Wind Energy Investment & Development Europe WIND 2018 is an annual flagship conference organised for the wind energy sector in Europe by The Voice of Renewables – a leading renewable energy intelligence and media company. WIND 2018 conference will take place in The Hague Hilton hotel in The Hague, The Netherlands on 24/25 May 2018.
During WIND 2018, Mr Joost Bergsma will take part in the panel discussion:Financing and developing European onshore wind energy market.
The Voice of Renewables: Mr Bergsma, thank you very much for finding time in your busy schedule to speak to us.
At the upcoming WIND 2018 conference in The Hague you will be taking part in the panel Financing and developing European onshore wind energy market. Renewables and other infrastructure projects tend to have long-term, low-risk characteristics, including the promise of stable cashflows, which are often inflation-linked. They also provide diversification and, given their relatively illiquid nature, offer a premium over other investments. What makes Glennmont invest in wind energy?
Mr Joost Bergsma: Glennmont invests in wind energy for a variety of reasons. Chief among them is that wind energy forms the largest segment within European renewables in terms of volume and has been around for a relatively long time – this allows us to be selective when it comes to choosing which assets to invest in, as well as to subsequently achieve significant economies of scale during operation. The scale and maturity of the sector has also resulted in assets with proven technologies, provided and guaranteed by experienced manufacturers, and serviced and managed by reliable counterparties.
The Voice of Renewables: Onshore wind is set to be the cheapest form of electricity generation and it can be deployed quickly. Yet, with rapid development of European offshore wind and falling prices of solar energy generation – the future of European onshore wind is not all that clear. What are, in your opinion, future prospects of this branch of wind power generation and what are the best ways to best make it attractive to investors?
Mr Joost Bergsma: We are quite optimistic about the onshore wind industry in Europe, and believe that there will continue to be a prominent role for it in the energy mixes of countries across Europe. Capacity factors are increasing while both direct and indirect costs are falling and this creates attractive equity and debt financing propositions. Repowering is also providing an additional route for investing, and is something which bodes well for the industry’s prospects.
Of course, the wind energy industry will increasingly need to manage more effectively the intermittency of wind production as the size of the sector, relative to other sources of energy, continues to grow. But we believe that developments in forecasting, data analysis, and energy storage all indicate that the risks of intermittency from a grid perspective can be adequately mitigated.
The onshore wind sector can be made more attractive to investors primarily by allowing it to continue along the lines that it has been developing in recent years – increased specialisation of actors, further development of contractual packages and mechanisms, and greater technological and financial innovation.
The Voice of Renewables: Speaking of wind power generation, what is your company preferred investment strategy?
Mr Joost Bergsma: Glennmont’s investment strategy has not changed very much over the past decade. We have always sought to achieve a balanced mixture of capital appreciation and cash flow generation (income) by investing across the clean energy value chain with a focus on lower risk, cash flow backed clean energy assets which utilise proven technologies, such as bioenergy, solar PV, and wind.
We have also always focused on medium sized, off-market assets which benefit from secure and long-term operational contracts. These assets are predominantly either to be built or operational; our funding of development stage projects is highly selective. We then create value through the active management of the resulting aggregated portfolio, realising gains through refinancing opportunities, economies of scale and enhanced performance.
The Voice of Renewables: As the wind power industry grows, many actors appear on the investment stage – institutional and private investors, pension funds, insurance companies, energy utilities, event large municipalities. What, in your opinion are the most important investment parties to keep the investment – and therefore the industry – sustainable?
Mr Joost Bergsma: There is not a single most important party. Sustainable onshore wind investment will be carried by many different parties each playing a specific role, according to their risk appetite and the services that they provide. Funds can help raise equity and debt capital and de-risk and cluster assets, pension funds and insurance companies may be interested in benefiting from cash yield as the long-term owners of assets, and corporates and utilities can write PPAs with the aforementioned parties and so on. Clean energy is very much distributed energy – i.e. smaller scale and local – which is a shift in paradigm from how the utility sectors has been traditionally organised where large scale single site investments were made. The volume of distinct parties involved in the wind power industry are key to making it an interesting space to work in, and to its sustainability – the strength of the competition encourages best practice.
