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Wind Farm Development

Thursday 16 th November 2006

Wind Farm Development Thursday 16 t h November 2006
Wind Farm Development Thursday 16 t h November 2006

Introduction to Mott MacDonald

Technical consultancy active in power, water, transport, buildings, communication, education, health etc

Leading capability in power covering renewables, thermal and nuclear

Approximately 800 staff active in power…equivalent of 90 in renewables

Mott MacDonald’s renewable energy capability focussed in Glasgow with wind, biomass and marine technology skills

Currently involved in 30+ wind projects across UK, Europe and Asia

wi th wind, biomass and marine technology skills • Currently involved in 30+ wind projects across
wi th wind, biomass and marine technology skills • Currently involved in 30+ wind projects across

Introduction to SgurrEnergy

Leading independent multi-disciplinary consultancy specialising in renewables

Based in Glasgow and Beijing Further international expansion planned

Over 40 experienced professionals

Accumulation of decades of experience

Experience in over 20 countries

• Over 40 experienced professionals • Accumulation of decades of experience • Experience in over 20
• Over 40 experienced professionals • Accumulation of decades of experience • Experience in over 20

Drivers and Regulatory Structures

Drivers and Regulatory Structures
Drivers and Regulatory Structures

UK Wind Project Development - Status

 

Onshore

Offshore

Operational

No. & MW

No. & MW

England

49

210

3

153

N. Ireland

11

89

0

0

Scotland

31

568

0

0

Wales

23

254

1

60

Total

114

1124

4

213

START OF COMMERCIAL OPERATIONS

Pre-Construction Onshore No. Offshore Planning & MW No. & MW 43 England 822 6 2718
Pre-Construction
Onshore
No.
Offshore
Planning
& MW
No. & MW
43
England
822
6
2718
N. Ireland
29
599
0
0
Construction
74
Scotland
5399
0
0
Wales
14
183
0
0
Total
160
7006
6
2718
Scheme Development Procurement Construction Handover O&M Decommissioning
Scheme
Development
Procurement
Construction
Handover
O&M
Decommissioning

Under

Onshore

Offshore

construction

No. & MW

No. & MW

England

8

111

1

90

N. Ireland

2

41

0

0

Scotland

14

523

0

0

Wales

3

46

1

60

Total

27

722

2

150

2 41 0 0 Scotland 14 523 0 0 Wales 3 46 1 60 Total 27

Revenues available to a UK wind generator

100 90 80 70 60 50 40 30 20 10 0 £ /M W h
100
90
80
70
60
50
40
30
20
10
0
£ /M W h
LEC ROC Energy
LEC
ROC
Energy
70 60 50 40 30 20 10 0 £ /M W h LEC ROC Energy •

A UK wind generator will be able to earn revenue from three sources; sales of energy and ROCs and LECs

ROCs and LECs are tradable green certificates issued for renewable generation – ROCs derive from the Renewable Obligation and LECs derive from the Climate Change Levy

for renewable generation – ROCs derive from the Renewable Obligation and LECs derive from the Climate

ROCs – Renewable Obligation Certificates

Derive from the Renewable Energy Obligation introduced in April 2002

Obligation on retailers to buy a certain percentage of their energy from accredited renewables generation – set at 3.2% in 2003, now 6.7%.

If a retailer does not comply it pays a fine – buyout penalty - now ~£33/MWh - on top of its energy cost

Accredited renewables generators are issued ROCs for energy produced - 1 ROC per 1 MWh

Retailers buy ROCs to demonstrate compliance with RO

are issued ROCs for energy produced - 1 ROC per 1 MWh • Retailers buy ROCs
are issued ROCs for energy produced - 1 ROC per 1 MWh • Retailers buy ROCs

ROC recycle

Buy-out payments are collected and are recycled to holders of ROCs in proportion to their ROC holdings

This means that a ROC has a value greater than the buy-out price as holders of ROCs receive a share of buyout monies

The recycle bonus rises as the level of shortfall increases

If the RO target were met the ROC price would drop to zero!

