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The wind industry in Europe is so fickle at the moment that while some will want to forget all about the past 12 months, others will champion them as a watershed period for growth

and prosperity. As always, we’ve gathered together a clutch of executives from throughout the sector with a range of

differing perspectives. And while we touch upon 2012, this is by no means a navel-gazing retrospective. We look to the coming years, dissect the current trends in technology, certification and legislation and offer a fresh selection of

viewpoints for your consideration.

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THE BIG DEBATE

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ALAN JOHNPartner, Osborne Clarke

REEMA MANNAHHead of Business Development and Senior Underwriter for Renewable Energy Products for Scotland & Northern Ireland, First Title

DAVID CRUICKSHANKDirector of Renewables, Maclay Murray & Spens LLP

GLENN JOHNSONCEO, Endurance

KIM MØRKDirector Business Line Renewables, DNV KEMA

STEFAN FRANKOBusiness Leader Renewables, GE Power Conversion

JOHN PETERSManaging Director, Engage Consulting

CONTRIBUTORS

PES: Welcome to the magazine. Before we head into the main subject of the day, can you tell us a little about your com-pany and how it serves the industry?

Alan John: Osborne Clarke is an international law firm, with over 550 lawyers working in our offices in the UK, Germany, Italy, Spain and North America.

We’ve been specialising in renewable energy since we advised on our first wind farm project in 1991 and have since then advised on a range of on and offshore wind projects. We’re also active in advising on solar, landfill gas, biofuels, energy from waste, marine and renewable heat projects, contracts and regulation.

Reema Mannah: First Title Insurance plc is one of Europe’s leading providers of title insurance for the property industry. Over the past decade First Title Insurance plc has been consulting with the renewable energy industry to develop products for bespoke title risk management solutions which is now branded under Green Title to reflect the sector’s exposures.

Each of our Green Title policies has been designed with the specific class of project in mind. Through consultation with project developers and their funders we have developed products that uniquely capture the exposures on each project style. In addition to the Green Title Wind Farm policy, we have developed policies for solar PV, hydro electric and biomass, which reassure developers that their risk management requirements are met.

Beyond the bespoke policy styles, we’ve worked with the industry to develop policy enhancements which are aimed at capped loss of profits cover, idiosyncratic

consequential losses and portfolio style cover for micro-generation developers. Our reputation for innovation in the title insurance industry has meant that we are always consulting and updating our products so that they correlate not only with rapidly advancing technologies but also with the precariousness of state-backed incentives while helping developers deal with the often unfamiliar territory of renewable energy projects.

As the frequency of renewable energy projects increases, developers are being forced to pre-emptively identify the vulnerable areas of these projects. These can mean preventing significant losses during the planning permission phase, title defects, and restrictive covenants.

David Cruickshank: Certainly. Our dedicated renewable energy team at mms advise the full spectrum of market participants, including contractors, developers, funders, investors, land owners and regulators and are involved in all the principal sectors of the renewable industry, wave and tidal, biomass, bio-gas, solar and of course wind (both on and offshore). In the wind industry we support developers and investors across projects ranging from the small scale (250kw) right up to the Viking energy project in Shetland, where we advise the Shetland Charitable Trust on its JV with SSE Renewables for the development of its 360 MW wind farm in Shetland.

Glenn Johnson: Endurance Wind Power is a manufacturer and developer of advanced distributed wind turbines 5 to 50 kW in size and soon to be adding the Norwin mid-size line of wind turbines to our offering. Our current flagship product is our E-3120 50kW wind turbine, which is ideal for

distributed applications for farms, schools, municipalities, businesses, or residences. Our turbines are tied directly to the grid, so there is no conversion loss, and if the energy produced by the turbine is not used on-site instantaneously, it can be exported to the utility grid.

Kim Mørk: DNV KEMA Energy & Sustainability is part of the DNV group with more than 10,000 employees in more than 100 countries and a total of 150 years’ experience in shipping, 40 years’ experience in offshore oil & gas and 25 years’ experience in the wind industry. DNV is a foundation established in 1864 with the purpose to Safeguard Life, Property and the Environment. The merger with KEMA in 2012 makes DNV KEMA, with around 2,300 experts, one of the largest combined energy consultancy and testing & certification companies in the world. DNV KEMA specialises in providing advisory, testing and certification services for the Energy industry with focus on power, electricity transmission and distribution, and renewables.

The wind team in DNV KEMA, consisting of over 250 wind energy professionals, has been supporting and actively involved in the wind industry for more than 25 years. We are a recognized independent 3rd part leader in Type Certification for wind turbines and have Certified the majority of all offshore wind farms in the world. In addition to certification we also offer a substantial portfolio of advisory services from feasibility studies, due diligence, electrical services, marine warranty to HSE Risk and AIM for offshore wind developments.

For offshore and onshore wind parks, we provide services to a wide range of wind

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industry clients including developers, utilities, operators, suppliers, land owners, investors, and government agencies with services including:

• Wind resource assessment, energy estimates, development support services, feasibility and technical assessment of proposed projects

• Independent design and analysis verification for all design and project phases

• Electrical grid integration

• Project due diligence

• Asset management support

• Accredited power performance testing services for wind turbines

DNV KEMA is strongly involved in developing standards and best practices through Joint Industry Projects (JIP’s) with the industry stake holders in a large number of areas

Our wind energy segment in Europe has main offices in Copenhagen, Hamburg, London, Oslo, Bonn & Arnhem.

Stefan Franko: GE acquired Power Conversion (then known as Converteam) in September, 2011. GE Energy Management’s Power Conversion business applies the science and systems of power conversion to help drive the electric transformation of the world’s energy infrastructure. It designs and delivers advanced motor, drive and control technologies that evolve today’s industrial processes for a cleaner, more productive future. It serves specialised sectors such as energy, marine, industry and all related services.

GE Power Conversion has three main areas of focus (i) transforming electricity into motion, in applications such as compressors, propellers, mills, etc.; (ii) motion into electricity – this is becoming more of a focus, because the question of how to harvest energy is becoming more important worldwide; and (iii) electricity into electricity – in which we are present in areas such as transportation power, solar, power quality and grid integration. Moreover, we are looking to engage in the area of HVDC (High Voltage Direct Current) technology.

