The U.S. Army has embarked on a program to enter into $7 billion worth of long-term contracts to buy renewable energy for U.S. Army bases. The other service branches have similar programs. There are special challenges when trying to finance a power project that sells its output under long-term contract to the military, especially if it is on land that the U.S. government has given the developer a right to use on a U.S. military base. Several veterans of financing government revenue streams under energy savings performance contracts and utility energy services contracts talked about the challenges at an Infocast conference on defense microgrids in Washington in April.

The panelists were:

• Jonathan Yellen, managing director of global capital markets at Morgan Stanley,
• Anita Molino, president of Bostonia Partners,
• Tracey Gunn Lowell, VP of renewable investments for U.S. Bank,
• Scott Foster, senior vice president and managing director for federal operations at Hannon Armstrong, and
• Andy Redinger, managing director and group head at KeyBanc Capital Markets.

Program host John Martin: Have you looked at the proposed U.S. Army power contract and, if so, are there any show stoppers in what you have seen so far?

KeyBanc’s Andy Redinger: We financed a wind project that was being used to supply electricity to the U.S. State Department last year. I believe the contracts are similar. That project was not on a military base, so we did not have to deal with the problem that the military insists on a right to terminate its contracts for convenience. I think there are ways to get around such termination rights. If the contract is terminated for convenience, then the military should make a payment that will make us whole as a lender.

Bostonia Partners Anita Molino: I can’t say I have studied the contract in depth, but it is pretty much what we expected. There are a whole host of issues. Termination for convenience is just one.

The Army is proposing a yield maintenance solution, which may or may not work. There is a ton of capital waiting to be deployed in this sector. The question is whether this capital is so anxious that it is willing to adapt to how the government insists on doing business. The government cannot violate the Anti-Deficiency Act. Its commitment to pay for electricity has to be subject to appropriations. There are a lot of issues on both sides, and the challenge will be how they all come together. We saw it happen very successfully in military housing, but we are not there yet on power contracts. Everybody is willing and everybody wants to try to get there, but there is a lot of work still to be done.

Morgan Stanley’s John Yellen: We looked at one service department’s form power purchase agreement. It is based on one that successfully attracted third party capital. The service department reached out to us and others to review the contract with an eye to financeability. The contract was blessedly simple when compared to contracts we see with investor-owned utilities. Key definitions and the schedules were redacted, but we had discussions with the department about termination for convenience and found a workable approach. The surest test of financeability is when a financing is completed with commercial entities like the ones who were involved in the prior project. The workable approach is for the military to compensate both the lenders and equity investors when the contract is cut short for convenience.

Hannon Armstrong’s Scott Foster: The contract should acknowledge that a third party has an interest and is providing financing.

Termination for convenience is a concern. There are contracting officers who refuse to put a termination liability amount in a schedule. A perfect example is the U.S. Air Force Davis-Monthan contract. The contract was unfinanceable. The only reason the deal got done was the North American Development Bank ended up doing it. It is going to take some flexibility by both the capital markets and the government as we work to make deals bankable.

U.S. Bank’s Tracey Gunn Lowell: We have seen a couple deals where the military had a right to terminate for cause, but “cause” covered a long list of items. We are waiting to see more of the top developers engaged in helping work through these issues.

Financing terms

John Martin: You have a federal government credit behind the electricity revenues. How does that affect the cost of debt and tax equity for such deals?

Yellen: The federal government is clearly a very strong credit; maybe not as good as it was a couple of years ago, but it is still better than the utilities and other entities who sign up to buy long term power. The government as counterparty is a very strong positive and probably one of the reasons that many of us have been looking so closely at this sector.

There is a perception that these projects should be able to raise capital at the same cost as a federal borrowing. The reality is that a least-common-denominator approach is applied to the project credit analysis. While the offtaker’s credit is very strong, we still have all the operating and construction risks associated with a power project that brings the overall risk of the asset down typically to a low investment grade level.

Martin: What is the premium to Treasuries for debt in this type of transaction?

Yellen: For assets like these that are structured well with long-dated, fully-amortizing financing against the PPA, assuming one can get past the termination for convenience clause and the other issues, you would probably be able to borrow for 25+ years at somewhere around 5 1/2% fixed.

Martin: What spread would a borrower get with a securitization compared to a bank financing?

