Experiences with Community Power Projects in Northern Germany


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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:

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Experiences with Community Power Projects in Northern Germany

  1. 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. 2. Agenda <ul><li>IBSH/ EWEA at a glance </li></ul><ul><li>Financing renewable energy in times of financial crisis </li></ul><ul><li>Community power projects in Northern Germany </li></ul><ul><li>Additional opportunities for community-owned projects </li></ul>
  3. 3. Investitionsbank Schleswig-Holstein <ul><li>Main development bank for the federal state of Schleswig-Holstein (Northern Germany) </li></ul><ul><li>Basic data (2009) </li></ul><ul><ul><li>Balance sheet total of 16,8 Bill. € </li></ul></ul><ul><ul><li>New business volume of 2,67 Bill. € </li></ul></ul><ul><ul><li>460 employees provide approx. 60 products and services </li></ul></ul><ul><li>IB business segments </li></ul><ul><ul><li>Corporate Financing </li></ul></ul><ul><ul><li>Real Estate Financing </li></ul></ul><ul><ul><li>Public Sector Financing </li></ul></ul><ul><ul><li>Grants </li></ul></ul><ul><li>We have started financing renewable energy projects in 1991 and regarding wind energy we haven’t had any distressed loan </li></ul><ul><li>Several special activities, e.g. </li></ul><ul><ul><li>IB.Europe </li></ul></ul><ul><ul><li>PPP Centre of Competence </li></ul></ul><ul><ul><li>Energy Agency </li></ul></ul>
  4. 4. European Wind Energy Association <ul><li>EWEA actively promotes the utilization of wind power in Europe and worldwide </li></ul><ul><li>Established in 1982, EWEA has become the largest and most powerful wind energy network </li></ul><ul><li>Members from 50 countries represent over 500 companies, associations and research institutions </li></ul><ul><li>Resources are mainly focused on </li></ul><ul><ul><li>lobbying </li></ul></ul><ul><ul><li>communication and policy activities </li></ul></ul><ul><ul><li>responding to enquiries from our member organizations </li></ul></ul>
  5. 5. Agenda <ul><li>IBSH/ EWEA at a glance </li></ul><ul><li>Financing renewable energy in times of financial crisis </li></ul><ul><li>Community power projects in Northern Germany </li></ul><ul><li>Additional opportunities for community-owned projects </li></ul>
  6. 6. Causes for the financial crisis <ul><li>A fatal triangle of developments in different sectors lead to the biggest market failure in history </li></ul>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. 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. 8. Financing of wind energy worldwide 2000-2009 Source: Dealogic $bn No of Deals
  9. 9. Global installed wind power capacity 2009 (MW) Source: GWEC
  10. 10. Financial crisis and renewable energy projects <ul><li>Reduced bank lending especially for large scale projects, but renewable energy sector still appreciated by banks </li></ul><ul><li>Market for syndication of renewable energy projects is heavily affected, especially international projects </li></ul><ul><li>Since fall 2008 no underwriting commitments for syndications available </li></ul><ul><li>Syndication sometimes substituted by so called „Club Deals“ but at higher costs </li></ul><ul><li>Higher margins (average 100-150 bps) and conservative structures </li></ul><ul><li>Banks concentrate on core-regions and core-customers </li></ul><ul><li>Average project size is smaller/ problems for offshore projects </li></ul><ul><li>Increased importance of governmental institutions like IFC, EBRD, EIB, KfW* and IB – risk sharing – and local/ regional banks </li></ul><ul><li>But - gradual easing since 4th quarter 2009 </li></ul>* International Finance Cooperation – World Bank Group, European Bank für Reconstruction and Development, European Investment Bank, Kreditanstalt für Wiederaufbau
  11. 11. Agenda <ul><li>IBSH/ EWEA at a glance </li></ul><ul><li>Financing renewable energy in times of financial crisis </li></ul><ul><li>Community power projects in Northern Germany </li></ul><ul><li>Additional opportunities for community-owned projects </li></ul>
  12. 12. Wind energy in Schleswig-Holstein <ul><li>Factor 1.000 in 20 years – energy production </li></ul>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. 13. Wind energy in Schleswig-Holstein <ul><li>Factor >100 in 20 years – turbine growth </li></ul>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. 14. Wind energy in Schleswig-Holstein <ul><li>Wind energy has become an important and effective instrument for rural development in Schleswig-Holstein </li></ul><ul><li>Wind power plants are an opportunity for farmers to diversify their business and finance growth </li></ul><ul><li>More than 7.000 jobs have been established </li></ul><ul><li>The annual tax revenue for municipalities in Schleswig-Holstein can reach up to 13.000 € per MW </li></ul><ul><li>Surface area of Schleswig-Holstein: 16.000 Km 2 </li></ul><ul><li>0,75% of the surface area = about 40% of the power requirement </li></ul>120 km 2
