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Experiences with Community Power Projects in Northern Germany

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Lender's Perspective: Experiences with Community Power Projects in Northern Germany …

Lender's Perspective: Experiences with Community Power Projects in Northern Germany
Speaker: Dr. Klaus Rave, Co-CEO, Investitionsbank Schleswig-Holstein, VP European Wind Energy Association (EWEA)

Part of the 2010 Community Power Finance Forum at MaRS:
http://www.marsdd.com/communitypower

Published in: Technology, Business

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  • 1. Community Power Finance Forum Experiences with community power projects in Northern Germany Dr. Klaus Rave Member of the Board Investitionsbank Schleswig-Holstein (IBSH) Vice President European Wind Energy Association (EWEA) Toronto, 10.05.2010
  • 2. Agenda
    • IBSH/ EWEA at a glance
    • Financing renewable energy in times of financial crisis
    • Community power projects in Northern Germany
    • Additional opportunities for community-owned projects
  • 3. Investitionsbank Schleswig-Holstein
    • Main development bank for the federal state of Schleswig-Holstein (Northern Germany)
    • Basic data (2009)
      • Balance sheet total of 16,8 Bill. €
      • New business volume of 2,67 Bill. €
      • 460 employees provide approx. 60 products and services
    • IB business segments
      • Corporate Financing
      • Real Estate Financing
      • Public Sector Financing
      • Grants
    • We have started financing renewable energy projects in 1991 and regarding wind energy we haven’t had any distressed loan
    • Several special activities, e.g.
      • IB.Europe
      • PPP Centre of Competence
      • Energy Agency
  • 4. European Wind Energy Association
    • EWEA actively promotes the utilization of wind power in Europe and worldwide
    • Established in 1982, EWEA has become the largest and most powerful wind energy network
    • Members from 50 countries represent over 500 companies, associations and research institutions
    • Resources are mainly focused on
      • lobbying
      • communication and policy activities
      • responding to enquiries from our member organizations
  • 5. Agenda
    • IBSH/ EWEA at a glance
    • Financing renewable energy in times of financial crisis
    • Community power projects in Northern Germany
    • Additional opportunities for community-owned projects
  • 6. Causes for the financial crisis
    • A fatal triangle of developments in different sectors lead to the biggest market failure in history
    Technology and globalisation (IT-Industry and global market = test market) Ideology and politics (deregulation, “home-owner society”, low key interest rates) Short-term thinking and demand for a high ROI (at banks and private households)
  • 7. IB an the renewable sector Capacity financed: 27 MW Volume of Business: 28,5 Mio. EUR Maturity of Loans: 15-17 years Wind Energy Capacity financed: 473 MW Volume of Business: 149 Mio. EUR Maturity of Loans: Max. 15 years Solar Power Biogas Capacity financed: Volume of Business: 38,4 Mio. EUR Maturity of Loans: Max. 15 years
  • 8. Financing of wind energy worldwide 2000-2009 Source: Dealogic $bn No of Deals
  • 9. Global installed wind power capacity 2009 (MW) Source: GWEC
  • 10. Financial crisis and renewable energy projects
    • Reduced bank lending especially for large scale projects, but renewable energy sector still appreciated by banks
    • Market for syndication of renewable energy projects is heavily affected, especially international projects
    • Since fall 2008 no underwriting commitments for syndications available
    • Syndication sometimes substituted by so called „Club Deals“ but at higher costs
    • Higher margins (average 100-150 bps) and conservative structures
    • Banks concentrate on core-regions and core-customers
    • Average project size is smaller/ problems for offshore projects
    • Increased importance of governmental institutions like IFC, EBRD, EIB, KfW* and IB – risk sharing – and local/ regional banks
    • But - gradual easing since 4th quarter 2009
    * International Finance Cooperation – World Bank Group, European Bank für Reconstruction and Development, European Investment Bank, Kreditanstalt für Wiederaufbau
  • 11. Agenda
    • IBSH/ EWEA at a glance
    • Financing renewable energy in times of financial crisis
    • Community power projects in Northern Germany
    • Additional opportunities for community-owned projects
  • 12. Wind energy in Schleswig-Holstein
    • Factor 1.000 in 20 years – energy production
    Sources: Statistisches Amt für Hamburg und Schleswig-Holstein, Ministerium für Wissenschaft, Wirtschaft und Verkehr des Landes Schleswig-Holstein, Deutsches Windenergie Institut 4% 13% 16% 31% 40% 100% Share in consumption
  • 13. Wind energy in Schleswig-Holstein
    • Factor >100 in 20 years – turbine growth
    2008 1980 Factor 4% Rotor diameter Capacity largest WT Capacity largest Wind farm Installed capacity worldwide Share in consumption (Europe) 4,6% 160.000 MW 1.600 5.000
  • 14. Wind energy in Schleswig-Holstein
