Wind Energy Developments in Emerging Market Countries

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

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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?

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Key Drivers

• Energy Security
• Economic Growth Electricity Demand Growth
• Environmental Objectives
• Local
• Global
• Industrial Development
• International Pressure

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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

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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

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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

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Mexico IPP Market

• Fully Developed IPP Market with gt20 projects,
  28,000MW of Conventional Generation (mainly,
  gas-fired CCGTs)
• Off-taker is National Utility CFE
• Committed Private Investment of US6B
• 22 of Mexicos Electricity from IPPs
• IFC has financed 5 conventional power IPPs since
  1996 with US247M in direct investment and
  US614M including B Loan participants
• IFC is ready to finance wind IPPs when market
  develops

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Mexico Wind Market

• Wind technical potential of gt40,000MW (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

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Brazils 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 gt 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

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Brazils Wind Market

• Wind Technical Potential of gt143,000 MW (mainly
  in Northeast, Central and Southeast coast)
• Installed capacity of only 48MW (incl. small
  turbines)
• gt7,000MW 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 Iberdrolas Enerbrasil subsidiary with
  US5.5M 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

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Best Wind Conditions in Brazil located in
Northeast
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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
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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.

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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

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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

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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

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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

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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)

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Thank You !

• Contacts
• Dana R. Younger, International Finance
  Corporation, dyounger_at_ifc.org
• Demetrios Papathanasiou,World Bank,
  dpapathanasiou_at_worldbank.org