Foster: A securitization requires volume. Assuming volume, if you use energy savings performance contracts as a guide, the spread would probably be 150 basis points over average-life Treasuries. It would be very cheap money. It is a well-developed market. What must happen is we need more volume with a consistent set of terms and conditions from one deal to the next.

We are much more comfortable with a federal government contract, if we can get the right terms and conditions, than we are with a commercial contract. The government can contract for up to 30 years. We are comfortable that the government will be around in the long term or we will have bigger problems. We are willing to do 20- and 25-year contracts with the government when we would limit the contracts to 10 and 15 years in a commercial setting.

Martin: We are talking about two types of projects. There are the small utility-scale projects of 10 to 20 megawatts and there are rooftop solar installations, for example, on military housing. What sort of coverage ratio would you need for the debt?

Yellen: We have seen the bank and bond markets converge to about 1.4 times coverage.

Redinger: I think the coverage ratios are between 1.3 and 1.5 tiimes, depending on size of the project, using P50 numbers.

Martin: We have several financing options represented at this table: debt, tax equity and securitizations that are a form of debt. Which type do you think this market will gravitate toward? I would have thought tax equity, because you have 56% of the cost of the project being paid by the federal government through tax subsidies. That’s the reason for third-party ownership structures where a power company owns the project and the military merely buys the electricity.

Redinger: The financing strategy depends on who owns the project. Somebody who has a tax appetite obviously does not need to access tax equity, so it will finance projects differently than another developer who lacks tax capacity. The more important question is whether the projects will be able to attract equity. Lenders and tax equity investors want to see real equity investors behind them in the capital structure. The returns on these projects do not look high enough for the equity market.

Martin: What do you think the returns will be?

Redinger: It is really hard to say. Every project is different. I suspect equity returns will be in the high single digits.

Martin: These are small projects. Returns are low for the equity, so why chase them? I assume because you guys are ahead of the equity in the capital structure?

Yellen: That could be one reason. We are also chasing them at times because we may have a relationship with the developer, and the developer is doing other things as well that could be of interest.

Non-appropriation risk

Martin: Anita Molino, you mentioned non-appropriation risk. Any payment from the federal government is subject to annual appropriations. How do you arrange long-term financing in the face of that risk?

Molino: Very carefully.

We have spent decades educating the institutional investor market about what the risk is and isn’t. With proper due diligence, investors can get comfortable. They will extract a premium for the risk, but that is not a huge concern because we have been dealing with non-appropriation risk for so many years in many different types of securitizations with the federal government.

Redinger: I agree with that. Due diligence is obviously critical, but non-appropriation risk is something that has been placed successfully in the market for decades. Deal volume is an issue. The stronger the forward calendar of deals and the more dependent the government is on its ability to continue to finance these projects, the less likely it will be to do something that will harm its ability to continue to secure financing.

Yellen: The analogy is often made to the military housing program, which was an extremely successful program over a period for more than a decade. It raised tens of billions of dollars and is probably the most successful global example of public-private partnerships, and it was done by the service departments within the U.S. military, so it is a great model to follow.

Base closure risk is another issue that those deals often faced. Some of the early deals had guarantees to address it. The services were willing to take that risk and not put it on investors. Over time, as people got more comfortable that the risk could be quantified through diligence, it became an issue that investors would take. They would assign a price to the risk. In some extreme examples where there was a greater risk of a base closure, the government had to provide a guarantee. The experience showed there are ways to deal with even the most difficult risks.

Martin: Scott Foster, Hannon Armstrong has had experience dealing with government paper over many years. What has the default rate been on your securitizations?

Foster: We have not had any defaults. The transactions have been primarily energy efficiency transactions, energy savings performance contracts and utility energy service contracts. We also finance submarine fiber optic cable and information technology in aircraft. We get comfortable that the risk of the agency funding being cut off is minimal. Where we have more risk is non-renewal. Non-renewal is very different from non-appropriation. It is the risk the agency will decide not to extend the arrangement.

Martin: What’s the difference between an ESPC, or energy savings performance contract, and a UESC, or utility energy services contract?

Foster: A UESC is similar to an ESPC, but there is usually no performance guarantee, and a utility is allowed to be the sole source the base approached for a contract if the base is within the utility service territory. The government can contract directly with a utility for demand-side management. The big difference between the two forms of contracts is that the military procurement regulations state clearly that ESPCs can have terms of up to 25 years while the permitted term for UESCs is somewhat grey. The procurement regulations say the permitted term is 10 years, but that has been interpreted as a UESC contract awarded to a utility can be valid for 10 years and then renewed, and the Department of Defense can grant special approval for terms of up to 30 years. Civilian agencies are limited to 10 years.

