financing of wind power developments within the context of market based support mechanisms and...
TRANSCRIPT
Financing of wind power developments within Financing of wind power developments within the context of market based support the context of market based support
mechanisms and related political risksmechanisms and related political risks
Presentation at EWEC 2006, Athen
Finance & Insurance Session Inger-Anne Blindheim – GreenStream Network AS
AgendaAgenda
• Introduction to GreenStream Network
• The Swedish – Norwegian elcertificate market
• Case study: Austevoll Wind AS – 21 MW
• Conclusions
GreenStream NetworkGreenStream Network
• Largest independent company within consulting and trade of CO2 and green certificates in Northern Europe
• Annual trading volume of above 10 TWh green certificates
• Key competence: – Calculate and demonstrate green values– Analyse and optimize trading strategies for green values (certificates, CERs and EU
allowances)– CDM/ JI project: PIN, PDD, registration and ERPAS or portfolio management of CERs– Development and financing of renewable energy projects – in co-operation with the owners
and technical advisors
• For most windpower projects, green values are the key to profitability and financing
• Owned by the management (60%) and HSH Nordbank /HSH Gudme Investment Bank
• Annual turnover 2005: 1,8 million Euro – credit rating AAA
• 20 employes – offices in Norway, Sweden, Finland, Germany, France, Estonia and Lithuania
• Environmental Finance: Best Broker of the year 2004 and 2005 – trade of green certificates in Europe ex-UK
Outline of the Swedish-Nowegian elcertificate market (1/2)Outline of the Swedish-Nowegian elcertificate market (1/2)
• The Swedish elcertificate market started up in May 2003
• Original target operation of a joint Swedish-Norwegian elcertificate market from January 1, 2006 - postponed to January 1, 2007 .........
• Proposed to last up to 2030
• Purpose: – release large scale investments in renewable energy,
– decreased fossile fuel production; and
– improved power balance
Outline of the Swedish-Nowegian elcertificate market (2/2)Outline of the Swedish-Nowegian elcertificate market (2/2)
• 15 years elcertificate production period per project
• Each power consumer (except energy intensive industry) obliged to consume a certain quota of renewable energy through elcertificates
• Increasing elcertificate quota level combined with penalty fee for non-compliance
• Elcertificates can be freely traded in the market: spot, futures, forwards
• Elcertificates can be accumulated and saved
• Technology neutral?
Time-schedule for the elcertificate marketTime-schedule for the elcertificate market
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
Clarify law principles in coordination with Norway
Clarify law principles in coordination with Sweden
Feb-June law proposalat the Energy comittee
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
Clarify law principles in coordination with Norway
Clarify law principles in coordination with Sweden
Feb-June law proposalat the Energy comittee
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
Clarify law principles in coordination with Norway
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
Oct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
Oct JanDec Feb Mar AprNov JuneMayOct JanDec Feb Mar AprNov JuneMay
Norway
2005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
Norway
2005 2006
Norway
2005 20062005 2006
15/02 (?) Law proposalto parliament
20/06 (?) Approval
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat the energy comittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
01/11 – 01/12 possible public reviewand additional law modification
17/3 law proposal to the parliament
March-June law proposalat theEnergyCommittee
20/06 Approval
Sweden
2005 2006
JunJanDecNovOct Feb Mar Apr May
Sweden
2005 2006
Sweden
2005 20062005 20062006
JunJanDecNovOct Feb Mar Apr May
Clarify law principles in coordination with NorwayClarify law principles in coordination with Norway