    • Wind energy has become an important and effective instrument for rural development in Schleswig-Holstein
    • Wind power plants are an opportunity for farmers to diversify their business and finance growth
    • More than 7.000 jobs have been established
    • The annual tax revenue for municipalities in Schleswig-Holstein can reach up to 13.000 € per MW
    • Surface area of Schleswig-Holstein: 16.000 Km 2
    • 0,75% of the surface area = about 40% of the power requirement
    120 km 2
  • 15. Wind energy in Schleswig-Holstein
    • Success story “wind energy in Schleswig-Holstein” started in the late 1970`s – promoted by a combination of several factors
      • Windy locations near the North Sea and the Baltic Sea
      • Existing maritime/ aviation technology
      • Farmers and idealists built first wind energy converters/ the Danish influence
      • Certifying/ financing/ insuring
      • 100-MW-/ 250-MW-program (community projects preferentially eligible for grants)
  • 16. Wind energy in Schleswig-Holstein
    • First community wind park in Lübke-Koog Nord (1991)
      • Combination of 10 initially independent applications to achieve a coherent development of wind energy in the municipality, lower costs, better access to the grid
      • High acceptance within the municipality: today 160 out of 180 inhabitants are participants in the community wind park “Lübke Koog Süd”
  • 17. Community wind parks in Schleswig-Holstein
    • Community wind parks have been and still are a very important factor for the development of the wind energy sector in Schleswig-Holstein
    • Community wind parks initiate economic growth in structurally weak areas
    • The new business volume (corporate financing) of some local banks in Schleswig-Holstein depends completely on renewable energy
    • IB preferentially finances community-owned wind parks because of the particularly positive effect on the local economy
    • Relevance of community wind parks for Schleswig-Holstein, e.g. county of North Frisia*
      • Number of wind turbines: 612
      • Installed capacity: 808 MW
      • Number of wind parks: about 60
      • Share of community-owned wind parks:
        • about 90 %
    *Source: by courtesy of windcomm Schleswig-Holstein
  • 18. The economic power of community wind farms Source: by courtesy of windcomm Schleswig-Holstein with regard to a study by the German Wind Energy Association 2007 1 EUR = 1,34 C$ 12 million € 3 million € 2.4 million € Compensation payments 2.94 billion € 735 million € 618 million € Total amount of investments Data accumulated 17.8 million € 4.45 million € 3.74 million € Payments for rents, rights of way etc 36.4 million € 9.1 million € 7.64 million € Business tax 6.12 billion kWh 1.53 billion kWh 1.29 billion kWh Electricity production 2,423 MW 676 MW =100 % 564 MW = 84 % Installed capacity Data for one year (2007) Extrapolation for Schleswig-Holstein Resulting data for North Frisia Data from participating wind farms
  • 19. Basics of an ordinary community wind park
    • How to define a community wind park in Schleswig-Holstein
      • Participants have to be resident in the municipality for at least one year
      • Option-to-buy for the community
      • Management by the participants
      • Selling of shares only possible within the family or the municipality
      • Average size: ca. 20 MW
    • Average costs of a community wind park in Schleswig-Holstein*
      • Investment-Costs: ca. 1,2- 1,5 Mio. EUR per MW
      • Needed space: ca. 4-5 hectare per MW
      • Land lease: ca. 3-5% of turnover (currently rising land prices)
      • Management: ca. 4% of turnover
      • Average ROI: 5-10%
    1 EUR = 1,34 C$ *Source: by courtsy of windcomm Schleswig-Holstein
  • 20. Agenda
    • IBSH/ EWEA at a glance
    • Financing renewable energy in times of financial crisis
    • Community power projects in Northern Germany
    • Additional opportunities for community-owned projects
  • 21. Community-owned power projects – an outlook
    • Community-owned electricity grid
      • Electricity grids are natural monopolies
      • Unbundling of production and transportation of energy to ensure the feed-in of renewable energy and the modernization of the grid
      • A separate company that runs the grid, gives investors the chance to invest in reliable, state guaranteed cash flows
    • „ ARGE Netz“
      • Association of more than 140 community wind parks (> 1.100 MW)
      • Objectives
        • Extend the electricity grid
        • Increase the share of renewable energy
        • Sell renewable energy at market prices
        • Services for partners of ARGE Netz
    • Offshore wind park “Butendiek”
      • Already 5 Mio. EUR of venture capital raised for the planning phase (8.412 participants)
  • 22. Offshore wind energy installations 2011-2020 (MW)
  • 23. Offshore perspective
  • 24. Contact IBSH / EWEA Investitionsbank Schleswig-Holstein Fleethoern 29-31 D-24103 Kiel Germany Phone +49 431 9905 0 Fax +49 431 9905 3383 [email_address] www.ib-sh.de European Wind Energy Association Rue d‘Arlon 63-65 B-1040 Brussels Belgium Phone +32 2 546 1940 Fax +32 2 546 1944 [email_address] www.ewea.org