If you want to do power contracts with civilian agencies, you have to start thinking outside the box of how are you going to deliver green power at brown power cost and work with a contract limit of 10 years. Congress is unlikely to change the law to facilitate financings as was done with military base housing. We have imaginative people in the market. Someone will figure out how to do this.

Sequestration

Martin: What was the effect of budget sequestration on the military’s readiness. How big an issue is sequestration for this market?

Yellen: It is having a near-term impact. I attended a conference in San Diego, and the Department of Defense personnel were not able to attend. From what we understand, a lot of their activities are considered administrative costs and have been curtailed. The longer-term impact is tough to assess at this stage.

Foster: At least on the energy efficiency side in small renewables, we have not been affected yet by sequestration. We have actually seen the opposite of more deals coming through the pipeline because these transactions are budget neutral. The military would like there to be no net cost to the government. It wants PPAs to look a lot like ESPCs or UESCs and try to have the green power be at the same price as brown power, or close to it.

Molino: I think we have started to see a bit of an effect from sequestration. These renewable energy projects require a lot of due diligence on the services side in terms of figuring out what projects to pursue, and we are hearing talk of some layoffs of contractors who do these evaluations. The result may be a slowdown in the program.

Termination for convenience

Martin: Scott Foster, you mentioned Davis-Monthan Air Force base. Most of us saw the contracts with the Air Force and figured that it was impossible to get the Air Force to agree to a termination value schedule showing what the Air Force would pay in the event it terminates the contracts for convenience. Why do you think any other service branch will do so?

Foster: I think each contracting officer has discretion. Some will agree to such a schedule. We see it all the time in ESPCs and UESCs. We did two biomass transactions under ESPCs — one at Oak Ridge and one at Savannah River — and at Oak Ridge, the government took fuel risk, and at Savannah River, it refused to do so, with the result that the cost went up for that reason. I wish I could tell you that every deal is going to be the same from the top down, but I think there will be a lot of negotiation with the local base and contracting officer.

Martin: Can you finance a project without a termination value schedule showing what the military will pay if the deal is cut short?

Foster: No one wins if the deal is cut short. We would still need to be comfortable that the base needs our electricity for the full duration of the contract.

Molino: I do not think such a project is financeable, or at least we would not consider it prudent to finance. There is no reason for the military not to agree to such a schedule.

Collateral

Martin: These projects are built on military land. There may be a default at some point. How do lenders realize on their collateral? What is the collateral?

Redinger: It is no different than with any other project that we finance. We want access to that collateral, whether it is on a military base or otherwise. I cannot think of a project with the government where we have not had some issue on third-party consents allowing the lender to step into the developer’s shoes to gain access to the collateral for whatever reason, and if we do not have that, it is a deal stopper for us.

I have been wondering how the military will deal with that, because I am sure it will have heartburn about just having any Tom, Dick or Harry roll onto U.S. military bases to collect his collateral. This will have to be worked out as we move forward.

Martin: If you’re dealing with a utility-scale project, is it satisfactory just to be able to come on to the base and remove the equipment?

Redinger: Is that realistic? No. It is just one of those things that lenders require to check a box. Going onto the base and removing that collateral is not something that we would do in practice. We would want the ability to leave the project in place and sell it to someone else.

Molino: We financed a solar array under an ESPC for the Army at White Sands, and there we had to do it on the basis of a site license, and it cost us a lot of legal fees to figure out how to get the project done. It materially shrank the universe of interested lenders. Lenders want their rights. They want the access, and the fact that access can be denied to them eliminates a lot of lenders.

Electricity price cap

Martin: The Army would like to pay less for electricity under these RFPs than it pays the local utility. But you are talking about technologies that cost more to generate electricity than gas, which the local utility might be using. In addition, the Army wants the renewable energy credits that are supposed to bridge that gap to the developer. Suppose you enter into a 20- or 30-year contract. The electricity price is below what the military base is paying the local utility for electricity, but over time, the contract price becomes higher than the local retail rate for electricity. Do you about worry about the political risk that the contract will be cancelled?

Foster: All you can do is try to end up with good terms and conditions from the perspectives of both parties so that the power contract can withstand that type of test.

