Download EDPR Designing an attractive renewable framework

EDPR Presentation
March 2011
Istanbul
www.edprenovaveis.com
Agenda
I.
EDPR
II.
Designing an attractive renewable framework
• Remuneration and processes
• Lessons learnt
III.
Application to Turkey
A balanced wind portfolio located in highly selective attractive
markets
Canada
-
UK
120
US
Poland
-
Belgium
2 859
99
19 246
120
57
1 300
France
60
13
1 406
62
220
Brazil
Portugal
Spain
680
2 278
70
53
308
1 439
571
4 9676
14
Italy
39
1 138
Romania
228
613
520
1H10 EBITDA MW + Eólicas de Portugal
Installed
Under construction
Pipeline + prospects
8 European countries, 26 States in the US, Brazil and Canada
2
Consistent delivery of strong growth in installed capacity
Historic Capacity Growth
(Gross MW)
CAGR
>40%
• Consistently delivering targets and a robust growth over the past 4 years
• Back-end loaded installation profile driven by wind farm construction schedule
• Capacity installed during 2009 to deliver stable cash-flows from 2010 onwards
3
2010-12: Executing a flexible growth strategy and taking advantage of
optionality to maintaining the risk profile
EDPR’s average annual capacity additions
(Gross GW)
EDPR’s new additions geographic breakdown
(% of EBITDA MW + ENEOP)
Gross MW
EBITDA MW
BR
EU
US
Flexible growth by adjusting the pace to current
economic and market environment…
…re-balancing the portfolio to maintain the low
risk and high visibility profile of the company
4
Agenda
I.
EDPR
II.
Designing an attractive renewable framework
• Remuneration and processes
• Lessons learnt
III.
Application to Turkey
What do stakeholders seek?
Develop local industry
Governments
Minimise system costs
Pay exactly what is needed
(avoid risk of over/under paying)
Low risk
High return
Renewables
investors
Low return
Feed-in tariffs
High risk
Market systems
There are four general policy systems to promote wind energy
Although hybrid systems are often put in place
System description
Secondary systems
Main systems
Feed- in tariff
•
Producers of green electricity receive a fixed price (normally set for a period of several years)
•
A variant of the feed-in tariff scheme is the fixed premium scheme in which a premium is paid above
normal electricity spot price
•
Renewable energy has two revenue streams:
− Conventional power prices from the conventional market
− Revenues from the sales of green certificate in a secondary market
Market price +
Green
Certificate
•
Secondary market is created when government forces a participant in the supply chain (generators,
suppliers) to prove that part of its supply has GCs associated to them, thus creating demand for GCs
•
Renewable energy producers supply GCs
•
Price for GCs is set by market supply and demand
•
The State places a series of tenders for the supply of renewable electricity:
− Selection based on price and other quantitative criteria (scoring system)
− Electricity supplied on a contract basis at the price resulting from the tender
− Additional cost typically passed on to end consumer through a specific levy
Tenders
Financial and
tax incentives
•
Reduction or exemption of electricity taxes applied to all producers
•
Investment grants as a reduction of capital and/or total costs due to low interest loans
incentives
Tax
Market price +
Green
certificates
Feed- in tariff
Each Government has to weigh up to pros and cons of every system
before deciding the system to implement
Advantages
Disadvantages
• Simple and low cost: easy to implement and supervise
• Reduces regulatory and market risk for investors and loan
risk for financial companies
• A stable investment environment promotes the development
of manufacturing
• Effective in promoting different technologies
• Risk of over/under funding:
- It can be partially compensated with market
monitoring and adjustment
- Need to adjust tariffs as targets are achieved or
market conditions change
• If working well, they lead to the best cost solution because
is a market instrument
• If it works well, the targets are exactly met
• Easily linked with existing fiscal and financial structures
Tenders
• Long term captaincy about receiving support
• Increased risk and required return for investors, thus
increasing effective costs, due to volatility & uncertainty on
future prices
• Administrative costs
• System may not create enough incentives to invest.
