Wind energy sector buoyant despite downturn


This article is part of our special report Wind Energy.

With a smaller dependence on bank loans than other industries, the wind energy sector believes it will be among the first to emerge from the recession, the European Wind Energy Association (EWEA) said at the opening of its annual conference yesterday (16 March).

The European wind sector is less affected by banks' reluctance to finance projects with loans as it can compensate with increased investment from institutional investors, infrastructure funds and power companies with strong balance sheets, EWEA said.

The announcement came as thousands of wind industry representatives from all over the world are gathering in Marseille for the European Wind Energy Conference 2009 this week.

Nevertheless, the sector urged governments and the European Investment Bank to act swiftly to accelerate economic recovery by establishing loan guarantees.

"Whilst many sectors are struggling with falling demand for their products, the European wind power sector is not. Although the sector is doing well in attracting new sources of finance, EU governments should learn a lesson from the US recovery plan, which provides billions of dollars in loan guarantees to renewables. We need all channels of finance, including bank lending and export credits, to be wide open to meet demand," EWEA CEO Christian Kjaer said.

Green MEP Claude Turmes, who was in charge of steering the Renewable Energy Directive through the European Parliament, also spoke in favour of allocating funding from the EU recovery plan to guarantee loans for renewable projects awarded by the European Investment Bank and others. This will ensure that these industries continue to grow and create jobs, Turmes said.   

In fact, the wind industry expects the attractiveness of wind as an asset to help it emerge unscathed or even strengthened by the economic turmoil. EWEA said wind energy has become less risky after EU leaders agreed to binding targets for the share of renewables in the energy production of all 27 member states. Moreover, the industry is not exposed to fluctuating fuel and carbon prices.

Kjaer pointed out that about half the institutional investors say they are now more likely to invest in clean energy than a year ago. "Many investors have burned their fingers on high-risk assets, but require a higher return than the 2% they could get from government bonds. The institutional investors are showing the way and the retail investors will follow," he stated.

Wind: The EU's ticket to prosperity?

EWEA also launched its new report on wind energy's contribution to prosperity yesterday, comparing the cost of wind to other power sources. Presenting the findings at the conference, Arthouros Zervos, EWEA's president, stressed that Europe only holds a fraction of the world's proven fossil fuel resources and is going to lose the battle over depleting fuel sources.

In contrast, Zervos pointed out that European companies hold two thirds of the global market for wind power technology, worth €35 billion. "Wind energy is Europe's contribution to peace, progress and prosperity and we should urgently develop, promote and export it to the best of our ability," he concluded.

According to the report, a larger share for wind in producing energy is justified in most European countries, simply because it reduces the risk of fuel price volatility. It argues that current methods of calculating the cost of energy "blatantly favour the use of high-risk options for power generation," calling on governments to correct these market failures.

At the same time, EWEA announced that it had increased its 2020 target for installed wind energy capacity in the EU from 180 GW to 230 GW, 40 GW of which would be offshore. Howeber, Zervos warned that the new target will only be met if all EU member states implement the new Renewables Directive "swiftly and effectively".

The upgraded target should produce energy for the needs of 135 million average EU households by 2020, corresponding to 60% of EU households, EWEA stated. It said this would meet 14-18% of EU electricity demand.

In January, the EWEA's Kjaer told EURACTIV that the Commission's objective of covering 12% of EU electricity consumption with wind energy by 2020 is not particularly ambitious and would not require a huge growth rate (EURACTIV 21/01/09).

According to the Commission, wind energy will represent more than a third of all electricity production from renewable sources by 2020. Wind power is increasing rapidly, and more than 40% of all new electricity generation capacity added to the European grid in 2007 was wind, the EU executive stated.

Speaking at the opening session of the European Wind Energy Conference (EWEC), EU Energy Commissioner Andris Piebalgs said: "Wind energy can replace a large proportion of the polluting and finite fuels we currently rely on. It makes good sense to invest in indigenous sources of power which hedge against unpredictable fossil fuel prices and in which Europe has a real competitive advantage."

German Socialist MEP Mechtild Rothe, a vice-president of the European Parliament, said wind energy had become a "driving force of our economies". "Especially in these times of uncertainty, it is very important that the European wind energy industry has created more than 60,000 new jobs over the past five years. These are not mere statistics - this is the competitive strength of Europe," she said.

Green MEP Claude Turmes  said more money from the EU recovery plan should be set aside for loan guarantees. "I welcome the proposal in the European Commission's draft of the five billion euro EU recovery plan to co-finance offshore wind and the first parts of a European supergrid, but this is not enough. The heads of state also have to address the difficulty being experienced by even the most dynamic economic sectors, like wind, in getting access to the necessary finance needed for their investments," he said.

Nobuo Tanaka, executive director of the International Energy Agency (IEA), said effective national policies and an international framework are needed to tap into wind's full potential to mitigate climate change. "We need to reinforce, expand and link up our transmission networks. We must also increase research and development efforts in wind-energy technology," he said.

According to Jean-Louis Bal, director of renewable energy at ADEME, the French environment and energy management agency, the EU's climate goals for 2020 - which include a 20% share for renewables - represent an "investment which will make the medium and long term benefits higher than the costs".

Roland Sundén, CEO of LM Glasfiber, argued that "the track record of wind is the most visible proof that wind creates great value". "As the financial and economic crises deepen, this becomes especially relevant, and that relevance creates an historic window of opportunity for everybody who is committed to combating climate change, to supporting technological leadership and to creating new competitive exports and jobs," he concluded.

Michael Liebreich of analysts New Energy Finance said:  "European governments have injected hundreds of billions of euro to support financial institutions, but the fraction that reaches the real economy in the form of project finance is being limited by banks' reluctance to lend. This short-term difficulty does not accurately reflect the medium-term attractiveness of the sector. In a recent survey, we found that 75% of institutional investors say they are likely to invest more in the sector by 2012."

On 23 January 2008, the European Commission proposed a new directive that mandates a 20% share of renewable energies in the EU's energy mix by 2020 (see EURACTIV LinksDossier).

A compromise deal was struck on 9 December 2008, setting out individual renewables targets for each member state (EURACTIV 09/12/08). It also addressed grid access problems experienced by small producers of renewable energy in the past by providing for "either priority access or guaranteed access to the grid-system of electricity produced from renewable energy sources".

The renewable industry broadly welcomed the directive largely, saying the new framework provides long-term investment security in green energy.

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