John Peters: Engage Consulting is a specialist energy and utilities consultancy,

delivering demanding and complex projects for government, trade organisations, energy operators and suppliers.

Our consultants have helped develop policy and strategy for the smart grid for regulators and industry bodies, as well as delivering research for new market entrants and facilitating the development of operating models between multiple market participants.

We have extensive energy and utilities experience in areas including market definition and regulation, strategy and planning, programme and project management, advice and guidance, requirements definition, operational support, business improvement, business assurance and implementation into complex environments.

Our core services include strategic energy and utilities consulting, Smart metering policy, implementation and market entry, revenue and margin assurance and energy.

PES: How would you sum-up the past year in your corner of the industry?

Reema Mannah: From a title insurer’s perspective and since title insurance risks impact primarily on land-based projects, there have been clear trends this year in biomass, on-shore wind, hydro and solar PV schemes. Over the past year, it is fair to say that whilst levels of biomass and hydro scheme enquiries have remained stable, there has been a marked increase in numbers of onshore wind enquiries and an even greater increase in numbers of solar PV enquiries. Whilst it is difficult to attribute these trends to one specific factor over another, the following reasonable assumptions may provide an explanation for the 2011/2012 trends:

i. A race to benefit from higher pre April 2013 ROC rates of 2 ROCS/mwh for solar PV and 1 ROC/mwh for onshore wind.

ii. Greater certainty in the pre CfDs, ROC regimes for onshore wind projects.

iii. Greater certainty for solar PV ROCs regime until 2015 albeit on a degressing rate basis.

iv. An acceptance within the solar industry of the FIT rate degression which is nonetheless offset by increases in electricity prices thus making small scale solar PV viable.

v. Notwithstanding negative speculation over the longevity of the on-shore wind industry, the short-term pipeline of consented on-shore wind projects remains healthy with, according to latest Renewables UK figures, 272 consented projects still to be built out and 356 projects still in the planning phase.

While in some quarters of the industry the funding gap appears to be narrowing, this has translated into an increased appetite for risk management by funders. Investors are likewise increasingly looking for clean exit strategies and title insurance policies, which benefit all successors in title and provide a mechanism for long-term risk transference that is attractive to them.

The on-shore wind industry in particular, is approaching a mature phase which is now typical of the residential, commercial and infrastructure development sectors, wherein title risk management is accepted as being integral to site assembly. From the perspective of structuring cover, the industry is also becoming more confident about the scope of the title risk coverage that it requires and the losses that it wishes to see built into the policy. Overall, we have found that the industry is more amenable to engaging with title insurers over premium and policy wording dynamics.

David Cruickshank: In a word, challenging! The funding gap for projects still exists, with few lenders in the small scale market, in particular, and although there are various investment funds providing both debt and equity into onshore wind projects the exclusion of FIT-based activity for both EIS and VCT schemes from April 2012 hasn’t helped. On the plus side the RO reduction for onshore wind by 10%, to 0.9 ROCs was less than anticipated, bringing the RO in line with the fit and broadly reflects the corresponding reduction in capital costs. Furthermore, the government recently announced that the RO will remain available for projects under 5 MW.

Offshore wind and the corresponding OFTO assets have seen some notable successes this year (2012), including the first construction phase financing on the Lincs Wind Farm project. Cost reduction and financing remain two of the key issues for the offshore sector.

The offshore wind cost reduction task force published its roadmap in June, setting out its proposals to bring the cost of offshore wind down to £100 MWh by 2020. Of particular interest is the call for a re-evaluation of the contracting structures and looking at increased collaboration or alliancing between the developers and supply chain.

The launch of the Green Investment Bank (GIB) in November and its announcement that offshore wind will be a priority sector is also critical for the industry. However, it

“Offshore wind and the corresponding OFTO assets have seen some notable

successes this year”David Cruickshank

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remains to be seen just how successful the GIB will be in attracting the project finance community and institutional investors to take-out projects funded on balance sheet at the early operational phase, thereby speeding up the recycling of capital into other projects.

Glenn Johnson: Endurance has realised triple-digit growth in every year since its inception, and in 2012, we continued that trend, once again achieving a record-breaking year in sales and growth.

Markets in the UK and US, along with other new developing markets have spurred the growing demand for our flagship product, the E-3120 50kW wind turbine. We’ve attained growth in sales in excess of 150% since last year, and in October of this year, our E-3120 50kW wind turbine fleet accumulated more than two million operational hours in less than three years, which has set a new precedent for fleet growth in the distributed wind market for this class size of wind turbine.

In addition, we formed a new strategic partnership with Norwin, a Danish-based designer of mid-scale wind turbines, to manufacture their line of products. Norwin boasts over 25 years’ experience in wind energy and within the industry, is renowned for its innovative engineering, research and development. This exciting partnership will vault Endurance to a new tier of distributed and community wind power.

Kim Mørk: The year 2012 has been dominated by high activity on the DNV Type Certification and Project Certification projects and consolidation for the early-phase oriented wind advisory services in a contracting market influenced by the financial and regulatory situation in Europe.

Stefan Franko: Headquartered in France, GE Power Conversion (as it is now known), is a provider of power conversion solutions and automation systems, based on high-efficiency power electronics, motors and generators. We are a world leading supplier of wind converters, with over 26GW installed.

From a company perspective, this past year we had the challenge to implement various processes simultaneously. While we belong to the Energy Management business [of GE], we can act autonomously, since we are the experts for power conversion equipment in the GE world. The integration within GE has helped us enormously as in some areas we are being contacted for projects by people trusting in our ability to handle them because we are now GE.

From an industry perspective, last year was a challenging year. Wind has traditionally been a cyclic industry with those cycles impacting the different strata of the industry value chain at very different times due to the extended project development period

between planning and commissioning, which can last over five years.

The slow-down of North America has driven many of the main players to reconsider their positioning and areas of focus. We have seen big industrial players reconsidering their decision to enter the industry, others have refocused on their core segments, some companies that have been in the industry since its beginning have stopped activities altogether whilst others are restructuring to find the key to operating profitably in an industry in consolidation.

