced the government's new "socio-environmental" direction for energy policy. Radanne said ADEME has doubled its wind goal to 500 MW within six years under Eole-2005 -- a government program run by utility Electricité de France (EdF), which develops wind through a series of tenders (Windpower Monthly, November 1998). To date, Eole-2005 has led to 80 MW of contracts, but only 19 MW has been built. A 75 MW call for tenders was issued late last year, with contracts to be announced by May.
Eole-2005 has been criticised for only slowly increasing wind capacity in France, for its low profit margins and its failure to encourage technology development, Radanne said. So ADEME has modified the program. EdF is no longer limiting wind project size to 8 MW, to allow for more economical projects. In addition, the dramatic remodelling of EdF going on right now, as the government starts liberalisation of the electricity market, means now is the time for wind to make itself visible, stressed Radanne. A new regulatory body is to administer a pool of funds to be used partly for the promotion of renewables. The key to making it work for wind, added ADEME's Francois Démarcq, will be to take a regional planning path. "We hope this will facilitate acceptance by the public," Démarcq said.
From a utility not generally known for its sympathy towards renewables, a presentation by EdF's Jean-Pierre Bourdier was encouraging. "We are looking ahead to the future," he said. "Fossil fuel and nuclear will not be sufficient to satisfy world demand. Wind energy will have a very important role to play." One major condition wind must fulfil to succeed, he said, is to "avoid the pitfall of public opposition. Avoid the NIMBY [Not In My Backyard] phenomenon. Fight against it from the start."
Show me the money
For the shakers and the movers in the wind energy business world, the highlight of the conference was a special focus on financing, where topics such as futures investors, counter trading and bond markets showed that wind is moving quickly into the international sphere where big pots of money await. In addition to the proliferation of terms like "non-recourse financing" and "manageable risk" at a number of sessions in the large auditorium, a separate "Wind Finance Forum," running parallel to the main program, brought 166 representatives from the financial and wind sectors face to face. For a full day discussions of hard core business issues progressed over the constant chirp of mobile phones. "We're seeing larger and larger projects now," explained Peter Gish, a lawyer with UPC International of Narbonne, France. "The larger the project, the lower the cost of capital. Combined with improvements in technology and wind's improved track record, banks are starting to accept wind. The economics are there."
Banks are not exactly knocking down wind's doors yet, however. "Banks are conspicuous by their absence in this particular forum," said Gary Griffiths of international financier and project developer MeesPierson. "It's our job to make banks aware so they can increase their participation." Capital from institutional investors "is very much available," he stressed. But to "get banks comfortable," a five year minimum warranty on wind turbines is critical. Caroline von Tilborg of Dutch Rabobank International explained: "Most turbines have a track record today of seven to eight years. Performance track records of today's new technology is scarce or non-existent, yet it's important for banks that this track record is there."
One major issue discussed was the dilemma of attracting a bank to smaller projects. Griffiths said MeesPierson does not look at any project smaller than $50 million, for example. Robert Paladino of the York Research Corporation of New York explained "A bank spends as much time and money on a $1 million project as it does on a $20 million project. Which one do you think they are going to choose? If they only look at the $20 million projects, what happens to all the people with $1 million projects?" One solution, he suggested, would be to standardise the forms and procedures to facilitate financing of small projects. "This lowers the cost of borrowing," he said.
Easier said than done. "We've been trying to standardise project financing in Germany for ten years now and unsuccessfully," said Marc Wallenstein of Germany's HypoVereinsbank. "If you have a small project you will always have a problem -- the legal and soft costs are regarded as too high. This is not a question of fiscal incentives, but more a way of structuring it." Creative structuring of small project financing is already out there and it works, as a few speakers noted. One example came from John Caird of ORIX Corporate Finance Ltd, a company with a financing threshold of $20 million. "We're always looking for opportunities to do individual projects and then rebundle them together. In many cases the risks are good if not better than in financing a traditional power station."
"You're going to see an increase in small projects coming out," predicted Gordon Edge, editor of the Financial Times Renewable Energy Report. "If banks don't get used to that, other banks will."
On the other side of the Atlantic Ocean, "It's getting hard to make a buck," said Mike Cook of TradeWind Insurance. Small independent power producers in the United States are finding it tough to compete with the "big boys" for projects and contracts; projects under 100 MW depend heavily on incentives, he added. "Many US developers have abandoned the US and gone to Europe, Asia and South America, where they can find higher tariffs and lower interest rates." Currently, he said, big companies such as FPL and Enron are not concerned with immediate profits in wind, but in building strategic markets in other utilities' territories. "We need to get banks and private investors back in who were burned at the stake fifteen years ago," he said, in a reference to the overnight axing of California's tax credits for wind in the 1980s.
Paladino, whose company financed a 34 MW wind farm in Big Spring, Texas, through bond markets said there is a ray of hope. "The US market is beginning to turn around as we have gotten operating experiences. Enron's successes have helped other developers. The situation has gotten better than it was just six months or a year ago."
The financing of wind was compared several times with conventional energy. In many cases, speakers said there was no difference. "The only real difference is evaluation and availability of fuel," said Caird. "In the case of wind, you can go through a great deal of research, but if God decides not to blow wind, there's not much you can do about that." Not everybody agreed. "Conventional fuels are commodities traded on the market," said another participant. "In the case of renewables, the fuel is free. The financial establishment must realise that the investment is totally different. We're dealing with the end product here, the kilowatt hour. This is the mechanism we have to use to convince the people that we can deliver."