• Since companies may avoid buying the GC by paying a
penalty, GC price may not rise to a level to make investment
profitable
• Needs a banding to promote different technologies
• Does not create long-term certainty of investments
• Risk of over/under funding
• Bidding price can fall so low that contracts cannot be fully
implemented
• Increases project preparation costs
• The stop-and-go nature does not conduct to stable
conditions
Most of the European successful countries have a feed- in tariff systems
Capacity installed in 2009YE by regulatory system
Germany
Feed- in tariff
Spain
France
Denmark
Portugal
Greece
Others
Market price plus
Green Certificates
Austria
Italy
UK
Sweden
Poland
Belgium
Netherland
s
Finland
Switzerland
MW
Two main issues to consider when designing a framework for wind
energy
Policy design
(Financial
support)
Permitting
process
• A regulatory framework that provides financial incentives for investors to
participate in the development of wind energy market
• Wind developers need to fulfil different steps to obtain the necessary
permits and the grid connection
• Main steps are administrative processes (Environmental Impact
Assessment permit, building permit, among others) but also includes the
access to the grid
Policies on permitting and licensing, and grid issues are also
critical to meet wind energy penetration
Issue
Typical barriers
• Complex and time consuming
process
Permitting and
licensing
• Many institutions involved
• No clear authorization procedures
Possible solution
• Set deadlines for the administrative
process: if the authority is not able to
meet the deadline, the project goes
automatically to the next stage
• Reduce the number of authorities
involved
• Provide a clear, streamlined and
transparent procedure and decisionmaking process
• Long time to obtain extensions
or reinforcements in the grid
• No transparent rules for bearing
Grid related
issues
and sharing the necessary grid
investment
• Reduce the average grid connection
lead time by setting deadlines for the
administrative process, and training and
allocating the necessary civil servants
to handle the applications
• Reinforce transmission system
• Lower the connection cost by:
- making the transmission operator
-
contributing to the cost
adapting the cost to the project size
Overview of the regulation in the main geographies
Country
Regulatory Update
Remuneration
Scheme
EDPR: 2009
Realized Price
• Pool + Premium
• Feed-in Tariff
€ 84
Spain
Agreement between Industry Ministry
and wind sector
Ongoing discussion on Energy Bill
US
Romania
Legislative update for the
renewable sector
• Power + REC
• Tax Incentives
$ 48 (1)
Green Certificate
€ 134 (2)
Unchanged
Feed-in Tariff
€ 95
Unchanged
Feed-in Tariff
€ 87
Unchanged
Green Certificate
Portugal
France
€ 98 (2)
Poland
Notes: (1) excluding institutional partnership revenues; (2) based on 2009 market price + green certificates
12
Agenda
I.
EDPR
II.
Designing an attractive renewable framework
• Remuneration and processes
• Lessons learnt
III.
Application to Turkey
Main lessons learnt from countries that have achieved large
wind deployment
1
Long-term
political targets
2
Predictable
revenues
3
Transparent and
straightforward
permitting
4
Avoid
fragmentation
5
Tenders
• Successful countries in developing wind energy, have set long-term political targets
and have drawn up structured action plans supported at the highest level to reach
them
• It´s essential to provide a stable framework with predictable revenues that assure
the profitability of the project
• It´s necessary to create a process that will facilitate increase generation in a timely
and simple manner
• Transparent rules for bearing and sharing the necessary grid investment costs are
necessary
• Fragmentation can prevent wind development, specially in countries with low wind
penetration
• The allocation of groups of capacity, together with the development of industrial
projects can be an effective tool to avoid fragmentation and spur the economy
5 Tenders are sometimes used to create a positive impact for the economy
Example: Portugal - ENEOP
Tender system for 1.200 MW capacity allocated
Tender
Description
Back-up
• Allocated capacity committed operators to develop an Industrial Project
• EDPR’s consortium, in which EDPR ‘s participation was 40%, won the tender for the 1.200 MW
installed capacity together with TP, Finerge and Generg, and Enercon Turbine Supplier
Energy system
Investment
Benefits
for the
country
• Minimum annual generation of 2.700 GWh (~4% of electricity in 2010-2012)
• Electricity supply for more than 2,3 M inhabitants
• Direct investment of 1.700 M€ between 2006-2010
• Wind farm development: 1.476 M€, factory units and associated services: 161
M€ and founding for the National Scientific System: 35 M€
Development of
National
economy
• Increase on exports >60 % of generation will be exported
• Decrease on generator component and raw material imports
• More than 1MtonCO2 not emitted per year: 24 M€ annually saved and avoidance
of ~80 M€ of external fuel payments
Regional
development &
employment
• Industrial project will represent 2,5% of the Regional Product (Minho-Lima)
• Reduction of regional socio economic differences
• Creation of 1.800 new long term jobs + 5.500 indirect jobs
Agenda
I.
EDPR
II.
Designing an attractive renewable framework
• Remuneration and processes
• Lessons learnt
III.
Application to Turkey
With an adequate remuneration scheme, Turkey will be poised for
growth
Issue
Evaluation of
current situation
Comments
• The Ministry of Energy announced its target to install 20 GW
1
Long-term
political targets
of wind energy by 2020
• Feed-in tariff is not enough by itself to make investment
2
Predictable
revenues
3
attractive and currently wind farms are selling energy in the
wholesale market
• New energy law
• In November 2007, EMRA received wind farm applications
Transparent and
straightforward
permitting
4
for 78 GW
• The first production licenses have been issued only after 3
years
• Nearly 58 GW of the 78 GW applications came from 20
Fragmentation
companies