recycle bonus rises as the level of shortfall increases • If the RO target were met
recycle bonus rises as the level of shortfall increases • If the RO target were met

ROC values versus RO shortfall in

2006

70 60 50 40 30 20 10 0 0 10 20 30 40 50 ROC
70
60
50
40
30
20
10
0
0
10
20
30
40
50
ROC value: £/MWh

% shortfall on RO Target

RO shortfall in 2006 70 60 50 40 30 20 10 0 0 10 20 30
RO shortfall in 2006 70 60 50 40 30 20 10 0 0 10 20 30

Drivers of ROC prices

Supply and demand

Supply will depend on amount of renewable capacity built and its utilisation – rule changes

Demand is set by the RO targets

Currently set to rise linearly to 10.4% in 2010

View is that target will be raised after 2010 possibly to the 20% target aspired to.

Buy-out prices indexed to inflation

Banking of ROCs by suppliers/ traders may affect prices

Dominant suppliers (which are also the main owners of RE plant) will ensure that RO target is not met to stop ROC values falling to zero

Scheme is now being reviewed

of RE plant) will ensure that RO targ et is not met to stop ROC values
of RE plant) will ensure that RO targ et is not met to stop ROC values

RO Review - Issues

There are a number of concerns regarding the RO

Rewards to lower cost renewable generators are too generous

There is considerable uncertainty regarding ROC prices, especially after 2015

There is a cliff edge for ROC prices if full compliance of the RO is achieved

Rewards for high cost more innovative renewable generation are too small to support deployment

the RO is achieved • Rewards for high cost more innovative renewable generation are too small
the RO is achieved • Rewards for high cost more innovative renewable generation are too small

RO Review Outcomes

Future ROC allocation may be banded. Mature technologies likely to issued less ROCs per MWh than selected promising but high cost technologies (like PV).

Scheme likely to be rolled out to 2020

The recycle arrangements will be changed in order to eliminate the possibility of ROC prices collapsing to zero

EU Commission still favours that all Europe moved to feed-in tariffs

possibility of ROC prices collapsing to zero • EU Commission still favours th at all Europe
possibility of ROC prices collapsing to zero • EU Commission still favours th at all Europe

Climate Change Levy (CCL)

Introduced in 2002, CCL is a tax on energy consumption by large industrial and commercial users – not paid by generators

Electricity is taxed at £4.3/MWh

Energy from certain renewable sources and from qualifying cogeneration is exempted and is issued a Levy Exemption Certificate (LEC).

Different set of renewables to RO – LECs include mini hydro and municipal waste, while ROC don’t. ROCs include biomass co-firing, LECs don’t

LECs are sold with energy to suppliers/customers who can then offset their CCL obligation (£4.3/MWh) – Can be separated for output sold off-site

Stand alone renewable generators can normally capture 85% of LEC value

Unclear how long tax will continue

•
• Stand alone renewable generators can normally capture 85% of LEC value Unclear how long tax

Energy Review and Renewable Grid Issues

One of the key issues that has delayed the introduction of renewables and limits the achievement of the 2010 target.

ER06 states there is the need to resolve a number of issues:

Final Sums Liability (paying up front for connection)

Connection queues as a result of increased interest in renewables [Clustering, i.e. group connections similar to NI, provide better network planning but can disadvantage some generators]

Renewables lower transmission use of system charges?