Altogether, this consolidation process will strengthen the industry as a whole and the companies able to ride this downturn will be in a much stronger position once the segment picks up again. There is no doubt that the wind industry is a key part of the energy mix for the future and that installations will continue. The question is whether we will continue to see exponential growth in the future, which is what helped many of the smaller players to survive in the past. While continuing exponential growth is unlikely, we believe that installations will grow at a rate higher than energy requirements, to account for an increased wind share and for the substitution of some decommissioned plants by wind.

John Peters: Our business has fared pretty well over the past 12 months - particularly given the current state of the economy; things could have been a lot worse.

We continued to be involved in the remit of smart metering and smart grid, working both with operators and suppliers to the industry and got involved in several very interesting and innovative projects. We also attracted several new clients.

We were also appointed to SmartGrid GB, the new cross-industry group promoting the development of smart grids in Great Britain. This group is championing the development of smart metering and smart infrastructure across Great Britain. We are the only energy supplier that is a member of the group and it is exciting to be at the forefront of the smart metering roll out in the UK.

The outlook for 2013 is promising. We have several good projects in the pipeline and will be going on a recruitment drive imminently to hire some new consultants to meet the increased demand for our services.

PES: On a European level, what kind of legislative changes would you welcome?

Stefan Franko: Any changes that help reduce uncertainty at industry level and that help reduce wind installations cycle time by cutting red-tape. Situations like those of Spain with changing regulatory framework, or the US or UK, with the industry dependent on the political scenario, do not help drive the long-term focus and investments required to continue the technological developments necessary to make wind a competitive source of energy without need of subsidies, a situation that is already present in certain segments and geographical areas but that should be the rule, not the exception.

John Peters: Over the past few years, wind energy growth in the EU has outpaced growth rates in coal, gas and oil. However, according to reports the market is now stabilising – banks aren’t lending to investors and government support for renewable support mechanisms has been wavering. In November it was reported that the UK government has effectively frozen its investment in wind turbines. The Financial Times said that the three largest manufacturers of turbines received only one order for UK offshore wind farms between them last year.

What the industry needs now in order to develop is some stability in terms of the support for support mechanisms – I would really welcome this.

This issue is now being addressed at EU Commission level. EU Energy Ministers stated in December they would instruct the European Commission to prepare post-2020 renewable energy policy “to ensure that the strong impetus provided by the current legislative framework is not lost”.

At the same time the European Wind Energy Association voiced its concerns about the wave of sudden or even retroactive changes that have been made by various EU member states in terms of renewable energy support mechanisms. Let’s hope that we will see some progress made soon.

Another issue holding the industry back is the lengthy and slow planning processes for wind farms – I would like to see this change.

“Another issue holding the industry back is the lengthy and slow planning

processes for wind farm”Stefan Franko

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PES: Do you feel as if you have enough support at national governmental level?

Alan John: In Italy, new incentive schemes have recently been introduced that have encouraged a focus on smaller wind generation plants. Although there is now an incentive scheme for small wind (whereas there is none for PV), the scheme is not well-designed, and more support from government for larger wind projects would be welcome to simplify the overly bureaucratic process that applies to larger schemes.

In Spain, our view is that there is not enough support at national level to stimulate and support energy from wind. While initial government support in 2007 looked promising, subsequent national government regulations have failed to provide the financial incentives required as the market develops. By 2009, existing quota-based financial incentives had been rapidly exceeded, and subsequent legislation failed to address the “tariff deficit” mismatch between regulated tariffs and free-market pricing.

During 2012, instead of delivering expected new regulations with financial incentives for wind farms, the government introduced legislation which eliminated (indefinitely) financial incentives for new electricity generation facilities using waste and renewable energy sources such as wind. Government announcements on future direction have not provided any assurance of active support for energy production from renewable sources.

In Germany, while there is strong support across all political parties for change in the energy policy, Bundestag elections have delayed decisions and created uncertainty in the market. The government has yet to determine the timeline for renewable energy expansion, and has not yet agreed whether the focus should be on centralised (with more offshore wind) or decentralised (with more onshore wind and PV) energy supply.

In the UK developers, financiers and the wind supply chain have long sought government support and policy that provides three key features: certainty, consistency and transparency. In recent years, lack of certainty as to subsidy levels and a series of consultations, reviews and changes to the Feed-In Tariff and Renewables Obligation have created development and investment uncertainty across the wind sector, from the smallest wind farm developments through to the largest offshore wind farms. Now that tariff levels and numbers of ROCs per megawatt hour of wind (and other renewable energy generation) have largely settled it is hoped that this will encourage greater wind energy deployment.

John Peters: Until recently, there was a huge amount of government support at national and EU levels – with wind power

being lined up to play a key role in its fight against climate change.

However, in recent months the coalition appears have reduced its support and withdrawn its investment in turbines. The new energy minister John Hayes recently stated the UK was already “peppered” with turbines; enough were planned and had been constructed to meet government targets. Other senior Conservative MPs have been querying the high number of wind turbines planned onshore across the UK and how these will affect communities and the environment. So, currently, the government policy and support for wind power is unclear.

PES: Is enough being done to educate the public on the benefits of wind energy?

Alan John: In Germany, we think that public involvement in renewable energy is best driven at community level. For example, several communities have established “pool systems” which entitle affected land owners to benefit from lease payments made by the wind park operator. Some communities have also established a “Bürgerwindpark” participation model, which enables citizens of the region to invest directly in the wind park and to profit from the income.

In the UK we are experiencing a similar surge in community owned renewables projects, including wind. This is due to a number factors including higher feed-in tariffs for smaller scale projects, higher chances of success in the planning process where the scheme is community lead and owned, the continuance of EIS (Enterprise Investment Scheme) tax relief for community renewables schemes taking advantage of feed-In tariffs and a rejuvenated use of Industrial and Provident Societies as vehicles for community ownership (which are exempt from certain financial promotions regulations).

David Cruickshank: No, I don’t think so. There is an opportunity to engage more actively on issues, such as perceived inefficiencies, high development costs, ease of planning permission, noise and visual impact. The well publicised clashes between the Coalition Government at Westminster on wind policy have not helped and only serve to undermine investor confidence in the sector. Although bodies, such as Renewable UK and

Scottish Renewables are admirable in their defence of onshore wind, I would argue that there is still not enough being done to debunk many of the myths surrounding wind.