  15. 15. Wind energy in Schleswig-Holstein <ul><li>Success story “wind energy in Schleswig-Holstein” started in the late 1970`s – promoted by a combination of several factors </li></ul><ul><ul><li>Windy locations near the North Sea and the Baltic Sea </li></ul></ul><ul><ul><li>Existing maritime/ aviation technology </li></ul></ul><ul><ul><li>Farmers and idealists built first wind energy converters/ the Danish influence </li></ul></ul><ul><ul><li>Certifying/ financing/ insuring </li></ul></ul><ul><ul><li>100-MW-/ 250-MW-program (community projects preferentially eligible for grants) </li></ul></ul>
  16. 16. Wind energy in Schleswig-Holstein <ul><li>First community wind park in Lübke-Koog Nord (1991) </li></ul><ul><ul><li>Combination of 10 initially independent applications to achieve a coherent development of wind energy in the municipality, lower costs, better access to the grid </li></ul></ul><ul><ul><li>High acceptance within the municipality: today 160 out of 180 inhabitants are participants in the community wind park “Lübke Koog Süd” </li></ul></ul>
  17. 17. Community wind parks in Schleswig-Holstein <ul><li>Community wind parks have been and still are a very important factor for the development of the wind energy sector in Schleswig-Holstein </li></ul><ul><li>Community wind parks initiate economic growth in structurally weak areas </li></ul><ul><li>The new business volume (corporate financing) of some local banks in Schleswig-Holstein depends completely on renewable energy </li></ul><ul><li>IB preferentially finances community-owned wind parks because of the particularly positive effect on the local economy </li></ul><ul><li>Relevance of community wind parks for Schleswig-Holstein, e.g. county of North Frisia* </li></ul><ul><ul><li>Number of wind turbines: 612 </li></ul></ul><ul><ul><li>Installed capacity: 808 MW </li></ul></ul><ul><ul><li>Number of wind parks: about 60 </li></ul></ul><ul><ul><li>Share of community-owned wind parks: </li></ul></ul><ul><ul><ul><li>about 90 % </li></ul></ul></ul>*Source: by courtesy of windcomm Schleswig-Holstein
  18. 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. 19. Basics of an ordinary community wind park <ul><li>How to define a community wind park in Schleswig-Holstein </li></ul><ul><ul><li>Participants have to be resident in the municipality for at least one year </li></ul></ul><ul><ul><li>Option-to-buy for the community </li></ul></ul><ul><ul><li>Management by the participants </li></ul></ul><ul><ul><li>Selling of shares only possible within the family or the municipality </li></ul></ul><ul><ul><li>Average size: ca. 20 MW </li></ul></ul><ul><li>Average costs of a community wind park in Schleswig-Holstein* </li></ul><ul><ul><li>Investment-Costs: ca. 1,2- 1,5 Mio. EUR per MW </li></ul></ul><ul><ul><li>Needed space: ca. 4-5 hectare per MW </li></ul></ul><ul><ul><li>Land lease: ca. 3-5% of turnover (currently rising land prices) </li></ul></ul><ul><ul><li>Management: ca. 4% of turnover </li></ul></ul><ul><ul><li>Average ROI: 5-10% </li></ul></ul>1 EUR = 1,34 C$ *Source: by courtsy of windcomm Schleswig-Holstein
  20. 20. Agenda <ul><li>IBSH/ EWEA at a glance </li></ul><ul><li>Financing renewable energy in times of financial crisis </li></ul><ul><li>Community power projects in Northern Germany </li></ul><ul><li>Additional opportunities for community-owned projects </li></ul>
  21. 21. Community-owned power projects – an outlook <ul><li>Community-owned electricity grid </li></ul><ul><ul><li>Electricity grids are natural monopolies </li></ul></ul><ul><ul><li>Unbundling of production and transportation of energy to ensure the feed-in of renewable energy and the modernization of the grid </li></ul></ul><ul><ul><li>A separate company that runs the grid, gives investors the chance to invest in reliable, state guaranteed cash flows </li></ul></ul><ul><li>„ ARGE Netz“ </li></ul><ul><ul><li>Association of more than 140 community wind parks (> 1.100 MW) </li></ul></ul><ul><ul><li>Objectives </li></ul></ul><ul><ul><ul><li>Extend the electricity grid </li></ul></ul></ul><ul><ul><ul><li>Increase the share of renewable energy </li></ul></ul></ul><ul><ul><ul><li>Sell renewable energy at market prices </li></ul></ul></ul><ul><ul><ul><li>Services for partners of ARGE Netz </li></ul></ul></ul><ul><li>Offshore wind park “Butendiek” </li></ul><ul><ul><li>Already 5 Mio. EUR of venture capital raised for the planning phase (8.412 participants) </li></ul></ul>
  22. 22. Offshore wind energy installations 2011-2020 (MW)
  23. 23. Offshore perspective
  24. 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