Need to change from ‘invest then connect’ to ‘connect and manage’

Regulatory framework for offshore wind

Need to change from ‘invest then connect’ to ‘connect and manage’ – Regulatory framework for offshore
Need to change from ‘invest then connect’ to ‘connect and manage’ – Regulatory framework for offshore
Need to change from ‘invest then connect’ to ‘connect and manage’ – Regulatory framework for offshore

All above issues were identified around time of ER03

• All above issues were identified around time of ER03 Transmission- level issues Distribution and Transmission-
Transmission- level issues Distribution and Transmission- level issues Distribution- level issues
Transmission-
level issues
Distribution and
Transmission-
level issues
Distribution-
level issues

Stern Review of Economics of Climate Change

Sir Nicholas Stern’s review of the economics of climate change has two key messages for renewables

Renewables are central part of the carbon mitigation strategy

There should be a huge scale up in funding of R&D and deployment of low carbon technologies, including renewables

There should be a huge scale up in funding of R&D and deployment of low carbon
There should be a huge scale up in funding of R&D and deployment of low carbon

Planning and Permitting Issues

Planning and Permitting Issues
Planning and Permitting Issues

Overview of Legislation

Windfarm consent needs are driven by legislation

Planning permission/consent to build granted under

Section 36 of Electricity Act for over 50MW

Town and Country Planning Act for under 50MW

Environmental Impact Assessment (EIA) needed for planning applications

The Electricity Works (Environmental Impact Assessment) Regulations 2000

Town and Country Planning (Environmental Impact Assessment) Regulations 1999

If require consent for grid connection

Either Section 37 of Electricity Act or Town and Country Planning Act

Also need an EIA for grid connection consent

Either Section 37 of Electricity Act or Town and Country Planning Act • Also need an
Either Section 37 of Electricity Act or Town and Country Planning Act • Also need an

Planning Process – Initial Stage

Early consultation with key stakeholders

Initial approach to local authority

Seek initial views of key stakeholders

Scoping of EIA

no surprises later

Focus on key issues through consultation and discussion with key stakeholders

Time spent at scoping stage could save time later in process

Identification of likely need for baseline studies

Identify available data / data gaps early

Develop public consultation strategy

Landowner consultation

– Identify available data / data gaps early • Develop public consultation strategy • Landowner consultation
– Identify available data / data gaps early • Develop public consultation strategy • Landowner consultation

Interfaces

Statutory Consultees (SEPA or EA, LPA, DTI or Scottish Exec, English Nature or SNH, MOD,
Statutory Consultees
(SEPA or EA, LPA, DTI or Scottish
Exec, English Nature or
SNH, MOD, CAA etc)
Public
Consultees
Client
Environmental
Technical
Transport/
Landscape and visual
Ecology
Ornithology
Hydrology & hydrogeology
Noise
Communications
Archaeology
Traffic & transport
Routes
Engineering
Layout
Geology
Optimisation
EIA
Civil
preparation
Planning

Planning Process – EIA Stage

Ensure project assessed covers all potential technical options

EIA scope focussed on key issues in a robust manner e.g.

landscape and visual impact including cumulative impact

ornithology; presence of SPAs and SSSIs close to site ecology

radar interference

Input from experts capable of taking to Public Inquiry

Supporting studies commissioned in timely manner and scope agreed with key consultees

Meeting project programme through management of large environmental resource and sub-consultants

Integration with the design process

–

Ensure mitigation measures consistent with project design

sub-consultants • Integration with the design process – Ensure mitigation measures co nsistent with project design

Planning Process – Application Stage

Maintain close interface with local planning authority (LA) / Scottish Ministers (SM) after application

Respond to queries/requests for more information in timely manner

Close integration with project design team to try and mitigate issues to avoid Public Inquiry

Agree planning conditions with LA and SM

Translate planning conditions into contractor requirements

Inquiry • Agree planning conditions with LA and SM • Translate planning conditions into contractor requirements
Inquiry • Agree planning conditions with LA and SM • Translate planning conditions into contractor requirements

Public Consultation

On going throughout the planning stage

Manage flow of information / publicity to local people and organisations – information voids can fill with bad news !