The increase in community projects can play an important part in the educating process, as it encourages individuals to really look at the economic, social and environmental benefits associated with wind and I am pleased to see various examples of these projects being developed in the onshore wind space. These offer a real alternative to the consumer allowing small investors to put money into renewable energy schemes and receive a regular cash return based on the energy generated. So not only do they educate about the benefits of onshore wind but also can serve to plug the funding gap that often prevents community projects getting off the ground.

In fact, there is recent evidence indicating that onshore wind has weathered a lot of the criticism aimed at it, with a recent poll finding 66% in favour of wind power.

Glenn Johnson: From my perspective, there is little to no public education about distributed wind. Compared to larger models, distributed wind turbines are not as tall; nor are they typically clustered in one location. Current models provide a significant amount of energy, are quiet, and are reasonably priced. Unfortunately, an assortment of negative articles about wind energy in the media today supersedes the positive ones. Wind turbines not only provide a powerful reduction in carbon emissions from our current global energy mix, they also provide tremendous economic advantages.

The creation of a wind turbine – from the supply chain, which sources the components for the turbine, to the construction of the machine and the installation and maintenance of the unit – results in significant direct economic stimulation of the local community from the benefactor of the installed turbine to all the parties and companies involved in supporting the unit. The UK’s commitment to developing a low-carbon environment will not only assist it in reaching its national targets, but will also provide long-term stability in its energy supply and significant local economic stimulation. One third of the UK’s economic growth is actually sourced from green businesses.

“Instead of delivering expected new regulations with financial incentives for wind farms, the

government introduced legislation”Alan John

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Glenn Johnson (continued): Although our industry associations are providing significant representation of the distributed wind industry, the other industry stakeholders, including manufacturers such as ourselves, will need to do our part in the future and together, better represent our industry’s value proposition. There is a much larger component of the industry that is not being represented or understood universally.

Stefan Franko: The general public has generally a broad understanding of what wind energy is and how it works. There is a clear need of more education on the impact and benefits of different energy sources and how all of them are necessary in the overall energy mix. The public generally tends to compare wind energy as a source of energy replacing all other energies, whereas the reality is that different sources of energy cover different layers of load demand and have distinctive advantages when utilised properly.

John Peters: Consumers aren’t engaged with wind power in the UK or across Europe and its opponents are powerful, vocal and strong. The industry and government must work harder to promote positive messages about wind energy across – namely that it is free energy and that it doesn’t produce any pollution.

There has been talk about incentivising communities that host onshore wind farms with reduced electricity bills and investment in local infrastructure. This would be a good start. However, greater consumer engagement and consultation with stakeholders is needed within communities that host wind farms. The environmental benefits that wind power can deliver needs to be promoted more strongly and consumers want evidence that the investment in wind is financially viable too.

However, getting the public on side is achievable. Look at the success of the London Array wind farm – its sheer size and proximity to greater London could have caused public outcry. However, the project was promoted exceptionally well. It is the best known wind farm in the UK and its construction received high profile media coverage. Key to the project success has

been strong consumer engagement and involvement in the project.

Messages focusing on the fact The London Array could eventually power up to 750,000 homes – about a quarter of Greater London and reduce CO2 emissions by 1.4 million tonnes a year have helped to win public support. This project demonstrates that public opinion can be influenced and the industry should take note.

PES: Small/medium wind technology seems to be gaining in popularity. Is there a danger that its success will merely cannibalise wind’s market share?

Glenn Johnson: The implementation of distributed wind helps advocate and enhance the general acceptance of wind technology in communities and to the general public. By putting wind to work for the individual owner’s benefit it gives the opportunity to provide some direct benefit for each individual landowner. Every turbine owner receives direct economic benefit from putting wind to work. The advancement of the technology and the surging costs of electricity in the past few years have allowed distributed energy to find a market space that can provide an additional revenue stream for customers to financially stabilise their farms, businesses or communities.

In many instances, distributed wind serves another segment of the wind industry than that of utility wind. They are often suited for an entirely different customer, wind speed, and electrical demand. Utility wind focuses on development in sites with very high wind speeds. Although a minimum average annual wind speed will still be required to provide meaningful energy production for distributed wind turbines, many are specifically geared for lower wind speed sites. In some markets, such as Italy, high wind sites are nearly all occupied by utility wind turbines, leaving a niche opportunity for the distributed wind industry.

Distributed wind also provides some additional benefits to the local utility company. In an age of digitalisation and ever-growing energy needs, many utility companies yearn for a new way to reduce the strain of meeting these rapidly-growing

energy needs. Distributed wind energy can be a cost-effective solution that produces energy directly at the point of consumption and helps to alleviate some of the high transmission costs often associated with centralised energy production.

PES: What do you think is the greatest technical challenge, or set of challenges, facing our industry today? Why do you think these issues are so important?

Alan John: In common with many other European countries, the greatest technical challenges in Germany are the expansion and updating of the power grid (to accommodate the growth in both embedded generation and the largest transmission connected wind farms and the drive towards making grids smart) and increasing energy storage capacity through technologies such as power-to-gas. In 2011 the number of forced shutdowns of wind parks rose by almost 200%, resulting in over 400 GWh lost as it was not possible to feed the electricity into the grid without endangering its stability. While wind park operators are fully compensated under law for such shutdowns, there is a significant cost borne by the consumer estimated at between €18-38m which may endanger public acceptance of the “Energiewende” energy policy.

Kim Mørk: There are three main challenges facing the industry in the years ahead. One is the need for continued political/public support, monetary incentives and legislative stability in a world still recuperating from the financial recession. Another is the need to upgrade the European electrical grid and timely prepare for a large scale integration of renewables. The last and major challenge is related to cost. Future large scale growth for offshore wind will need to see a reduction in the Levelised Cost of Energy (LCOE) from technology and supply chain.