The Voice of Renewables: Investing is never a simple game. What do you see as the biggest investment risk in wind?
Mr Joost Bergsma: The risks associated with onshore wind have fallen a lot in recent years, as the industry matures and the knowledge of the parties involved improves. In particular, regulatory risk has come down and operational risk is cheaper to manage. The largest risk is still public opinion, such as not in my backyard type attitudes. We still need taller towers or more sites to provide the necessary onshore wind capacity and these opinions do not help. This investment risk is, of course, relevant primarily to those companies endeavouring to finance projects still seeking various planning approvals, though it also has a risk implication for projects with government-backed support schemes as well. Storage technology will also be important for the further roll out of onshore wind, and I suppose carries its own technology specific risks.
The Voice of Renewables: BNEF’s long-term forecast anticipates wind and solar costs will fall sharply over the next 25 years and onshore wind and solar will be “the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s”. Where in Europe you see the biggest potential for further development of wind installations in next five years?
Mr Joost Bergsma: With regard to space and wind resource, Poland, Spain and Sweden currently have a lot to offer, and are consequently regions in which Glennmont and other clean energy investors regularly examine projects. However, the more mature markets are also likely to remain attractive, in particular France and Italy have been very good at consistently delivering new programmes to support renewable energy, with the exception of Italy’s cuts to feed-in tariff payments for certain solar photovoltaic projects.
The Voice of Renewables: What do you currently perceive as the greatest obstacle to wind development in Europe?
Mr Joost Bergsma: Not in my backyard attitudes, both from local and national government seem to remain the greatest obstacle. In the case of the UK, for instance, I can understand that offshore wind should get priority but the effective halting of new onshore wind in the UK is both a commercial and environmental mistake – it is a purely political decision.
The Voice of Renewables: Traditionally, energy grids radiate energy from relatively few large power sources to the end users. As dependency upon renewable energy increases, what changes, in your opinion, must be implemented on the wind-to-grid infrastructure?
Mr Joost Bergsma: There are a few key changes that I expect will need to occur: first, energy producers and consumers will need to develop more accurate production and consumption forecasting tools; second, more sophisticated real time availability tools will need to be developed to complement forecasting and supply- and demand-side response systems; third, local short-term storage options will need to improved; and fourth, grid curtailment systems will need to be refined.
The Voice of Renewables: Let’s talk about blockchain for a moment – it is seen by many as a gateway to a new energy world, a world where energy is decentralised, digitised and decarbonised. It is said to make utilities and grid operators become more efficient by balancing supply and demand in real-time and supporting renewable energy integration into the grid in a cost-effective fashion. On the other hand, the intangible and comparatively small nature of EE assets and projects discourages traditional bankers and investors from dipping a toe into this area. The elusiveness of EE benefits is a significant drawback to potential investors. Contrary to other investments, energy efficiency cannot be directly measured in terms of incremental physical production.
Where do you stand on this missing link for renewable energy investment?
Mr Joost Bergsma: Energy efficiency is clearly very important for decarbonisation objectives and it is evident that more can be done in terms of regulation at national and EU levels where companies have clearer incentives to implement energy efficiency programmes. We have historically looked into investing in energy efficiency projects but it seemed difficult to make them scalable or replicable. This was in part due to the difficulties associated with adapting existing stock, for instance old buildings. However, I am not an expert in this field.
The Voice of Renewables: Finally, our last question: what would be the most crucial piece of advice you could offer to developers and investors who want to get involved in onshore wind energy in Europe?
Mr Joost Bergsma: I would offer two pieces of advice. First, get a good team. Glennmont’s work is made possible only through the complementary skill sets offered by the individuals within the team. They bring technical, legal, financial and structuring experience to the firm, all of which are essential to what we do. Second, diversify your projects by geography. This mitigates not only regulatory risk but also weather risk, and the value of it should not be overlooked.
Thank you very much for the opportunity to be interviewed.
The Voice of Renewables: Mr Bergsma, thank you very much for your time today and we are looking forward to meeting you in The Hague on 24th of May.
End of the interview.
November 29, 2022