Chadbourne & Park LLP
www.chadborune.com

Windpower Engineering & Development

Ref: “Shale gas and renewables: divergence or win-win for transatlantic energy cooperation?”, by Marianne Haug, Journal of Transatlantic Studies, Vol. 10, No. 4, 358–373, published by Routledge, Taylor & Francis.

Writing in the Journal of Transatlantic Studies, Marianne Haug of the University of Hohenheim argues that although the transatlantic energy partners are committed to common goals – namely energy security, environmental sustainability, and economic competitiveness – the relative priority given to each has changed substantially since the early 1990s. Domestic issues, geopolitical concerns, differing resource bases, changing energy markets, government policy, public opinion, the accession of new countries to the EU and the choices of investors have all altered the landscape. To address these new challenges, both the U.S. and Europe have jointly and separately reached out to new markets, partners and collaboration arrangements.

Haug points to the example of the Kyoto Protocol as a turning point for energy policy. Before the 1997 agreement, which the U.S. did not ratify, energy security was considered the most important of the three goals. After Kyoto, European countries gave higher, if not equal, priority to environmental concerns. European countries entered into partnerships beyond the U.S. to develop low-carbon technologies, such as windmills, photovoltaic units, solar thermal hot-water installations and rapeseed biofuel. The EU also developed emission-trading systems, biofuel targets, energy-efficiency guidelines and standards, which stimulated the market for renewables and the industry as a whole.

In the U.S., where the European acceptance of the potential dangers of continued fossil-fuel use is not widespread, public and private investors have spent heavily on shale gas, building on existing fossil-fuel technology. The ability to extract shale gas efficiently could indeed ‘change the game’ for the U.S. and other countries by contributing to energy security and bringing lower prices. However, the industry is still in its infancy in Europe, due both to stricter regulations and public opinion. This may be changing, at least in the UK: the government stated in its March 2013 budget the intention to invest in its production.

Haug concludes that this parallel development of shale gas in the U.S. and renewables in Europe diversifies and enriches the world’s energy-supply choices. They are complementary technology pathways to limit import dependence for both partners and contribute to secure, affordable and sustainable energy for all. They are the result of transatlantic diversification – initially driven by energy-security then environmental concerns – through public and private R&D and supportive government policies. Now further cooperation between the transatlantic partners is needed to scale up the development of both forms of alternative energy for the benefit of the global energy community. This article is essential reading for anyone seeking to understand the major players’ current positions on alternative-energy sources and what the future might hold for global energy supply. Read the full article, free of charge, online: at http://dx.doi.org/ 10.1080/14794012.2012.734671.

Journal of Transatlantic Studies
http://www.tandfonline.com/doi/pdf/10.1080/14794012.2012.734671

Windpower Engineering & Development

Outfitted with a large-scale energy storage, the center will help PGE test how to store and better integrate variable renewable energy sources such as solar and wind into the electrical grid, along with several other smart technologies as part of its Salem Smart Power Project. The technologies work together to create a reliable “micro-grid” that serves about 500 business and residential customers in southeast Salem. An onsite visitor center offers educational exhibits about the project and smart grid.

PGE collaborated with Eaton and EnerDel, Inc. on the $23 million Salem Smart Power Project. It received U.S. Department of Energy matching funds as part of the largest regional smart grid demonstration project in the nation — the Pacific Northwest Smart Grid Demonstration Project.
“Together with our project partners and customers, we are demonstrating smart grid technologies to help Oregon and the nation can learn how to build intelligent energy resources for the future while continuing to deliver long-term value for customers,” said Jim Piro, PGE president and CEO. “We are proud of the collaboration, hard work and ingenuity that went into this project, and thank our Salem customers who volunteered to participate in this important study.”

“Increasing renewables, reliability and storage moves our country toward a low-carbon, more sustainable energy future,” said Senator Ron Wyden of Oregon, chairman of the U.S. Senate Energy and Natural Resources Committee. “This Smart Power Center and the Pacific Northwest Smart Grid Demonstration Project show that when it comes to energy innovation, Oregon takes a back seat to no one.”

The PGE project will test energy storage, dispatchable standby generation, remotely operated power line switches, demand response, renewable energy integration and transactive control.