This includes increased turbine sizes, improved turbine reliability and availability, optimized foundations, efficient deployment, reliable cabling among others. Offshore cabling with High Voltage Alternate Current (HVAC) or emerging High

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Voltage Direct Current (HVDC) platforms are viewed as some of the key critical elements where the risk needs to be managed. This is recognized by the industry by the contribution to and engagement in the ongoing work on updating the DNV-OS-J201 “Offshore Substations for Wind Farms” and the ongoing Cable RISK JIP with the objective to develop an internationally acceptable design standard for offshore renewable cable connections.

Stefan Franko: The four main challenges current today and to be solved in the coming years are:

Cost: wind energy has already achieved grid parity in many geographical regions, a concept that indicates that is competitive with other energy sources without subsidies. Costs must continue to be reduced to make wind a competitive technology everywhere that the wind resource is present. Accelerated investment in new lower cost technologies and manufacturing processes are available only if adequate political certainty is provided.

Reliability: wind O&M costs still account today for a sizable percentage of cost of energy. Reliability levels have improved dramatically in the past years, but it must continue to improve in the future to improve wind competitiveness.

Grid integration: as the share of wind in the energy mix increases, new challenges appear, especially in areas with weak grids. In the early days of the industry it was believed that there was an upper limit of how much wind could be installed because of stability issues. Today, it is understood that wind can actually play a very favourable role in sustaining the grid, rather than being a problem to the grid. Grid operation will shift from a model in which generation had few local nodes distributed elsewhere, to a model in which generation is geographically distributed. GE and its Energy Consulting group have always played a key role in the study and analysis of grid challenges.

We see Battery Energy Storage also as playing a key role as it serves two main purposes: it helps meet grid requirements and grid stability – through energy storage we’re able to counteract the variability inherent in renewable sources. We are able to synthesise the inertia inherent in conventional power generation, and to respond to frequency issues in the distributed network.

It can also help in the overall energy balance – by storing energy when the renewable resources outweigh demand and feeding into the grid when either the demand is higher than the renewable resource or during peak consumptions – when prices are higher and it is therefore economically efficient.

Offshore: The last technical challenge is offshore. Offshore is the next big area for development of wind technology, and everybody knows that the still untapped offshore wind resource has a huge potential in the future. Offshore wind solves many objections, offers new freedoms, but presents additional challenges to onshore wind, that will need to be resolved in the next few years for the industry to be able to fully exploit the offshore potential. GE Power Conversion is a world leading supplier of converters to the offshore segment.

John Peters: Wind power is variable and intermittent so it is difficult to make the economics of wind energy work. This is the biggest technical challenge. These issues are leading to wobbly government commitment which will stall industry growth.

PES: Small wind hasn’t been embraced by the public to the same scale as domestic PV, say. What needs to be done to improve its uptake?

Alan John: The Italian government has introduced incentives whereby small wind installations up to 60kW are not subject to registration. This has increased the market focus on small wind, and similar initiatives should be encouraged.

On-building installed wind turbines have historically received poor publicity in the UK due to inefficiency of some models, poor siting, vibration and noise issues and supplier failure. Small to medium scale standalone turbines have however fared better and are enjoying renewed interest from domestic and commercial landowners in areas of good wind resource. The output and payback periods of well sited turbines compare favourably with those of solar PV installations although this has received much less publicity than solar PV. There are a series of wind-for-free financed models available for landowners who want to avoid up front capital costs of installing wind turbines in return for free (or heavily discounted) electricity and this should assist further deployment.

Reema Mannah: From a title insurer’s perspective, we are seeing a tip in the balance of micro-generation enquiries in favour of commercial solar PV. Domestic solar PV projects rarely ever trigger title insurance enquiries as there are fewer significant insurable risks that could prejudice the property owner’s right to

install the panels. Small-scale wind installations that require turbines on freestanding masts are therefore much more intrusive than solar roof panels. The typical installation height of between 20m and 35 metres is enough to discourage installations despite the benefits they would bring. There is also the added issue of noise nuisance, which must be considered within the General Permitted Development Order for wind turbine installations.

Despite the practical and bureaucratic considerations associated with small wind installations, the most significant obstacle is the cost factor. The reducing year-on-year costs of solar PV panels complemented by rapid technological advancements make the choice of solar PV more attractive to the domestic installer. The recent reduction in FIT tariffs for small scale wind by 25% to 21p/kwh has not helped matters and has been criticised by the small wind industry as the current government policy discouraging uptake of this form of renewable power.

The driving factor behind increased uptake in small wind, notwithstanding the reduced FIT incentive, should be an attempt to indirectly focus of the minds of potential installers on this sector. In addition to the small wind industry’s continued lobbying for DECC to make positive changes to the currently published MCS Guidance, the industry itself would do well to promote the advantages of small wind projects above other forms of small scale renewable.

A good starting point would be to highlight the year-round generation factor of wind energy, particularly during high electricity demand periods. The fact that support for small wind translates into support for local turbine manufacturers which will in turn eventually drive turbine costs down and make the projects more attractive could form part of a long-term marketing strategy for the industry.

Glenn Johnson: Both types of technologies serve a different market segment depending upon the renewable energy source available. In the past, solar energy proponents have done a phenomenal job in working together to lobby for their industry and build the collective growth of the industry. Solar is generally a straightforward form of renewable energy that can be installed nearly everywhere and maintained quite easily.

“Distributed wind also provides some additional benefits to the local utility company”

Glenn Johnson

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Wind, however, is more complex, requiring enough space to allow for adequate tower height in order to reach a clear, prevailing wind for optimum energy production. Often wind is not an ideal technology for heavily urbanised and/or residential areas. This helps to explain why it is not as common as solar in domestic applications.

However, due to the manner in which these two technologies complement each other, the next natural progression of the industry will be to more integrated hybrid systems. This has already begun to take place in many projects around the world, but as both industries continue to look for new areas in which to expand their business horizons, it will seem a natural fit for these companies to work together to provide a complete renewable energy system for customers.

John Peters: Consumers need to understand more about the benefits of small wind. Domestic PVs have been embraced by consumers rather than wind because there have been financial incentives to encourage consumer uptake, they are considered more attractive and the price of PVs are coming down all the time – this isn’t the case for small wind.

PES: Is there a European country that is setting the standard for fostering a robust wind industry?