Understand the local and regional politicians – background to phase 1 essential

Review comments from third parties of previous EIA’s and identify potential supporters and risks

1 essential • Review comments from th ird parties of previous EIA’s and identify potential supporters
1 essential • Review comments from th ird parties of previous EIA’s and identify potential supporters

Project Evaluation

Project Evaluation
Project Evaluation

Site Identification & Provisional Layout

Wind resource and regime

NOABL

Reanalysis

Grid connection

Access and buildability

Constraints

Wind resource and regime – NOABL – Reanalysis • Grid connection • Access and buildability •
Wind resource and regime – NOABL – Reanalysis • Grid connection • Access and buildability •
Wind resource and regime – NOABL – Reanalysis • Grid connection • Access and buildability •

Technical & Environmental Constraints

Houses

(noise,

Shadow-flicker)

Areas with Historical Importance

(noise, Shadow-flicker) Areas with Historical Importance Overhead Lines Landowner Boundary Underground Cables /
(noise, Shadow-flicker) Areas with Historical Importance Overhead Lines Landowner Boundary Underground Cables /

Overhead

Lines

Areas with Historical Importance Overhead Lines Landowner Boundary Underground Cables / Pipelines Roads

Landowner

Boundary

Underground Cables / Pipelines

with Historical Importance Overhead Lines Landowner Boundary Underground Cables / Pipelines Roads Wildlife Areas
with Historical Importance Overhead Lines Landowner Boundary Underground Cables / Pipelines Roads Wildlife Areas
Roads
Roads

Wildlife Areas

with Historical Importance Overhead Lines Landowner Boundary Underground Cables / Pipelines Roads Wildlife Areas
with Historical Importance Overhead Lines Landowner Boundary Underground Cables / Pipelines Roads Wildlife Areas

Wind Regime Assessment

Wind Regime Assessment • Undertake wind regime assessment campaign using: – Wind Monitoring Masts – SODAR

Undertake wind regime assessment campaign using:

Wind Monitoring Masts

SODAR

LIDAR

Monitor for 12 months or more

Monitor at multiple locations

– Wind Monitoring Masts – SODAR – LIDAR • Monitor for 12 months or more •

Measured Turbulence Intensity & Wind Shear

Height (m)

Measured and Modeled Turbulence with Height

60

50

40

30

20

10

and Modeled Turbulence with Height 60 50 40 30 20 10 10% 20% Tubulence (%) 30%

10%

20%

Tubulence (%)

30%

Modeled Fit Measured Data

Modeled

Fit

Measured

Data

40%

Ambient turbulence intensity and…

Measured and Modeled Wind Shear in Forestry

80 70 60 50 40 30 20 10 0 Height Above Ground Level (m)
80
70
60
50
40
30
20
10
0
Height Above Ground Level (m)

012345678

Average Wind Speed (m/s)

Open Moorland

Wind Shear Zo =

0.4

Forested Area

Wind Shear

Theoretical Forest Wind Shear based on Zo = 0.8

Shear Theoretical Forest Wind Shear based on Zo = 0.8 …wind shear must be accounted for

…wind shear must be accounted for in fatigue life calculations

Theoretical Forest Wind Shear based on Zo = 0.8 …wind shear must be accounted for in

Added Turbulence

Wake induced turbulence must also be investigated.

Modified Sten Frandsen model combined with far wake modelling

Plotting predicted CTI against IEC threshold 35% 30% Plotting predicted CTI against IEC threshold 25%
Plotting predicted CTI against IEC threshold
35%
30%
Plotting predicted CTI against IEC threshold
25%
35%
CTI (V90
2MW)
IEC 61400
20%
threshold
30%
15%
25%
CTI (Bonus
2.3)
10%
0
5
10
15
20
25
IEC 61400
20%
threshold
Wind Speed (m/s)
15%
10%
0
5
10
15
20
25
Wind Speed (m/s)
Characteristic Turbulence Intensity
Characteristic Turbulence Intensity
15% 10% 0 5 10 15 20 25 Wind Speed (m/s) Characteristic Turbulence Intensity Characteristic Turbulence
15% 10% 0 5 10 15 20 25 Wind Speed (m/s) Characteristic Turbulence Intensity Characteristic Turbulence

Impact of Complex Roughness

Complex roughness, such as buildings and forestry has significant impact on wind turbine operation.

