Financing Wind Europe speaker Felix Fischer, of Chatham Partners LLP, spoke to us about prospects for renewable energy at a time of declining subsidies, as well as the future of German offshore wind.
Felix Fischer is one of the founding partners of infrastructure law firm, Chatham Partners. He specialises in advising developers and investors with regard to renewable energy facilities, with a particular focus on offshore wind.
Felix was one of the guest speakers at Financing Wind Europe 2018 – to find out about Financing Wind 2019, visit our conference site.
As you may have seen in the press, we are on Ørsted’s panel of legal advisors in Germany. And we are supporting another large developer in his project execution, in particular with contracts and claims management.
We advise some larger-scale onshore wind project developments and a few commissioned projects, both on- and offshore across Germany on legal matters of operations. And what I am particularly happy about is that we recently contributed our first advice to one of the projects in Taiwan.
It depends whether we are talking about onshore or offshore. In terms of offshore, my perception is that the US is a very interesting market at the moment – you can tell from Ørsted’s acquisition of Deepwater Wind that they are increasing their footprint in that market. A number of projects are making large progress and have been awarded power purchase agreements [PPAs] by state governments, like the 800MW Vineyard project.
I think that market is very interesting because, though you can say what you want about the current government, it is still an established industrial market where it is possible to comfortably set up the logistics of a project. This means that, although it is geographically further away, it is still a quite familiar environment for European developers.
There are also opportunities in markets further afield. Look at Taiwan, India and Korea – to name a few. What you see on the ground is that the complexities are obviously slightly bigger than in more established markets. This concerns political processes, supply-chains and simply culture.
For onshore wind, it is my perception that the market has become truly global. We see clients invest in most fairly stable economies across Asia, North and South America and Europe. After all, investors have to consider how large your appetite is for return expectations, and that decides to what extent your interest lies in more established or emerging markets. On the other hand, some players simply have a global strategy.
To be honest, I must say that we’ve overcome a lot of the challenges. Now the main regulatory issues are problems of grid congestion and environmental permitting.
In my view, few countries so far provide a viable regulatory framework to finally break-through on storage technologies or power-to-X solutions. To improve this would be important in order to allow for a faster and efficient build-out.
The step from subsidised to purely marketed electricity production is large from a financing perspective. We are still experimenting with that. It is more common in Scandinavia and the UK than it is in Germany, so PPAs with volatile electricity are still something we are learning how to address properly, both economically and contractually.
On the other hand, everybody always talks about the PPA market as though it was a new thing – but we have known and worked with PPAs for decades. There still are many parallels to the days of nuclear and fossil power plants. So that is no revolution from my perspective – at least in the legal sense, it is not as complicated as many people claim. Economically, one may take a different view, in particular considering the range of electricity price forecasts.
The government is planning to auction an additional 4GW of onshore wind capacity so that is good news. Also, the prices have increased in the last auction. Overall, I think onshore wind might over this period become the cheapest electricity we have, especially with further scaling.
Right now, offshore wind is a bit problematic because our grid enhancements and expansions have not kept pace. But I think with more technology coming to the market, that helps to balance the grids and some infrastructure measures – this natural boundary to offshore wind – will fall. We will see more capacity being realised than most people expect at this point.
The fundamental logic of power production will stay the same. But I do not know what the impact might be on the political agenda of the UK.
It is possible there will be less foreign investors willing or able to invest in the UK. But that will not be a problem as long as there is so much capital in the market. If at any point in time we see a general downturn with less money in the market, then it could hit the UK harder as investors would have to diversify their portfolios.
Each year, we hold a one-day conference exploring the biggest issues in European wind. To find out more about our 2019 event, click below…
Investment expertise. High-quality events. Exclusive content. Lead generation.
Talk to the Tamarindo team today to find out how membership would benefit your business.
US offshore wind is beset by economic challenges, but this shouldn’t blind the sector to the potential for incorporating green hydrogen production into project plans