Reema Mannah: Within the United Kingdom, Scotland has most definitely emerged as the wind energy frontrunner. Leaving aside UK-wide state incentives, with devolved powers to set its own renewable energy targets and to set its own policy framework to encourage investment in the renewable energy sector Scotland has set an example in Europe as well as in the UK. At this year’s Renewable UK Conference in Glasgow, the First Minister of Scotland highlighted some of the staggering achievements made by the sector in that jurisdiction:

• Scotland has met 35 per cent of its electricity demand from renewables in 2011 and is beating the previous interim target of 31 per cent by the end of 2011

• Electricity generation capacity now expected to exceed demand by around 35 per cent in 2015, allowing Scotland to meet its own power needs while producing a surplus that will be vital for supply across the United Kingdom

• Currently jobs in green energy total 11,000

• 2011/2012 has been a landmark year for investment that has seen projects totalling £2.3bn committed to Scotland – more than any other part of the UK.

If the support for the industry materialises in the manner detailed in the Scottish Government’s 2020 Renewables Routemap we can expect to see 50 per cent of

Scotland’s electricity demand met from green power by 2015. The Scottish Government in this Routemap recognises the importance of both on-shore and off-shore wind and the overall contribution to meeting Scotland’s ambitious renewable energy targets.

This proactive and aggressive stance towards wind power generation adopted by the Scottish Executive and the renewable sector in Scotland has resulted in significant progress ranging from the ability to attract investment from key offshore wind turbine manufacturers such as Doosan Power Systems, Gamesa and Mitsubishi to the significant on-shore wind farm milestones of planning system and section 36 consent reconfiguration, support for community ownership and investment structures and removal of aviation barriers all with a view to fuelling the momentum of the local wind power generation industry.

Glenn Johnson: The United Kingdom is making tremendous strides toward setting a worldwide standard for distributed wind. Their national commitment to reducing carbon emissions and implementing more renewable energy sources is a leading global example for other nations on the development of a low-carbon economy.

While many people identify significant government incentives to be the sole reason for successful wind energy adaptation, (and these incentives are important), there is another framework of inter-connected mechanisms that has acted as a catalyst, in association with the Feed-In-Tariff, to allow the market to grow effectively. It is not merely enough to have the incentives; one also needs associated policies and governors to influence the successful adoption of wind technology – from the permitting and interconnection phases to the regulation of qualified installers and products. Making the low-carbon target a mandate has improved both the acceptance level and user adaptation of the technology.

The UK has also provided a sense of security and marketplace confidence by preserving the available Feed-In-Tariff until the year 2021. This move ensures that appropriate investments can be made to nurture and cultivate the industry. Although a longer term outlook would assist in further stabilising the industry’s foundation, and there is always room for improvement

in the current system, the United Kingdom has provided a substantial kick-start to embracing the industry and sustaining its growth for years to come.

John Peters: The wind industry is still maturing across Europe – Spain, Holland and Germany are all making great progress in terms of wind energy.

However, there are issues facing all these countries. Take Germany, it has gone further down the renewable energy route than many countries. It has poured hundreds of billions of Euros in subsidies into wind and solar power, making its electricity bills almost the highest in Europe.

However, the jury is currently out about the effectiveness of wind power in Germany and it is facing similar issues that all countries will face. There are technical issues at stake - firstly it is incredibly difficult to maintain a consistent supply of power to the grid, when that wildly fluctuating renewable output has to be balanced by input from conventional power stations. Last year, the actual output of Germany’s wind farms averaged around 17% of their capacity (the UK achieved 25%).

There are also economic arguments. As wind power is variable, it is difficult to make the economics of wind farms work. The other issue is that keeping back-up energy resources constantly available can require fossil-fuel power plants to run much of the time very inefficiently and expensively.

PES: If you could wave your magic wand, what improvements would you make to the subsidies currently offered to the wind industry?

Alan John: In Italy the government has already taken a number of steps to increase incentives for wind installations, and these have been received positively by the market. Further changes we suggest would be to delete the bid procedures currently in force for accessing the tariff for projects larger than five MW.

In the UK many stakeholders in the wind industry would like to see current subsidy regimes left alone by government so that business and investment plans can be developed and implemented with subsidy certainty and longevity. The wind industry does not however exist in a bubble and it is

“ In Italy the government has already taken a number of steps to increase

incentives for wind installations”Alan John

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unrealistic to expect subsidy regimes to be frozen for extended periods. For example the larger wind projects (those that rely on the issue of ROCs) will be affected, like all other ROC supported renewables technologies, by the major and wide ranging Electricity Market Reform which is currently underway.

One EMR principle is that ROCs will be gradually phased out (with appropriate “grandfathering” protection for existing schemes) and replaced for new projects by a power purchase contract for differences. The attractiveness of this alternative system has recently been enhanced by the announcement that the counterparty to these contracts will be a government backed entity.

David Cruickshank: Quite rightly, it is not government policy to support renewables at any price and the aim of the governments at both Westminster and Holyrood is to ensure that the renewable sector becomes competitive without the need for the subsidy. However, the ongoing market failings necessitate continued support as the industry works towards cost parity with conventional energy.

As mentioned, the RO reduction for onshore wind by 10% to 0.9 ROCs will bring it into line with the fit and was less than anticipated and the RO will still remain available for projects under 5 MW. It is a similar story for offshore, with Westminster proposing the level of support to be set at 2.0 ROCs in 2014-15, reducing to 1.9 ROCs in 2015-16 and to 1.8 ROCs in 2016-17. The Scottish government is also looking at potentially introducing a new band for innovative offshore wind deployment in deep water.

Where a magic wand (or maybe a crystal ball) is required is in anticipating the impact on investment that the transition to contracts for difference (CFDs) will have. One of the key components of the energy bill, CFDs are long term contracts to provide stable and predictable incentives for companies to invest in renewable generation.