From an insurance perspective of comparing green and grey power, wind has an advantage. "The nice thing about wind is that unlike conventional power plant, in a wind farm one, two, or three turbines can go down but the loss is insignificant with regard to the economics of the whole project," said Gish. "The wind farm represents an extremely manageable risk."
Along similar lines, a representative from Britain's Straits International, which consults on counter trade in conventional energy, related his company's new interest in wind's value. Counter trading is a way of financing a project in markets with neither cash nor credibility, he said, and it has many forms. In an offset trade, for example, a rich country agrees to buy a large amount of raw material from a poor country, insisting it take a wind plant or two in return. In Europe, the trade could be in offset credits or obligations. "It would use wind as a counter credit," said Matthias Rapp of Straits. "The wind farm will be paid for by the party that wants to buy the offset credit."
From land to sea
Meanwhile on the technical front of the conference, many papers and posters focused on offshore wind issues. With the next major wave of development expected to sweep offshore, the subject attracted some of the highest numbers of delegates to such topics as technology development, technical feasibility, machine limitations, grid connections and costs. One session was so popular, in fact, it left several delegates standing outside a full mini-auditorium, unable to get inside.
Regarding costs, offshore plants were claimed to be just as economical as land based machines, yet reliability of offshore wind turbines was clearly still a major issue. The first integrated design tools for offshore plant are starting to appear in several countries, and points were made about stability of offshore plant, two-bladed designs and the reduced problem of visual constraints when planning for offshore projects.
Several short workshops, which were new for a European wind conference, were praised for the way they gave a fast glimpse of essential information, upgrading the value of the posters. Besides the offshore theme, workshop topics included large scale integration, aerodynamics, aeroelasticity, load and safety, hybrid systems and MEASNET, the network of European measuring institutes.
Another session gave wind turbine manufacturers a chance to present their latest developments. One delegate said it was the best session because companies were blatant in advertising their products, not disguising promotion behind scientific research papers. "I'm happy to see that nobody else is announcing anything new here," said Henrik Jørgensen of Vestas Wind Energy Systems with a broad smile. "It proves the industry has now become market driven and mature."
Although details were scarce, a few general trends were revealed from the session. One of these was that small companies are now developing large, reliable wind turbines. In general, reliability has become an issue again as the industry moves to larger machines and 5% of the bugs will remain hidden as a new model of turbine goes into operation, one manufacturer's representative said. "When you have a small failure in one machine, you're probably going to have this in 100,000 machines later on," he added.
MORE FLEXIBLE TURBINES
Another trend was around design, revealing that large machines are becoming more flexible and better able to adapt to changing conditions, although aerodynamic problems still exist. In addition, transportation logistics confront the whole industry. "We're not in a hurry with these monster machines," said Josep Prats of Spain's Ecotècnia, which has 40 1.5 MW units in operation. "We're just touching the borderline of the transport system -- we can just get over bridges. Right now we cannot transport blades over sixty-six metres long."
In his conference summary, session organiser Jos Beurskens also noted information revealed about current attempts to attach an economic value to wind-strength forecasting models, which allow utilities to plan ahead for the amount of wind power coming in to their system. "Wind turbines have become so reliable, they can be used as an instrument to verify different wind forecasting models." Beurskens noted a few other conference highlights: a renewal of old ideas, such as small scale hybrid systems; first attempts to commercialise condition monitoring, and the appearance of fast, remote sensing measuring technologies.
Some of the most notable messages to the European wind community came from EWEA's past and new presidents. "The future of the wind energy industry is about selling electricity," Rave told delegates at a well attended closing session. Because investment is so critical, "You need to get your figures right." While it is easy to define the costs for investment, it's tougher to define the cost of operation, he explained. Further, "This industry has every right to claim a well deserved environmental bonus," Rave said. "But bear in mind that a large amount of other power producers are working toward that as well." In a single European power market, "we need a grid operator, load manager or system operator who gives us fair access and allows the cost [of wind] to be transparent to customers. Without transparency, there will be no market." In a reference to the ongoing liberalisation process, he added: "We must play an active part in the new rules that will be decided soon if we are to have a level playing field in Europe."
Ian Mays, the outgoing president of EWEA, reminded conference delegates of EWEA's prediction that 3000 MW will be installed in Europe annually from the year 2000. What is needed now, however, is a "stable and sustainable market mechanism that will achieve the massive growth" clearly on the cards. With regard to the price of wind, he said "A significant threshold has been breached." In the recent Scottish Renewables Obligation, the price was brought down to under EURO 0.03/kWh (Windpower Monthly, March 1999). Grid planning and public support, however, remain a large obstacle for growth across Europe, Mays said. "The current grid is designed for centralised generation and we need to change to dispersed generation. How and who will invest in that development?" One solution is to call for governments to pass down their national carbon dioxide reduction targets to local authorities, linking this to grid planning, Mays said.
He quoted Søren Krohn of the Danish wind turbine manufacturers association, who noted that more people work in wind industry today in Denmark than in the fishing industry. Mays said, "We need to get this message out: Wind energy is abundant, sustainable, eco-attractive, popular, and it creates jobs."