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

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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 ConferenceSession “World Wide Wind”

March 2011

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Wind Energy Potential

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Influencing factors for policy makers in emerging countries regarding energy infrastructure

Rising energy demandRising energy demand

Energy SecurityEnergy Security

Price volatilityPrice volatility

Power mix based on fossil fuels

Power mix based on fossil fuels

Energy subsidiesEnergy subsidies

External costsExternal costs

(Inter-)National Climate Change Mitigation Measures

(Inter-)National Climate Change Mitigation Measures

Depending on the evaluation of these factors there is an opportunity for wind power.

Depending on the evaluation of these factors there is an opportunity for wind power.

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What is the right policy mix for wind energy in emerging countries?

Which support mechanism?Which support mechanism?

What is the role of the public sector?What is the role of the public sector?

Are there other important factors?Are there other important factors?

How to share risk and profit?How to share risk and profit?

Understanding the rationale of an investor helps to design more effective policies.

Understanding the rationale of an investor helps to design more effective policies.

How to minimize the costs for electricity?How to minimize the costs for electricity?

What is the role of the private sector?What is the role of the private sector?

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Qualitative: 11 Interviews (May und June 2010)Qualitative: 11 Interviews (May und June 2010)

Qualitative: one day workshop with 14 experts (November 2010)

Qualitative: one day workshop with 14 experts (November 2010)

SBI Wind Investment Study - evaluation of the preferences of the private sector

Quantitative: Survey, 41 responses by project developers (July und August 2010)

Quantitative: Survey, 41 responses by project developers (July und August 2010)

Some involved companies and organizations are:

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Key messages 1: Support mechanism

Feed-in-Tariff is the most attractive support mechanism

International Tender: Discontinuous market development Transparency?

Quota-System: High risks lead to high financing costs

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Key messages 2: Non-financial aspects

Very attractive for project developers:Legal securityTransparency Low risk of unforeseen changesKnown duration of the approval process

“one-stop-shop” – don’t do it! Lack of Transparency Additional administrative barrier

Local content requirements: Challenging for investors (even with bonus!)

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Key messages 3: Grid access and power dispatch

A guaranteed grid access and power dispatch is an attractive framework condition.

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No guarantee for grid access and power dispatch is very challenging for an investor.

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Key messages 4: How and where to start?

A continuous approach is best for all stakeholders.

Framework conditions that are either extremely attractive or not attractive for investors.

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How to further use the results?

The study is not a blueprint for the „perfect“ support mechanism.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

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

Support for international climate change initiatives Global FIT and others

Further studies on a country level lead to more specific recommendations.Further studies on a country level lead to more specific recommendations.

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Thank you for your attention

www.cfi21.org

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Backup

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CFI - Climate Change, Financial Markets and Innovation

Project partners:

Sustainable Business Institute (SBI)

Climate Change Finance Forum

Financed by the German Ministry of Research and Education (BMBF)

Increase the application of clean tech innovations

Venture Capital for clean technologies Financing of infrastructure through Public Private Partnerships Financing of selected technologies

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The impact of risk on the total power generation costs

Costs for “green” electricity

Costs for the technologyRisk and return perception

of the investor

Framework conditions

by policy makers

Jager, D. & Rathmann, M. (2008): "Policy instrument design to reduce financing costs in renewable energy technology projects". Paris. IEA, OECD.

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Sample of the survey

Participants of the study

The participants had up to 28 years of professional experience

Responsibility of the participants Headquarter of the companies

Companies where the participants work

75% of the companies had a high strategic focus on small emerging countries

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The respondents have a broad professional experience in different emerging markets

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One example from the survey

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Application of a new method in the field of investment preferences : Maximum-Difference-Scaling

1. Identify the 20 most important aspects when facing an investment decision in an emerging country

2. Identify experienced project developers (158 Persons, 25% return rate) 3. Each person answers 12 questions4. Statistical Analysis: Hierachical Bayes estimation & rescaling of the results

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Findings: Overview

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Support mechanism

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Financial aspects

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Non financial aspects

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Grid access and power dispatch