Richard Bridle Renewable Energy Systems Ltd.

1. WIND POWER DEVELOPMENT - FROM SITE PROSPECTING TO FINANCING Richard Bridle Renewable Energy Systems Ltd.

2. Wind Farm Development - Introduction • Process can be long, exasperating, frustrating and unsuccessful. • Therefore important to have large portfolio of sites. • RES have developed internationally; USA, France, Portugal, Ireland, Japan, Caribbean, Australia, UK.

3. Overview- Development Process Wind farm development, from site prospecting to financing

4. Site Prospecting • Site Prospecting: Searching a specific region for potential wind farm sites • This study is carried out against “ideal” site criteria established by the developer for: • Wind resource • Proximity to designated areas • Proximity to airport exclusions • Proximity to habitation • Proximity to grid connections • Development plans of Local Authority • Likelihood of gaining planning permission GIS constraints map to aid site prospecting

5. Site Selection • Site Selection: Examining sites identified by site prospecting and determining which are the best candidates for development. • Once a number of potential sites have been identified, the sites should be assessed and ranked in order of priority. • It is likely that the most promising of the sites will require a site visit and preliminary discussion with both the landowner and the planning authorities. • The selection of sites for wind farms is influenced by environmental considerations and technical considerations.

6. Site Selection – Environmental Considerations • 1. Visibility from surrounding areas • 2. Proximity to habitation: • Noise: minimum separation of 10 rotor diameters (approximately 800m for a 2MW machine). • Shadow flicker: minimum separation of 10 rotor diameters. • Safety: Modern turbines very reliable. Minimum distance from above more than enough in case of blade failure • 3. Electromagnetic Effects • TV interference (“ghosting”) • Radar (airports) / Microwave / Mobiles • 4. Flora and fauna • Identify particular areas/species • Breeding birds will may influence times of construction • 5. Impact upon land use • Normally no problem • <1% of land used • Farming still possible • Farmer may be able to use access tracks • 6. Designated areas (eg: Sites of Special Scientific Interest – SSSI’s)

7. Site Selection – Technical Considerations • Wind Resource • •Wind Farm economics dominated by mean wind speed • •Wind turbine layout dominated by wind direction • •Also consider local turbulence and surface roughness (eg: forests) • •Mesoscale resource modeling • Availability of suitable land • •Large open land area required (turbine spacing 100 to 400 m) • •Well exposed • •Not too steep • •Suitable ground conditions (eg: peat bogs not good) • Good access • •Building long site access tracks is expensive • •Corners, buildings can cause problems for lorries carrying blades • Grid Connection • •Building grid connection is expensive, particularly if underground • •Site needs to be reasonably close to existing medium voltage network

8. Selection • After considering all relevant environmental and technical considerations a developer will make a decision as to which sites to develop further. • The selected sites begin the core part of the development process which consists of: • -Resource & Energy Yield Assessment • -Environmental Assessment • -Planning • -Power Sales Procurement • -Detailed Engineering • -Financing

9. Resource Assessment • The term ‘wind resource’ is used to refer to the amount of useful wind available at a site. • The economic viability of a wind project is dictated by the resource assessment and hence it is extremely important to get right. • Measure wind for at least 12 months to observe seasonal variation. • But what is the wind speed over 15 years? • Use Measure-Correlate-Predict (MCP) to predict long term wind resource. • Important: no significant measurement changes at met station over long term period (e.g. Met mast moved) • If no long term data exists – measure on site for longer (e.g. 5 years) MCP Process

10. Layout Design and Optimisation (1) • A preliminary assessment of ground conditions and constraints is normally carried out during wind monitoring period. • This information, together with the measured wind data and wind flow model, is used to provide an initial site layout for the turbines. • This layout should be such as to optimise the energy yield from the site by maximising the beneficial topographical effects and minimising wake effects while staying within the various constraints. • Layout design is inevitably an iterative process. Wind flow model used for layout design Layout designed around various constraints

11. Layout Design and Optimisation (2) • The complexity of the optimisation process is indicated by the wind rose. • For a unidirectional wind rose the turbines will be positioned in rows; within the rows turbines are positioned reasonably close (2-3 rotor diameters) while the rows are spaced farther apart (>5 rotor diameters). • For multi-directional winds layout optimisation algorithms will be required. Optimum layout for a site with a multidirectional wind rose. Optimum layout for a site with a unidirectional wind rose.

12. Energy Yield Assessment (1) • Wind farm energy yield: Calculated by combining measured wind resource, wind shear exponent, and turbine power curve. Input: Long term wind resource (at a particular height) Wind Direction Frequency Distribution (Wind Rose) Wind Speed Frequency Distribution

13. Energy Yield Assessment (2) Input 2: Wind shear Needed if wind not measured at turbine hub height. How to calculate wind shear (using power law): Wind speeds measured at two heights (V1 @ H1, V2 @ H2). Shear defined by: • is known as the shear exponent. The value of α depends on the surface roughness, atmospheric stability, and topography. Alternatively a flow model (e.g. WASP) may be used to extrapolate the measured wind resource to hub height.