These features produce higher than specified turbulence intensity & wind shear.

than specified turbulence intensity & wind shear. Effects on: – Power Curve – Operational Loads –
than specified turbulence intensity & wind shear. Effects on: – Power Curve – Operational Loads –

Effects on:

Power Curve

Operational Loads

Fatigue Life

The effects of trees are further

complicated by growth and felling

Power Curve – Operational Loads – Fatigue Life The effects of trees are further complicated by

Extreme Wind Speed

Analysis typically performed only at site mast

Two methodologies for Extreme Wind

WAsP Engineering to model gust values across the site

only at site mast • Two methodologies for Extreme Wind • WAsP Engineering to model gust
only at site mast • Two methodologies for Extreme Wind • WAsP Engineering to model gust
only at site mast • Two methodologies for Extreme Wind • WAsP Engineering to model gust

Components of a Wind Turbine (Model shown is Vestas V80)

Nacelle

Gearbox Hydraulic Yaw gears
Gearbox
Hydraulic
Yaw gears

Tower

system

Oil cooler

Rotor

blades

Ultrasonic

sensors

High voltage transformer

Hub

controller

Main shaft

Electrical

generator

Oil cooler Rotor blades Ultrasonic sensors High voltage transformer Hub controller Main shaft Electrical generator
Oil cooler Rotor blades Ultrasonic sensors High voltage transformer Hub controller Main shaft Electrical generator

Technology Selection

IEC Classification

Technology Selection • IEC Classification – Mean & Extreme Wind Speed – Turbulence Intensity – Wind

Mean & Extreme Wind Speed

Turbulence Intensity

Wind Shear

Compliance

Noise Emission

Grid Code Compliance

Environmental Conditions

Noise Emission – Grid Code Compliance – Environmental Conditions • Economic Viability – Production – Cost

Economic Viability

Production

Cost

Noise Emission – Grid Code Compliance – Environmental Conditions • Economic Viability – Production – Cost
Noise Emission – Grid Code Compliance – Environmental Conditions • Economic Viability – Production – Cost

Energy Yield Modelling

Energy Yield Modelling • Final layout iteration – Compromise between maximum production and constraints •

Final layout iteration

Compromise between maximum production and constraints

Predict energy yield

Rigorous quality checks

Multiple MCP techniques

Model validation and tuning

Complex forestry modelling

Quantification of uncertainty

MCP techniques – Model validation and tuning – Complex forestry modelling – Quantification of uncertainty

Performance Testing

Power performance testing

Noise compliance

Planning & environmental compliance

Grid code compliance

Power performance testing • Noise compliance • Planning & environmental compliance • Grid code compliance
Power performance testing • Noise compliance • Planning & environmental compliance • Grid code compliance
Power performance testing • Noise compliance • Planning & environmental compliance • Grid code compliance

Project Procurement and Financing

Project Procurement and Financing
Project Procurement and Financing

Overview of Contracting Strategies

- Who and Why

EPC Contracts

Majority of risks on Contractor

One contract to deal with

Sometimes developers with little experience or as a pre- requisite to Project Financing

Multi-Contract

Lower overall costs

Increased competition; more choice of contractors

Usually developers with sufficient in house experience or good OE support, using own funds

Prevalent for UK onshore projects

with suffic ient in house experience or good OE support, using own funds – Prevalent for
with suffic ient in house experience or good OE support, using own funds – Prevalent for

EPC Contracts

Single Contractor

Takes most of the risks, handles the interface workload and risks, provides price certainty

More expensive than multi-contract; risk premium added in

Not always the WTG supplier who leads

Can be for multiple sites

Owner still needs to do front-end development and gain permits

Owner may also need technical support

sites • Owner still needs to do front-end development and gain permits • Owner may also
sites • Owner still needs to do front-end development and gain permits • Owner may also

