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Wind Energy Developments in Emerging Market Countries

Wind Energy Developments in Emerging Market Countries. Global Opportunities Session European Wind Energy Conference Athens, Greece March 2, 2006 Prepared by Dana R. Younger,International Finance Corporation and Demetrios Papathanasiou, World Bank Presented by Demetrios Papathanasiou.

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Wind Energy Developments in Emerging Market Countries

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  1. Wind Energy Developments in Emerging Market Countries Global Opportunities Session European Wind Energy Conference Athens, Greece March 2, 2006 Prepared by Dana R. Younger,International Finance Corporation and Demetrios Papathanasiou, World Bank Presented by Demetrios Papathanasiou

  2. Outline • What is driving wind energy in emerging market countries? • Where is wind energy market growth in the developing world? • What is needed to accelerate wind energy in the developing world? • What is the World Bank Group doing?

  3. Key Drivers • Energy Security • Economic Growth – Electricity Demand Growth • Environmental Objectives • Local • Global • Industrial Development • International Pressure

  4. Key Wind Energy Markets • Largest Markets: India ~4,430MW, China 1,264MW, Egypt 230MW, Ukraine 82MW, Poland 73MW, Costa Rica 71MW, Morocco 64MW, Brazil 58MW, Carib. 55MW, Tunisia 35MW, Estonia 30 MW, Argentina 26MW, Latvia 26 MW, Philippines 25MW, Turkey/Colombia 20MW (each) • Growth Leaders: India, China, Brazil • Poised for Growth: Mexico, Poland, Turkey • Planned Projects: e.g. Argentina, Bulgaria, Chile, Colombia, Costa Rica, Croatia, Dominican Republic, Ecuador, Ghana, Honduras, Hungary, Jordan, Kazakhstan, Malaysia, Kenya, Morocco, Nicaragua, Pakistan, Panama, Philippines, Romania, Russia, South Africa, Sri Lanka, Tunisia, Uruguay • Market Growth is Still Slow and Uneven

  5. Established Growth Markets - India • Largest installed base in developing world (4.5GW) --Technical potential of 45GW • New electricity law --RE standards at state level • Indian non-energy companies expanding investments • Project finance for wind projects beginning • Larger projects (300-500MW) announced • Manufacturing base is growing – Suzlon IPO, LM Glasfiber blade factory and Gamesa/Asia Pioneer assembly plant are examples • IFC financing wind and private power facilities

  6. Established Growth Markets - China • Fast growing market (1.2GW installed) • Massive wind potential (200-300GW onshore) • Concessions for 100/200MW projects (WB loans) • Private projects totaling 10-30GW under development • New RE law and wind target of 20GW by 2020 • Tariff system announced in January 2006 may slow growth • Large domestic players active and new foreign entrants (CLP, HydroTasmania, CR Power, etc.) • Large manufacturing investments -- Vestas, GE, Gamesa, Suzlon, Acciona/Ingetur, Nordex and Goldwind for domestic sales and export • IFC financing wind and private power facilities

  7. Mexico IPP Market • Fully Developed IPP Market with >20 projects, 28,000MW of Conventional Generation (mainly, gas-fired CCGTs) • Off-taker is National Utility – CFE • Committed Private Investment of US$6B • 22% of Mexico’s Electricity from IPPs • IFC has financed 5 conventional power IPPs since 1996 with US$247M in direct investment and US$614M including B Loan participants • IFC is ready to finance wind IPPs when market develops

  8. Mexico Wind Market • Wind technical potential of >40,000MW (Oaxaca, Yucatan & Baja) • Only 5MW installed in last 10 years – 2MW is La Venta I plant of CFE in Isthmus of Tehuantepec in Oaxaca State • 83.3MW La Venta II under construction for CFE by Gamesa/Iberdrola – 850kW WTGs • 101MW La Venta III – First Wind IPP to be bid by CFE in Fall 2006 • 404MW of additional wind IPPs by 2010 – 101MW per year • 7 private wind projects at ~957MW have CFE permits as “self-supply” projects • Additional 2,250MW of “self-supply” projects in Private Developers Pipeline • Major Companies involved including EDF, Iberdrola, Endesa, Union Fenosa, Gamesa, Clipper, and Preneal • Regulatory/transmission constraints involving CRE (regulator) and CFE (utility) limit private investments in “self-supply” market • World Bank is developing IPP segment with GEF support