PGE worked with EnerDel to outfit the center with their 5-megawatt, lithium-ion battery system, and Eaton to provide engineering expertise and two-way inverters to manage and operate the energy storage system. The energy storage system works with state of Oregon standby generators to create a high-reliability zone to reduce service interruptions for PGE customers. The Oregon State Data Center, Oregon Military Department and the Anderson Readiness Center are participating.

“Oregon is already a national leader in energy efficiency with rich opportunities to boost locally produced renewable energy and clean energy infrastructure,” said Oregon Governor John Kitzhaber. “It seems only fitting we help lead a future that not only powers our homes and businesses in the most efficient way, but also the smartest.”

Salem-based Kettle Brand is connecting its 616-panel rooftop solar installation to the project to help test storage and bring solar energy into the grid when it’s needed most.

To test demand-response technologies, PGE business customers are volunteering to cycle their heating, cooling, and other systems on and off throughout the day or shift their use to off-peak. In addition, residential customers are letting PGE automatically cycle their water heaters on and off for brief periods throughout the day.

PGE also will be the first Northwest utility to test its own Smart Power software, which brings power generating resources online at the optimal time to ensure customers receive the most benefit at the least cost. It also works with transactive control technology being used in the PNW-SGDP that communicates the cost of delivering energy through the power system. For example, PGE will store energy at the center when energy market prices are low, and pull from energy storage, rather than buying power, when market prices are high.

The Salem Smart Power Project is part of the five-year PNW-SGDP, which is managed by Battelle, and involves more than 60,000 customers, 11 utilities, the Bonneville Power Administration and several technology participants in Idaho, Montana, Oregon, Washington, and Wyoming. In the next two years, PGE will provide data to PNW-SGDP as one of the project’s 13 test sites that represent the region’s diverse terrain, weather and demographics.

Portland General Electric Company

www.PortlandGeneral.com/SmartGrid

Windpower Engineering & Development

AWEA says WINDPOWER 2013 in Chicago drew in 10,000 attendees and 600 exhibitors.

There’s good news and not-so good news from the recent AWEA WINDPOWER 2013 conference in Chicago. The not-so good news is that the crowds and exhibition floor were smaller than in past events. The good news, however, is that most of the right people were in attendance and perhaps better than that, the companies that did display, showed new equipment and developments that indicate a technically vibrant industry.

Windpower Engineering & Development

Overmolded valve plug cordsets conform to the EN 17 5301-803 standard (replacing DIN 43650) for electrical connectors, which service hydraulic and pneumatic solenoid valves as well as pressure sensors.

An overmolded face eliminates the need for an additional sealing gasket, ensuring optimal performance in harsh environments, such as wind turbine nacelles. The cordsets feature a translucent molding material with embedded, bright LED’s, and provide superior visibility for power indication from any angle with black, grey, yellow, and clear coloring options to accommodate diverse applications.

The overmolded design offers a full cordset alternative to traditional field wireable connectors, which require assembling and hand wiring before they can be used. Field wireable configurations increase the chances of mis-wiring, and also incur high labor costs. TURCK overmolded valve cordsets provide a completely assembled solution that is 100% factory tested and ready to use for fast, easy implementation.

Solenoid valves control the flow of gas or liquid in cylinders, fluid power motors, and larger industrial valves. These cordsets also meet NEMA 1, 3, 4, 6P and IEC IP67 standards.

TURCK
www.turck.com

Windpower Engineering & Development

Four Hydrogenics electrolyzers work at the E.ON installation generating hydrogen gas from electricity.

Hydrogenics Corp., a developer and manufacturer of hydrogen generation and hydrogen-based power modules, announced that the largest Power-to-Gas facility in the world recently went “live” with the first direct injection of hydrogen into a gas pipeline using Hydrogenics technology.

Last year, Hydrogenics received an order from E.ON for a “Power-to-Gas” project in Germany. The two megawatt energy storage facility uses surplus renewable energy sources to produce hydrogen for storage in the country’s existing natural gas pipeline network. The facility, delivered at the end of 2012 and commissioned over the first quarter of 2013 has passed all tests and all required permits and certifications have now been granted for the operation of this facility. Dr. Urban Keussen, Senior Vice President Technology & Innovation of E.ON, witnessed the milestone event this week.

Technician put the finishing touches on a Hydrogenics electrolyzer.

This Power to Gas facility converts renewable generation when it is not needed into renewable power, fuel, or heat where and when it is needed. With this facility now in full operation E.ON Gas Storage is feeding 640 m³ per hour into the local natural gas grid.