14. Energy Yield Assessment (3) • Input: Wind Flow Model • Know wind resource at one location (Met mast) • Need to know wind resource over whole site • Terrain influences wind speeds • Surface roughness and trees influence wind speeds • So use 3D flow model: Traditionally WASP/ MS3DJH (linearised models), more recently full CFD calculations have been performed. Wind flow model used for energy yield assessment

15. CFD Modelling Linear models perform well in shallow terrain but become unreliable when gradients are relatively steep (>17º). CFD predicts flow separation which the linear model is unable to capture. MS3DJH results are fundamentally wrong.

16. Energy Yield Assessment (4) • Input: Turbine Power/Thrust Curve • Defines performance of turbine • Get from turbine manufacturer • Can be site specific (some machines density sensitive) • Energy yield calculated by combining power curve with wind distribution

17. Energy Yield Assessment (5) • Energy Yield calculated from: • - power curve (& thrust curve for wake losses) • - wind distribution • - wind shear • - air density (power linearly proportional to density) • turbulence (impact on wake losses and power curve) • Losses • -Wake losses: Initial velocity deficit given by manufacturer turbine thrust curve • -Topographical effect: Calculated using flow model • -Availability (turbine and electrical grid) • -Electrical line losses • -Turbine control losses • Eg: power curve and wind distribution combined gives 5.5GWh per year energy yield for 1 turbine • For 25 turbines • Wake losses = 5% • Topographical effect = 2% (increase) • Turbine availability = 97% • Grid Availability = 99% • Turbine net yield = 25 * 5.5 * 95% * 102% * 97% * 99%

18. Environmental Assessment (1) • If the energy yield assessments from a site suggest that it will be financially viable, the next major step in the process is the environmental assessment. • Environmental assessment evaluates the effect of the proposed Wind Farm on the landscape and environment. • Required as part of the planning application. • Allows the developer to show how they have considered the environmental impact of the Wind Farm. • Early discussions with landscape, ecological and ornithological consultees are strongly advised in order to ascertain serious concerns, and modify where possible.

19. Environmental Assessment (2) The EIA consists of the following: • Introduction – report purpose, introduce applicant 2. Site selection • Overview of UK site selection, including environmental and technical considerations • Details of how and why site was selected 3. Project description – details of proposed development 4. Assessment of Effects – main substance of document • Visual and landscape assessment • Visual impact has proved to be the key issue in the UK • Worth creating a quality product

20. Environmental Assessment (3) • Visual and landscape assessment: Wireframe • Visual and landscape assessment: Photomontage

21. Environmental Assessment (4) • Zone of Visual Influence (ZVI): • Defines locations where wind turbines are visible • Colors define number of turbines that are visible Can also do cumulative ZVI’s for wind farm intervisibility

22. Environmental Assessment (5) • Ecology – Flora and Fauna • Use respected, independent consultants • Identify areas of national or local interest • Identify protected species • Breeding/migrating birds very important – construction • Archeological, Architectural & Historical features • Consult local sites and monuments record officer • Establish any local features and ensure sufficient separation • Agriculture and Land Management • Give details of project land usage and intended integration • Look for underground springs • Noise • Measure background noise • Predict noise caused by Wind Farm at nearby locations • Ensure noise below regulations • Noise a complex subject – further research ongoing

23. Environmental Assessment (6) Environmental Constraints

24. Environmental Assessment (7) Electromagnetic Links • Looking for interference with TV, Radar, Microwave, Mobile phones • Keep turbines away from line-of-sight Highways and Rights of Way • Public rights of way kept open at all times, including construction Ecological Benefits • State the environmental benefits • State emissions (CO2 and NOX) savings Local Benefits • Landowner rental payments • Tourism • Local jobs • Community Fund Safety • Turbines independently certified • Sufficient separation from habitation and roads • Construction • Details of traffic movements and other significant effects

25. Environmental Assessment (8) Mitigating Measures • Allows developer to show how they have minimised the environmental impact of the Wind Farm Visual and Landscape Assessment Examples: • re-location of turbines • layout revised • number/size of turbines changes • color of turbines Ecological Assessment Examples: • avoid sensitive areas (eg: rare flowers, archeological site) • avoid construction during bird breeding

26. Planning Procedures (1) • All Wind Farms need planning permission. • Application for planning can take a long time. • Public consultation plays a major role in planning success. • The Application • Important to talk to planning officers prior to application • Normal to provide an Environmental Assessment (EIA) • The Assessment • Planning authority sends EIA to statutory (e.g. Environment Agency), and nonstatutory (e.g. RSPB) consultees • Planning authority required to determine in 16 weeks

27. Planning Procedures (2) • The Decision • After consultation, planning officer submits report to planning committee with a grant/refuse recommendation • Committee debate application and take a vote • If refused, options are: • accept decision, look for a new site • appeal to Secretary of State for the Environment • amend application and re-submit

