Wind Power Mature Market: History and Lessons

The views expressed in this presentation are those of the presenter and do not necessarily represent those of the Asian Development Bank.

Angelika Wasielke
Development of Wind
Energy Capacity EU
 Mature Markets - Germany

Angelika Wasielke
 Wind Measurements – Key for Success

(1) high-quality calibrated instruments installed according to IEC

wind measurement standards, and

(2) covering each relevant region of the country. Whenever
possible, base the search for locations on

(3) a mesoscale wind modeling of the country and

(4) the transmission grid map, and have experts to find good,
representative sites in each region. After a year provided a short

(5) pre-feasibility evaluation for each location, with a

(6) micro-scale WAsP wind modeling analysis, the government
should

(7) maintain the masts and instrumentation in place, maintaining
masts year after year and continued to collect data from the masts
without moving them, so as to provide

(8) good long-term reference data for nearby wind projects.
 Success Factors

Good wind resources are not on their own sufficient to ensure

strong wind energy development and reductions of the cost of wind
energy.

Even fair pricing is not necessarily enough

Only countries that have set up an adequate enabling environment

and long-term stable comprehensive public policies, with strong
political commitment, have succeeded in developing wind power.
Their policies have been focused, not only on reducing costs and
improving revenues to increase profitability, but also on
reducing risks!
 Policy Instruments

Analysis: the policy approaches resulting in the most significant growth of RE

markets are all characterised by:

• A combination of different policies, rather than using a single policy,

• Long-term and predictable policy support,
• The use and adaptation of markets.

Feed-In laws – the main instrument used in Europe to promote wind energy –
have the advantage of giving developers long-term stability and predictability and
have helped create three of the world’s largest wind energy producers. In the
European context, they have been more cost- effective than Quotas.

Tender-driven policies have major drawbacks and until now, there has been no
successful experience (in Europe) of tendering as the sole instrument of a
nationwide ambitious wind dissemination policy.
 Grid Issues

Policies on permitting and licensing and grid issues are critical. If

obtaining all the necessary permits and licenses is a complex, costly
and uncertain process, investors can be deterred and project
profitability jeopardized.

Grid access is of course critical to wind energy development, but

even when regulations giving grid access to wind farms are in place,
many critical issues related to grids can remain – including
connection delays and charges, transmission charges and grid
stability and ancillary services.

Another barrier is transmission availability. The best locations for

new wind plants are often in distant areas without close access to a
transmission line.
 Preconditions for Success,

A real commitment by policy-makers to develop wind energy;

A legitimate public authority to set rules and obligations and enforce them
in a way that will appear credible to investors;

A grid that has enough capacity and technical stability to accept large
amounts of wind energy without jeopardizing its security;

High electricity prices compared to which wind energy will be more easily
competitive;

and a large enough commercial wind energy potential.

 Criteria for Investment Decisions

2 KEY QUESTIONS

1. What Makes a Wind Farm Investable?

2. Dragon Capital’s Toughest Decision – Invest in wind farms -

In Vietnam, or
Thailand?
 Criteria for Investment Decisions

ASSESSMENT BY COMPARISON
FINANCIAL

Thailand
Vietnam

20 $Cent/ KwH 10 year • 4.5$ Cent/ KwH

Power Price and Base Price, +$?
Feed-In Tariff term

CIT Exempt 8yrs
Import Duty + CIT (3

Tax Incentives
years minimum)

Local Bank loans
Limited to 60%, 10yrs
Limited risk appetite/ cost
term/cost/risk
appetite ~%?

Expert Strategic • 1 Expert Fund

Investors

1 Expert Fund - MBCDF

Exchange Rate • Manageable • Negotiable

Risk
 Criteria for Investment Decisions

ASSESSMENT BY COMPARISON
LEGAL

Thailand
Vietnam

Expert Development
Companies #
1-3 3-6

Contract
Enforceability
Reliable
Uncertain

Company Licensing
Slow Effective

Land Rights

Very Difficult Effective

PPA Predictability Well-defined
5 yrs ~ $ price

Contact: Angelika.Wasielke@gtz.de