For Hydrogenics this has been a turnkey Power-to-Gas project which included supply, installation, connection, and commissioning of the hydrogen production facility including gas compression, master controls, as well as a five year service and maintenance agreement.

Hydrogencis
www.hydrogenics.com

Windpower Engineering & Development

The test center also houses a classroom and lab for training Stark State students in electrical and mechanical engineering as well as alternative energy programs including solar and wind energy, oil and gas, and fuel cells.

A collaboration between The Timken Co. www.timken.com) and Stark State College led to development of the new Technology and Test Center, the first testing facility of its kind to be constructed in the Americas. The $14 million center on Stark State College’s North Canton, Ohio, campus tests large bearing systems that can have up to 13-ft ODs  on sophisticated equipment capable of simulating harsh operating conditions similar to those found in large multi-megawatt wind turbines.  The new test facility is expected to shorten development cycles and improve the reliability and cost-effectiveness of these large rotating systems.

Testing capabilities within the 18,000-ft² facility have the flexibility to focus on wind turbine applications as well as other large, rotating equipment for industries including off-shore oil rigs, mine trucks, electric shovels (in mining), steel rolling mills, cement vertical mills and hydraulic roll presses.

The $14 million Center houses a large test rig that can handle 13-ft. OD bearings. It’s  capable of producing  load combinations experienced by utility-scale wind turbines, up to 5 MW.

The test center also houses a classroom and lab for training Stark State students in electrical and mechanical engineering as well as alternative energy programs including solar and wind energy, oil and gas, and fuel cells. Stark State offers associate degrees, one-year and short-term certificates in those energy programs.

“This world-class testing facility will supply knowledge vital for the development of mechanical power-transmission component technologies in multiple industries,” said Douglas H. Smith, senior vice president and chief technology officer for Timken.

“This relationship between Stark State College and The Timken Company marks the latest collaboration between our two institutions to create advancements in technology and industry,” said Dr. Para M. Jones, president of Stark State College. “The test center is also an example of our joint commitment to develop education and training capabilities that support industry-leading clean energy programs.”

Officials from Timken and Stark State College were joined by a number of community and government leaders, including Ohio Lt. Gov. Mary Taylor and U.S. Rep. Jim Renacci, to officially mark the opening of the Technology and Test Center, located on 15 acres near the Akron-Canton Airport.  Funding for the project combines more than $6 million invested by Timken; $2.1 million from Ohio’s Third Frontier Commission; and a $1.5 million loan from the Ohio Air Quality Development Authority’s Advanced Energy Jobs Stimulus Program. Stark State funded the land acquisition, site preparation, building construction and academic furnishings at total cost of $3 million, supported by a gift from the Timken Foundation, a private charitable family foundation.

Timken
www.timken.com

Windpower Engineering & Development

Installation of 56 N117/2400 turbines, like this one, is due the second quarter of 2015.

A big order will let wind turbine manufacturer Nordex further expand its business in South Africa. The independent power producer CENNERGI has placed an order with Nordex for the delivery and turnkey installation of the 134.4 MW “Amakhala Emoyeni” wind farm. CENNERGI’s principal shareholders are the South African mining group EXXARO Resources and India’s Tata Power.

Nordex is to start construction work for the complete infrastructure of the wind farm at the site south of Bedford in South Africa’s Eastern Cape Province in the third quarter of 2014. Installation of the 56 N117/2400 turbines is due to follow in the second quarter of 2015. After completion of work connecting it to the grid, the handover of the wind farm is scheduled for June 2016. The scope of supply also includes a service agreement for a period of ten years initially.

“Amakhala Emoyeni” is one of the projects from the second round of the South African REIPP auctions approved by the South African Ministry of Energy in May 2012 and comes with a 20-year electricity PPA. The next round of tenders will be held in August this year. The goal is to further increase the share of renewable energies in South Africa’s power supply system.

“This order is an important building block to create a solid foundation for our new subsidiary in Cape Town,” said Lars Bondo Krogsgaard, a member of Nordex SE Management Board.

Prior to the “Amakhala Emoyeni” project in November 2012 Nordex had already been awarded contracts for two large-scale projects in South Africa with a total of 180 MW, which are already in the construction phase. This means that Nordex now has an overall market share of around 26% from the first two auction rounds.