Clarify law principles in coordination with Sweden
Feb-June law proposalat the EnergyCommittee
Risk of market based incentivesRisk of market based incentives
• Political risk
• Price risk
• Hedging premiums
Price development – Nord-Pool over 30 daysPrice development – Nord-Pool over 30 days
Price development – power and elcertificate marketPrice development – power and elcertificate market
180
230
280
330
380
430
480
530
22.4
19.5
17.6
15.7
11.8
7.9
5.10
1.11
26.1
1
23.1
2
24.1
18.2
17.3
15.4
12.5
8.6
5.7
1.8
26.8
22.9
19.1
0
15.1
1
12.1
2
Elcertificate
Powerprice
Elcert+Powerprice
SEK/MWh
Austevoll Vind AS – 21 MW, NorwayAustevoll Vind AS – 21 MW, Norway
AustevollVind AS
Austevoll Vind AS – NorwayAustevoll Vind AS – Norway
• 3 small projects, total 21 MW located within a distance of 15 km
• Some of the best wind-parks in Norway:– Stable wind-speed of 7,9 to 8,3 m/s – Close to existing grid– Low infrastructure costs– Grid connection confirmed – Power deficit in the surrounding area – Mild weather-conditions and no icing – Increasing power prices – Elcertificates could contribute to approx. 40% increased income on top of the power prices– Internal rate of return on equity > 24%
Austevoll Vind AS – NorwayAustevoll Vind AS – Norway
Comparison elcertificate vs. investment support regime
Assumptions - Austevoll Vind 21 MW Scenario 1: Elcertificate market
Scenario 2: Investment support regime
Investment cost (NOK) 189 588 000 189 588 000Equity (NOK) 37 917 600 47 397 000Debt finance (NOK) 151 670 400 94 794 000Investment support - 25 % of investment na 47 397 000Installed capacity 21 MW 21 MWAnnual power production (MWh) 60 900 60 900Economic lifetime 20 years 20 yearsInterest rate 5,50 % 5,50 %Annual inflation rate 2,50 % 2,50 %Income taxation 28 % 28 %Property tax 0,007 % 0,007 %Depreciations 15 % 15 %Return on total investment 11,70 % 9,90 %Return on equity 23,50 % 13,70 %
ConclusionsConclusions• Properly adapted market based incentives with high ambition level for renewable energy may result in:
– The most cost-efficient projects with lowest marginal cost will be developed first– Only the best projects will be developed– Higher return on investment for investors at the current maximum investent support level in the EU – 25 % – Renewable energy projects more competitive to fossile and nuclear power– In a market based power system, the elcertificate market will result in investments in new capacity, reducing the pressure for increased power prices for the consumers
• Price risk for market mechanisms may be handled through risk hedging, but the project owner looses part of the upside in return of safe sleep
• Political risk must be minimalized through:– Efficient political processes – A clear legal framework ensuring a predicable, long term market (minimum 20 years horizon)– Cross-border systems – one government can not change the market system itself
• Investment support regimes are subject to annual budget allocations, – Investments in the range of 10 – 15 TWh required to improve the Norwegian power balance will be a heavy burden on the annual budgets– Lead time for project development is 4 – 7 years. Will investors build up a sufficient project pipeline under an uncertain investment support scheme subject to annual government approvals?
Thank you for your attention!Thank you for your attention!
GreenStream Network Ltd.www.greenstream.net
Erottajankatu 1 Stureplan 4 C Lysaker Torg 8 Zur Bülte 12FIN-00130 Helsinki S-11435 Stockholm N-1366 Lysaker 33739 BielefeldFinland Sweden Norway GermanyTel. +358 40 840 8000 Tel. +46 70 618 8003 Tel. +47 6752 1131 Tel. +49 173 601 0380Fax +358 9 278 2600 Fax +46 8 463 1010 Fax +47 6752 1199 Fax +49 521 8750 580
Please contact us:
Project finance Inger-Anne Blindheim Mob: + 47 480 39 511Proj. fin./certificates/pol. risk Arne Jakobsen Mob: + 47 920 89 032Green certificates Europe Thomas Müller Mob: + 49 521 8750 484CDM/JI Tommi Tynjälä Mob: + 358 40 840 8003Trade of EU allowances Jussi Nykänen Mob: + 358 40 840 8001