Unfortunately, the ‘strike prices’ for wind have yet to be published and are not anticipated to be unveiled until sometime in 2013. Although the Energy Bill does makes provision for long term investment contracts to be introduced to encourage

investment in advance of the CFD regime coming into force in 2014 and also transitional arrangements for investments under the RO scheme the absence of a decarbonisation target for 2030, lack of clarity on strike prices and unanswered questions as to how the CFD counterparty will operate mean that there is real uncertainty for investors and supply chain companies, particularly those looking at larger projects, with time horizons extending beyond the next few years.

Not strictly on point but for the direct subsidy regime to work the whole support system has to work in tandem. Developers in the onshore wind sector have voiced increasing concerns over the rise in business rates. Rates are now the biggest capital expense for wind farms, having increased by 200% in a five-year period and it is claimed that profitability is suffering as a consequence. The way in which wind farm rates are calculated has been heavily criticised as being inappropriate and to the extent that rates continue to rise there is a danger that more marginal projects may no longer be economically viable despite a relatively robust subsidy regime.

Kim Mørk: In a world in economic recession the available capital will find its ways to the largest return of investment with the lowest risk. In order to attract more capital to the wind industry the perceived financial risk could be lowered by introducing transparent, coordinated long-term incentive schemes and legislative stability.

Stefan Franko: The question is not what changes should be made to the subsidies, but when we will be able to dispense with subsidies on all energy sources, altogether. Subsidies have been a valuable tool in making the industry grow and mature, but wind, fossil, marine and mineral fuelled energy needs to find its competitive position without being subject to political changes.

PES: Do you believe we are making inroads into improving turbine downtime?

Stefan Franko: Yes, absolutely, we have seen dramatic improvements in availability of wind turbines in recent years. Technology has gone a long way to solving the issues that were burdening wind turbine technology and although there is always room for improvement, reliability of turbines

today is much superior to that of wind turbines just a few years ago. Whereas in the past wind turbines were utilising general industrial solutions which were not well fitted to the very rigorous wind requirements., wind requirements today are much better understood, and suppliers have developed wind specific technology and solutions.

PES: Do you feel as if planning regulations are stifling or encouraging wind power development?

Alan John: In Spain planning regulations are passed at a local level, and our observation is that most city councils have been very interested in installing wind farms and therefore planning regulations have not been an obstacle.

In the UK, recent planning reform has removed much of the bureaucratic red tape and streamlined the planning process.

This looks to have had a positive effect on wind power development – the most recent RenewableUK report on wind energy noted an increase in planning approval for onshore wind schemes (below 50 MW), with decisions being reached faster than the previous year. However, there is a risk that such progress could be compromised by mixed messages from the coalition government as to the future of wind power once environmental targets are met.

The UK coalition government’s lack of a united, long-term policy on wind power (and recent contradictory statements from government ministers on wind policy) may hinder future deployment and investment.

In Germany planning regulations have had a positive contribution to development in wind energy. In the past year a number of new suitable sites (“Eignungsflächen”) have been reported in southern Germany, leading to a boom of new onshore wind projects – referred to by some as the new “gold rush” in wind energy.

Glenn Johnson: It is important to note that planning regulations are an important part of the approval process, and although they provide some additional complications, they also serve a valid purpose to protect local customers and their communities from unsuited or unproven technologies.

More often than not, planning regulations and their associated delays for project approval can be stifling to the industry. In

“More often than not, planning regulations and their associated delays for project approval can be stifling

to the industry”Glenn Johnson

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an industry where time is of the essence –from a business planning standpoint to the time that an incentive is available or digressed - our industry is always working against the clock. Delayed planning regulations can cripple the financial position of the customers, project developers, dealers, and manufacturers and have a volatile effect on the cash flow of all parties involved.

PES: What are your thoughts about prospects for the near future with regard to your organisation, and the wind industry in general?

Alan John: With Spanish government suspension of financial incentives for new generation facilities using renewables sources such as wind, we do not expect to see the promotion of wind farms in Spain during 2013-2014. As a result, we expect to see some consolidation amongst Spanish renewable energy businesses through M&A. We also expect to see businesses concentrate on other markets – for example, Iberdrola forecasts it will invest 42% of its global investments in the UK. It will also be interesting to see if companies can find commercial models that will make wind farms profitable in the absence of government incentives.

The German wind energy industry is forecast to continue to grow strongly, with the federal government expecting Germany to remain one of the largest market for wind energy in Europe. On-shore wind energy is expected to see net growth of approximately 1,550MW annually during 2014-2016. Off-shore wind energy will continue to gain importance, with a goal of 25GW of offshore capacity by 2030. According to medium-term forecasts, offshore wind farms will add between 1,300MW and 1,500MW to the network annually from 2013-2016. For these goals to be achieved, further investment will be required in offshore grid expansion to connect offshore wind farms.

The offshore wind industry in the UK continues to anticipate substantial growth in the year ahead. 2.7GW of capacity is currently installed with a further 3.8GW in construction or having planning approval and 4.7GW in the planning system. The industry expectation is that 18GW of capacity will have been installed by 2020. In support of this ambitious deployment vision there will be a continuing substantial

mobilisation of the wind supply chain and infrastructure investment in ports, manufacturing facilities and grid connections.

At the other end of the scale there is likely to be good activity in single turbine, small wind cluster and community scale developments. In the medium to large onshore wind sector we would expect to see continuing the trend of repowerings and extensions of existing sites as well as a select number of new developments, particularly those that have on or near site electricity demand to enhance the value of electricity off-take.

Reema Mannah: We expect to see a spike in premium income for renewable energy risks underwritten in the past year pre-April 2013 as project developers aim to take advantage of the higher ROCs and FIT tariffs. Generally, we expect that there will be a steady stream of renewable energy title insurance enquiries as we look further ahead to 2014. The flow of enquiries is always tempered by funding and other resource restrictions but any shortfalls may also be compensated for by existing site extensions or fresh schemes in the vicinity of low planning risk operational projects.

Macro-generation projects are not likely to decrease as there is still a long way to go in bringing planned and consented projects to operational phase to meet 2020 targets before any brake is applied to planning applications. The introduction of preliminary accreditation, which guarantees a two-year revenue stream for large-scale wind projects, will also stabilise project numbers. Micro-generation projects of a less offensive nature are not likely to decrease, notwithstanding reduced FITs and given that these projects are still likely to provide a good return on investment.