Nordex
www.nordex.com

Windpower Engineering & Development

MAKE Consulting expects the Americas region to add nearly 92 GW of new wind power capacity from 2013 to 2020, but the rate of growth will be significantly different between North America and Latin America. Despite macroeconomic headwinds in North America, enough demand exists to support average build over 6 GW/yr, but the market is crowded. The real opportunity over the next eight years will be in Latin America where MAKE forecasts a 20% compounded annual growth rate. For the first time, MAKE forecasts most of new wind capacity in the Americas occurring outside of the U.S. market.

Opportunities in Latin America abound as market potential has yet to be fully realized, and only recently have regulatory frameworks been executed to spur growth in renewable energy. Unlike in North America, the emerging economies of Latin America and associated macroeconomic conditions support higher electricity consumption that creates opportunities for wind power development. Several markets in the region are also subject to seasonal or unsecure power sources, or both, which drives an interest in harnessing domestic energy sources such as wind power.

Growing pains caused by inadequate infrastructure, volatile political regimes and ineffective policies will influence a more sporadic growth trajectory than in more mature markets, but general demand is undeniable. Brazil highlights the region, becoming the second largest market for new growth in the Americas with nearly 14 GW of wind capacity forecast to be installed through 2020.

The U.S. wind market is in the midst of what MAKE believes to be the last PTC cycle. Given the expected stipulations of the program, the firm predicts that installation numbers in the U.S. will rebound in 2014.

A similar near-term growth is foreseen in Brazil on account of new capacity born from the 2009-2011 national power auctions and the delayed grid connection of 2012-2013 installations in 2014. Together, the U.S. and Brazil markets will account for over 26 GW of installations from 2013 to 2016, with a bubble year expected in 2014. Policy fulfillment, surplus power, and competition from inexpensive gas and hydroelectricity will impact demand for wind power in North America over the next eight years.

Short-term policy support in the U.S., Ontario, and Québec will support growth from 2013 to 2016. In the longer term, the industry will leverage a decreasing LCOE for onshore wind, increasing gas prices, and opportunity born from coal retirements in the U.S. and Canada markets to sustain growth.

The firm’s inaugural Americas Wind Power Outlook Report more fully examines the region and to account for the different dynamics that drive growth and create opportunity for the wind power industry. The Americas Wind Power Market Outlook is a 100-page report that provides in-depth analysis and 2013-2020 forecasts of countries in the region.

Make Consulting
www.make-consulting.com 

Windpower Engineering & Development

Accounting, tax, and advisory firm CohnReznick LLP has released a report, “Green Energy 2013: Renewable Energy M&A Activity in the Americas”, published in collaboration with Clean Energy Pipeline. The report focuses on mergers and acquisitions (M&A) activity in the renewable energy sector in the Americas, based on a survey of more than 800 senior executives in the renewable energy industry worldwide.

The report found that the U.S. is by far the most attractive country for investors with almost 45% of survey respondents planning to invest in or acquire in the U.S. renewable energy sector during the next 18 months, more than double the number targeting 2^nd place Germany. Globally, a total of 591 acquisitions valued at $37.8 billion were announced in 2012, a 58% increase by number on the 375 deals totaling $42.1 billion announced in 2011.

“The report provides insider analysis that is largely positive in terms of future growth, showing that industry leaders are nearly unanimous in predicting a positive outlook for M&A activity in the renewable energy sector, especially throughout the U.S.,” said Tim Kemper, Partner and National Co-Leader of the CohnReznick Renewable Energy Practice. “We can see that global renewable energy M&A activity has grown at a steady pace during the past four years.”

 A few report highlights include:

• The Americas accounted for 42% of the total value of M&A deal activity last year.
• Wind and solar were the most active sectors, accounting for a combined 78% of the total value of all transactions.
• Solar is the most attractive sector for North American survey respondents. Some 63% of survey respondents are targeting investments or acquisitions in solar PV, more than the number targeting biomass (45%), onshore wind (41%) or biofuels (39%).
• Renewable energy projects are now cost competitive with newly built fossil fuel power plants in many Latin American countries.
• Canada is now the fifth most attractive country globally for renewable energy investment, showing a significant increase of survey respondents who are targeting Canada for clean energy investments than last year.

The report was written in collaboration with Clean Energy Pipeline, a specialist in renewable energy research, data and financial news provider. A full copy of the report can be downloaded here.

CohnReznick
www.cohnreznick.com.

Windpower Engineering & Development