Multi-Contract

Multiple Contractors covering several scopes

Electrical, civil, WTG supply, grid connection

Lower overall cost

Owner takes interface risk and has much higher workload

Owner still needs to do front-end development and gain permits

Several contracts to negotiate instead of one

Owner likely to need more technical or project management support

• Several contracts to negotiate instead of one • Owner likely to need more technical or
• Several contracts to negotiate instead of one • Owner likely to need more technical or

Sources of Funding…

Equity Debt Investors Project Shares i.e. VC Finance Subordinated Bonds Standby Debt Mezzanine Equity Finance
Equity
Debt
Investors
Project
Shares
i.e. VC
Finance
Subordinated
Bonds
Standby
Debt
Mezzanine
Equity
Finance

• Return on Investment

• Payback period

• Initial commitment

• Guarantees/Support
• Guarantees/Support

• Definite Term

• Financial Market Rates

• Fees

• Cover Ratios

• Initial commitment • Guarantees/Support • Definite Term • Financial Market Rates • Fees • Cover

Why Project Finance…Depends on who you are?

PF for Sponsors

Insulation from Project Debt and Risks!

•Spread of risks for large projects

•Off balance sheet

•Corporate borrowing restrictions

•Tax advantages

•Risk sharing

borrowing restrictions •Tax advantages •Risk sharing PF for Utilities/Govt •Access to foreign investment

PF for Utilities/Govt

•Access to foreign investment

•Foreign skills and know how

•Outside Public Sector Borrowing

•Accelerates non-priority projects

foreign investment •Foreign skills and know how •Outside Public Sector Borrowing •Accelerates non-priority projects

Project Finance…why not!

Time… • Project scale…

Project Finance…why not! • Time… • Project scale…
Project Finance…why not! • Time… • Project scale…

Project Structure

Financial Risks Banks Credit Supply Sponsors Agreements Agreements Shareholder Offtake Agreements Agreements
Financial Risks
Banks
Credit
Supply
Sponsors
Agreements
Agreements
Shareholder
Offtake
Agreements
Agreements
Project Company
Consents/
O&M
Permits
Agreement
Concession
Construction
Agreement
Local
Agreement
Legislation

Construction & Operation Risks

Market Risks

Suppliers Offtakers
Suppliers
Offtakers
& Operation Risks Market Risks Suppliers Offtakers Operator Contractor Government Legal & Regulatory Risks
Operator Contractor
Operator
Contractor
Government
Government
& Operation Risks Market Risks Suppliers Offtakers Operator Contractor Government Legal & Regulatory Risks

Legal & Regulatory Risks

Implications of Gearing and Non/Limited Recourse Nature

•Turbine Technology - turbine reliability issues ranging from minor to very major

•EPC risk – Wrapped EPC no longer essential for banks but is risk pricing sufficiently clear?

•Operations - Availability of third-party maintenance providers post warranty period

•Offtake Risk – Firm Power Purchase Agreement (PPA) and confidence regarding Green Certificates

•Wind Risk – Confidence needed in P50 or P90 value in FM

Agreement (PPA) and confidence regarding Green Certificates •Wind Risk – Confidence needed in P50 or P90
Agreement (PPA) and confidence regarding Green Certificates •Wind Risk – Confidence needed in P50 or P90

Summary

•Drivers •Market drivers in the UK are sufficiently strong to ensure continued growth of RE projects. ROC improvements will reinforce this

•Barriers

•Availability of grid connection and planning consent are the major obstacles to the rate of deployment

•Development Focus

•An awareness of project financing and project risks is a requirement from the outset – all technical and environmental issues must ultimately relate to these

risks is a requirement from the outset – all technical and environmental issues must ultimately relate
risks is a requirement from the outset – all technical and environmental issues must ultimately relate

Summary

•Contract Strategy

•Need to adopt contract strategy based on resources and attitude to risk

•Financing

•Financing options must be considered from the outset to ensure the project is developed appropriately

•Need to understand how to match project structure and risk profile to financing options

is developed appropriately •Need to understand how to match project structure and risk profile to financing
is developed appropriately •Need to understand how to match project structure and risk profile to financing
www.mottmac.com

www.mottmac.com