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How to attract Wind-Investments in Emerging Markets – a project developers point of view

How to attract Wind-Investments in Emerging Markets – a project developers point of view Christian Friebe, Dr Paschen v. Flotow, Sustainable Business Institute (SBI), Germany EWEA Annual Conference Session “World Wide Wind” March 2011. Wind Energy Potential.

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How to attract Wind-Investments in Emerging Markets – a project developers point of view

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  1. How to attract Wind-Investments in Emerging Markets – a project developers point of view Christian Friebe, Dr Paschen v. Flotow, Sustainable Business Institute (SBI), Germany EWEA Annual Conference Session “World Wide Wind” March 2011

  2. Wind Energy Potential

  3. Influencing factors for policy makers in emerging countries regarding energy infrastructure Energy subsidies Rising energy demand (Inter-)National Climate Change Mitigation Measures Price volatility Power mix based on fossil fuels Energy Security External costs Depending on the evaluation of these factors there is an opportunity for wind power.

  4. What is the right policy mix for wind energy in emerging countries? What is the role of the public sector? How to minimize the costs for electricity? How to share risk and profit? What is the role of the private sector? Which support mechanism? Are there other important factors? Understanding the rationale of an investor helps to design more effective policies.

  5. SBI Wind Investment Study - evaluation of the preferences of the private sector Qualitative: 11 Interviews (May und June 2010) Quantitative: Survey, 41 responses by project developers (July und August 2010) Qualitative: one day workshop with 14 experts (November 2010) Some involved companies and organizations are:

  6. Key messages 1: Support mechanism Quota-System: • High risks lead to high financing costs International Tender: • Discontinuous market development • Transparency? Feed-in-Tariff is the most attractive support mechanism

  7. Key messages 2: Non-financial aspects • Local content requirements: • Challenging for investors (even with bonus!) “one-stop-shop” – don’t do it! • Lack of Transparency • Additional administrative barrier Very attractive for project developers: Legal security Transparency Low risk of unforeseen changes Known duration of the approval process

  8. Key messages 3: Grid access and power dispatch No guarantee for grid access and power dispatch is very challenging for an investor. ?? A guaranteed grid access and power dispatch is an attractive framework condition.

  9. Key messages 4: How and where to start? Framework conditions that are either extremely attractive or not attractive for investors. A continuous approach is best for all stakeholders.

  10. How to further use the results? The study is not a blueprint for the „perfect“ support mechanism. Policy makers can increase the attractiveness of their country at little cost: Transparency, duration of the approval process, no unforeseen policy changes Support for international climate change initiatives Global FIT and others Further studies on a country level lead to more specific recommendations.

  11. Thank you for your attention www.cfi21.org

  12. Backup

  13. CFI - Climate Change, Financial Markets and Innovation Increase the application of clean tech innovations • Venture Capital for clean technologies • Financing of infrastructure through Public Private Partnerships • Financing of selected technologies Project partners: • Sustainable Business Institute (SBI) • Climate Change Finance Forum Financed by the German Ministry of Research and Education (BMBF)

  14. The impact of risk on the total power generation costs Framework conditions by policy makers Risk and return perception of the investor Costs for the technology Costs for “green” electricity Jager, D. & Rathmann, M. (2008): "Policy instrument design to reduce financing costs in renewable energy technology projects". Paris. IEA, OECD.

  15. Sample of the survey Companies where the participants work • 75% of the companies had a high strategic focus on small emerging countries Participants of the study • The participants had up to 28 years of professional experience Responsibility of the participants Headquarter of the companies

  16. The respondents have a broad professional experience in different emerging markets

  17. One example from the survey

  18. Application of a new method in the field of investment preferences : Maximum-Difference-Scaling • Identify the 20 most important aspects when facing an investment decision in an emerging country • Identify experienced project developers (158 Persons, 25% return rate) • Each person answers 12 questions • Statistical Analysis: Hierachical Bayes estimation & rescaling of the results

  19. Findings: Overview

  20. Support mechanism

  21. Financial aspects

  22. Non financial aspects

  23. Grid access and power dispatch

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