This sector of the industry is also likely to be spurred on by decreasing turbine costs stemming from oversupply by China. The rise in FIT support levels for small scale hydro schemes may signal some attrition away from small wind projects towards hydro projects. However, the technical hurdles that are required to be surmounted for hydro sites compared to the prevalence of feasible wind sites may tip the balance in favour of the latter.

Not surprisingly, the wind industry will continue to struggle to obtain local community support in 2014 except for

large-scale projects in remote regions where there is capacity for local employment. Community projects that are ethically funded are also likely to increase as turf wars intensify in remote regions. The public debate over the impact of these projects on rural landscapes is likely to have garnered fresh vigour in the wake of recent political wrangling over future planning consents for wind farms.

Wind farm projects developers may therefore find that there is a risk of increased judicial review challenges in a more contentious 2014 landscape. Funding and skills gaps will also present challenges in 2014 as they have in past years and this is likely again to result in slippage in scheduled construction and operational dates.

David Cruickshank: For our renewables team at MMS, we fully expect wind (both onshore and offshore) to continue to be an essential part of our practice in 2013/2014 and beyond.

I believe we’ll see investment funds acquiring portfolios of operational small-mid size onshore wind farms and I would like to see more community-based projects accessing capital through community finance platforms.

There has also been a lot of recent talk about the utilities increasing community wind payments fivefold, if they get reassurances that subsidies will remain at current levels. This will have the effect of lessening opposition to future developments.

I’ve talked about the need for more clarity on the contracts for difference and, hopefully, the publication of strike prices for wind in 2013 will provide investors with the comfort that projects under the CFD regime will offer comparable rates of return enabling the sector to attract the required levels of debt and equity.

In offshore, the industry will be watching closely to see how the green investment bank intends to attract capital in such a constrained lending environment. As a starter, one possibility might be for the GIB to acquire a minority equity stake in an operational offshore wind project, which could then be placed into an offshore fund.

It will also be interesting to see how the sponsors of these projects look to

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implement some of the recommendations made by the offshore wind cost reduction task force and whether increased collaboration and alliancing can really deliver significant cost savings.

One particularly exciting technological advancement is the development of the world’s first circuit breaker for high voltage direct current (HVDC) by ABB. this breakthrough will enable the development of DC transmission grids, which in turn will facilitate the integration and exchange of renewable power.

Overall, the scope for scalability of wind projects and the fact that it can be deployed both on and offshore, makes me optimistic for both its short and long-term future.

Glenn Johnson: As more nations realise the importance of renewables and a growing demand for the distributed wind sector, we expect sustained expansion for Endurance in 2013 and beyond.

The continued collaboration of the wind industry and developing strategies to break down common market barriers will be an ongoing requirement to sustain the continued growth of the industry. However, as our society strives to become more sustainable and energy costs continue to rise, the appeal for wind turbines will continue to grow. We expect that wind energy will continue to be largest-growing newly-installed energy source in the world and will not only provide a friendlier socio-economic option, but also a cost-competitive option for the future.

Kim Mørk: The EU’s 20-20-20 directive on 20% renewable energy by 2020 remains a driver. It is recognized that with a 10% of total energy in EU the best wind locations in central Europe is already being developed and further growth for onshore wind in coming years is expected in countries like Sweden, Poland, Turkey and Eastern Europe.

The largest activity is however expected to be related to offshore wind with UK and Germany in the driver seat. There is no doubt that the political and financial situation is controlling the speed of the wind development and integration in Europe and elsewhere in the world. While 2013 is expected to be year characterized by lesser growth, consolidation and project delays due to available finance or grid

integration constrains 2014 may see a return to higher activity.

Stefan Franko: GE Power Conversion is continuously improving its technology and product portfolio. 2012 has been a key year for our organization because of the integration within GE. We have taken substantial steps towards exploiting the synergies existing with all GE technologies and have achieved remarkable successes on new technologies. According to all forecasts 2014 will be the year when installations will grow again after the 2013 downturn and GE Power Conversion will contribute to this growth through its reliable and more cost effective technologies and successful partnerships with its customers at integrating those technologies into their wind turbines.

John Peters: We are very upbeat about our business prospects in 2013 – there are lots of projects on the horizon and new people coming on board.

In terms of the wind industry – there are clearly several hurdles to overcome – not least of all investment issues, consumer engagement and achieving consistent government support.

But, personally, I think wind is becoming more commercially viable and I think the industry needs to take a bolder approach. Wind has been around for several years, there are big installations in place producing lots of energy. Companies need to promote the fact they are generators and can provide services including frequency support and power factor control and mature into those roles.

PES: What new technical developments can we expect to see in the future?

Kim Mørk: While onshore wind developments require very location specific optimized turbines the major technical development is likely to be governed by the growth in offshore wind parks in deeper water further away from infra-structure. Developments will be driven by the need to bring down the Cost of Energy (CoE) to make these large projects economically feasible. This will evidently lead to the introduction of increasingly larger turbines with novel optimized foundation design concepts. In addition, we expect to see a significant portfolio of floating wind concepts being qualified for deeper water areas with good wind resource conditions.

New concepts need to be qualified and in the past three years, DNV KEMA has been undertaking a JIP with a large number of industry partners on Floating Wind Turbines. A guideline with industry best practices will be issued in spring 2014.

PES would like to thank all our roundtable contributors. For more information, please visit their respective websites.

Alan John, Osborne Clarke: www.osborneclarke.co.uk

Reema Mannah, First Title: www.firsttitleinsurance.eu

David Cruickshank, Maclay Murray & Spens LLP: www.mms.co.uk

Glenn Johnson, Endurance: www.endurancewindpower.com

Kim Mørk, DNV KEMA: www.dnvkema.com

Stefan Franko, GE Power Conversion: www.ge-energy.com/electrifyingchange

John Peters, Engage Consulting: www.engage-consulting.co.uk

Opinion makers and idealists wanted!

Would you like to sit on the next roundtable? We’re currently looking for contributors and would welcome applications. Please contact the editor, Simeon de la Torre, at sim@pes.eu.com for details.

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“Often wind is not an ideal technology for heavily urbanised and/or residential areas”

Glenn Johnson

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