  9. Brazil’s Electricity Sector • More than 91,000MW of installed capacity • Growth in demand will require expansion of 17,000-46,000MW by 2012 • 75% of electricity is hydro – 65GW > 30MW • Private IPP and Merchant Power Market (25%) • Wholesale electricity market with large national utility – Electrobras major off-taker and generator (mixed capital company with publicly traded shares) • Diversification underway to utilize more RE esp. wind, small hydro and biomass • National Law – PROINFA passed in 2002 to accelerate renewables development

  10. Brazil’s Wind Market • Wind Technical Potential of >143,000 MW (mainly in Northeast, Central and Southeast coast) • Installed capacity of only 48MW (incl. small turbines) • >7,000MW in 117 private sector wind projects have ANEEL (regulator) approvals • PROINFA Phase I has awarded 1,400MW of wind projects (Ceara, Rio Grade do Sul, & Santa Catarina have ~230 MW each) • 20 year PPA with Electrobras at favorable tariff (higher tariffs for lower wind speeds) -- $94-$107/MWh • Wobben/Enercon making 800kW and 2MW WTGs locally; GE Wind and Fuhrlander may also manufacture locally (60% local content requirement) • IFC helped finance 49.3MW Rio do Fogo Wind Project of Iberdrola’s Enerbrasil subsidiary with US$5.5M equity investment • 200 MW under construction with 300-500MW seeking equity finance • Phase II of PROINFA will be 10% RE RPS including wind, biomass and small hydro

  11. Wind speed [m/s] 50 meters above the surface Campo aberto Zona costeira Morro Montanha Mata CLASSE DE ENERGIA Best Wind Conditions in Brazil located in Northeast

  12. Wind Energy and HydroAverage water flow of São Francisco River versus Wind Speed m3/s m/s 10,000 10 9000 8000 9 7000 8 Optimal wind conditions during the dry season 6000 7 Water flow 5000 6 Wind 4000 5 3000 4 2000 3 1000 2 jan 1 feb mar apr may jun jul aug sep oct São Francisco river discharge nov Months dez Typical wind speed – Northeast coast

  13. Other Markets Poised for Growth –Poland • EU accession driving market • RE portfolio standards • Tariffs still too low but REC sales (“green certificates”) make projects “bankable” • 1-2GW in development • 200-400MW per year possible by 2007 • Local banks engaged and also concessional loans from BOS, EcoFund and National Fund for Environmental Protection • New foreign entrants – Iberdrola, Vattenfall, Invenergy/REG, EuroWind, etc.

  14. Other Markets Poised for Growth - Turkey • New RE law • Higher tariff for wind from 2007 for 7 years – may not be sufficient • Power sector re-structuring moving but slowly – distribution company privatization planned (32 separate Distribution Comp.) • 750MW-1.5GW under development • Previous BOT awards from 2000-2001 for ~390MW cancelled due to fiscal crisis • 20MW installed since 1998 • Local power sector firms interest grows in wind • Enercon manufacturing blades locally

  15. The Long and Winding Road • Electricity Sector at a crossroads (again) between privatization, de-regulation and state ownership / state responsibility • Perceptions (and realities) on • Intermittency • Quality of resources • “real” system value • high capital costs • Project Financing implications

  16. What will it take for wind energy to grow in emerging markets? • Clarity needed given uncertain regulatory/market structures and limited financial returns in many markets • Further policy development and higher tariffs • High … oil prices (but…) ? • Wind capital cost increases, turbine availability, full EPC quotes • Transfer of knowledge in systems dispatching, power management, power planning • Continued international support • Resolution of post-Kyoto uncertainties • Continued expansion of investments in global and local manufacturing • Better coordination among stakeholders -- developers, utilities, investors, manufacturers, financiers, government agencies, regulators, and donor agencies

  17. The World Bank Group • Working on the interfaces with poverty, macroeconomics, governance and environment • Support for reform process and associated capacity building to regulate and develop competitive energy markets • Facilitating transfer of knowledge among developing countries • Catalyzing private investment flows to non-investment grade countries

  18. The World Bank Group • G8 Gleneagles Clean Energy Investment Framework • Policy Support for wind and other RE often with GEF funding support -- new RE laws in Mexico, China and Turkey • US$ 9 billion for renewable energy and energy efficiency since 1990 • US$ 748 for 41 projects in 28 developing countries in the last year alone • Commitment to increase RE and EE portfolio by 20% annually through 2010 • Leveraging of public and private resources • Complementary roles of World Bank/IDA, IFC and MIGA • Development of carbon finance market (including new products)

  19. Thank You ! • Contacts: • Dana R. Younger, International Finance Corporation, dyounger@ifc.org • Demetrios Papathanasiou,World Bank, dpapathanasiou@worldbank.org

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