28. POWER CONTRACTS AND FUNDING MECHANISMS • A wind farm with planning permission and a good resource has no value if the electricity it generates can not be sold. • The sole income to a project is normally the revenue received from the generation and sale of electricity. A power purchase contract (PPC) is required. • Developers obtain PPC’s in a number of ways; • Through Government sponsored process (eg: RO) • Responding to Requests for Proposals (RFP’s) from Utilities. These are normally competitively bid, the PPC’s being negotiated with the successful bidder. • Through a Government set tariff scheme (e.g. Spain and Portugal) where all developers have the right to a PPC if they obtain the necessary licences and permits (a.k.a. feed in law). • Direct sales to consumers. • The key considerations to any developer are that the PPC is secure and ‘bankable’ i.e. international banks are prepared to lend money against the P.P.C. If possible, the energy price should be index linked and the PPC should run for at least 10 and preferably 15 years.

29. UK Funding mechanisms • In the UK, the Non Fossil Fuel Obligation (NFFO) used to fund renewables via a consumer levy on electricity. • NFFO is now dead - has been replaced by the Renewables Obligation (started 2001, ends 2026) • Renewables Obligation: • Electricity suppliers obliged to use renewable energy • 5% by 2003, 10% by 2010 • Penalty - Buy out price (pence per kWh) • All penalty costs recycled to competitors

30. Detailed Engineering After both planning and the PPC have been obtained, detailed design and engineering is carried out. • Detailed Wind Farm Design and Engineering: • Site investigation – establish ground conditions • Turbine supply tender – find best turbines • Wind loadings used to calculate foundation designs • Design of access roads • Design electrical system • Design sub-station

31. RES first offshore turbine (installed last week)

32. RES first offshore turbine • The turbines have a hub height of 78m • Rotor diameter of 107m.  • Nacelle and hub weight is 190tonnes.   • The jack-up vessel in the picture is the MV Resolution which is 120m long and carries 6 complete sets of turbine components each trip.  • Given good weather one turbine should be erected per day with 24hr working. • Project cost £330m. 

33. End of presentationAny questions?

34. Wind Farm Economics (1) • Revenue: • The revenue stream earned by the project is simply calculated by multiplying the net energy yield by the price per kW hour paid for each unit of electricity. • The revenue stream may be structured to take account of the seasonal variation in wind speeds. For example certain power purchase mechanisms (e.g. AER – Republic of Ireland) will vary the price paid per kWh by a few percent depending on the time of day, day of the week, and time of year.

35. Wind Farm Economics (2) • Capital Costs • The capital cost of the project is the summation of all the costs which have been or will be incurred in developing and constructing the project. Principle cost items are: • Development Costs • Turnkey Costs for construction of the wind farm incorporating: • -Turbines • -Civil • -Electrical • -Project Management • -Insurance • Grid Cost: Cost of grid connection etc. • In addition to capital costs if debt (project) financing is being used (i.e. if the project is not being internally financed) then the following will also be incurred: • Arrangements Fees • Interest during construction • Commitment Fees • Due Diligences fees • Legal Costs

36. Wind Farm Economics (3) • Operating Costs • Although the energy source has no fuel costs, the wind farm still incurs operational costs relating to the following items: • Operation and maintenance of wind turbines • Operation and maintenance of electrical and civil works. • Land rental (normally 2% of revenue) • Grid costs, comprises of mainly: • Annual grid charges • Consumed real power • Consumed reactive power (don’t always have to pay) • Rates • Insurance • Import of electricity • Management • Other non-operational costs, including • Interest payable on any bank loans. • Corporation tax on profits.

37. INVESTMENT APPRAISAL AND FINANCING • Is it worth investing in the Wind Farm? • Calculated using discounted cash flows (DCF) • Based on the idea of calculating the value today (“present value”) of future costs and revenues • Eg: £100 pounds invested today at a 10% interest rate will be worth £110 in 1 year. So the present value of £110 in 1 year is £100. • Would you prefer to be given £100 today or £105 next year? • 105/(1+0.1) = £95.45 • The Present Value of a stream of costs (X) over time (and in real terms) is calculated by applying the following formula: • The Net Present Value (NPV) of a project is the sum of the present value of all costs and revenues over the project life time. • Main Wind Farm Financial Issues • No fuel costs but … • Capital costs are large and occur in year 0 (i.e. not discounted). Year 1 revenue is discounted.

38. Tutorial – Wind Farm Economics A wind farm generates 7.5 GWh per year and has a PPA worth £0.05 / kWh. The project has a life of ten years, involves capital costs of £1m in the first year (i.e. cost to project on day 1) and annual operating costs of £200,000 (paid at end of each year). All costs and revenues are in constant prices and the assumed rate of discount is 10% per annum. a) What is the annual income of the wind farm? b) Calculate the Net Present Value of the wind farm? c) Would you invest in this wind farm?