Download - Strathclyde MSc march 2016
MAKING IT MAINSTREAMDEVELOPING RENEWABLE ENERGY IN GLOBAL MARKETS
University of StrathclydePresentation by Adam BruceGlobal Head of Corporate Affairs, Mainstream Renewable Power
March 2016
Overview
• Introduction to Mainstream Renewable Power
• The Renewable Energy Opportunity
• Some parting thoughts
Introduction to Mainstream
3
Develop and sell wind and solar plant at scale on a global basis
Onshore: exit at commissioning
Offshore: exit at “ready to build”
Sell to utilities and infrastructure asset investors
EntrepreneurialRenewable
Energy Company
The world is in a once-off transition from fossil fuels to
sustainability
Holders of generation assets need new plant
Mainstream has the ability and focus to address the need for new
plant at scale
The Value Proposition
4
Unique Source of Competitive Advantage
A ValuesDriven Culture
Differentiated Business Model
Record of DeliveringReal Value toShareholders
Positioned at the Cutting Edge
of Policy Formation
Companyand Investor
Interests are Aligned
Sale of Airtricity for total equity of €1.80bn,
realizing value of €1.36bn over invested shareholders capital of
€0.44bn
Management invested significant amount of equity capital
Not a utility
Focus on development and
create high value by building strong JV partnerships with local developers
Industry foresight, thought leadership
and first mover advantage
Four Continents
Dr Eddie O’Connor /Founder & CEO• Founded Mainstream in 2008.• Previously founded global renewable
energy company, Airtricity. • CEO of Airtricity until 2007. Airtricity
was sold to utilities E.ON and SSE (UK) for €2bn.
• 2008: Founded Mainstream.• Awarded the European Wind Energy
Association’s most coveted prize, the ‘Poul la Cour’
• Named World Energy Policy Leader by Scientific American magazine.
• Named in top five most influential figures in US clean energy by Oil.com.
• Received honorary doctorates from Universities in Ireland and the UK.
Chicago
Dublin
Glasgow
Toronto
Santiago Cape Town
Johannesburg
Mainstream officesMainstream activityAs at January 2016
…and now with numbers…
DateInvestment
amountCumulative
raised Description
Dec 2014 €60m €362Closed a four year €60m corporate debt facility arranged by BlueBayIreland Corp Credit Ltd with substantial investment from the National
Pensions Reserve Fund of Ireland.
Oct 2013 €50m €302m Closed an equity investment from Marubeni Corporation.
Sept 2012 €40m €252m Corporate facility closed with Macquarie Bank and Macquarie Capital comprising junior debt and equity warrants for up to €60m.
Sept 2012€17m €212m Equity raised from retail investors in Ireland.
Dec 2011 €40m €195m Refinanced loan notes issued in December 2008 with €40m loan notes from retail investors.
Aug 2010 €57m €155m Raised €57m from retail investors in a series of equity fundraising rounds.
Dec 2008 €26m €98m Successfully raised €26m in loan notes from Irish retail investors.
Aug 2008 €40m €72mClosed a €20m investment from Barclays for a 14.6% stake in the company, with the Board, management, staff and related parties
investing a further €20m.
Feb 2008 \ €32m Founded with a seed capital of €32m.
€3
62
m
Putting capital to work
Projects in Construction and Operation
De Aar solar park, South Africa Noupoort wind farm, South Africa
Knockaneden wind farm, Ireland Knockaneden wind farm, Ireland
Offshore
We have developed almost 8000MW of offshore wind plant in the North Sea – including Scotland’s largest
We have our CfD and grid connections and are in pre-construction of 450MW in Scotland
Offshore – power at scale
Mainstream Neart na Gaoithe offshore power station450MW – 6MW WTG
Scottish Territorial Waters5 sites 4.8GW
Zone and approximate
capacityDevelopers
Argyll Array(1.8 GW)
ScottishPowerRenewables
Beatrice(1 GW)
SSE Renewables plc
Inch Cape(1 GW)
Repsol
Islay(0.68 MW)
SSE Renewables plc
Neart na Gaoithe(450 MW)
Mainstream Renewable Power Ltd
Inch Cape
Neart na Gaoithe
Beatrice
Argyll Array
Islay
Neart na Gaoithe
• Neart na Gaoithe = Nart na Gweeha
• Gaelic for ‘Strength of the Wind’
• 450 MW capacity
• Will generate enough electricity to power 325,000 homes – equivalent to the city of Edinburgh
• Between 70 and 90 turbines
• 15.5 km from shore at closest point (Fife Ness)
• Area of approximately 105 km2
• Water depths of 45-55 m
• 1 or 2 offshore substations
• 28 km of offshore export cable
• 12 km of onshore cable
• Grid connection at Crystal Rig onshore wind farm in East Lothian
Neart na Gaoithe• Planning consent – Q3 2014
• CfD contract – Q1 2015
• Financial close – Q2 – 2016
• Total estimated capital expenditure (“capex”) -£1.3bn
• Compares to: -– New Forth crossing (~£.15bn)
– New QE Class Carrier (~£2bn)
• All three projects require similar transferable skills and are all located in the R. Forth basin
• Potential for up to 40% of total capex to be sourced in Scotland
• Potential £150m-£600m GVA for Scottish economy
THE RENEWABLE ENERGY OPPORTUNITY
The electric society
Power sector business models
Energy demands of
modern society
Sustainability and climate
action
• No new fossil plant
• Carbon taxes• Large scale
variable generation
• Big grids
• “Utility death spiral”
• Utilities as energy services providers
• “Intelligent” and active consumers
• Electric vehicles and solar pv
• Domestic/local storage
• Anticipatory technology
the “we have done it like this for a century” value chain in developed electricity markets will be turned upside down within the next 10-20 years.UBS August 2014
Key Drivers – the Energy Trilemma
16
Finite fossil fuel supply – where will the electricity come from?
Reduce dependency on imported fossil fuels
Reduce CO2 and noxious gas emissions
Average global surface temperature is likely to rise by 2.6-4.8C this
century(1)
Threat of extreme climate events – economic disruption
Worldwide energy consumption projected to rise 56% from 2010 to
2040(2)
EIA projects that developing countries will require c. 90% more
energy by 2040(3)
EIA projects OECD countries will require c. 17% more energy by
2040(4)
Today’s population expected to increase from 7.2 bn to 9.6 bn in
2050(5)
Transportation – moving to electricity
Climate Change
Increased Global Energy Demand
Security of Supply
___________________________1. Footnote: The Intergovernmental Panel on Climate Change, Physical Science Basis, 20132. Footnote: EIA, International Energy Outlook, June 20133. Footnote: Ibid.4. Footnote: Ibid.5. Footnote: UN Department of Economic and Social Affairs, World Population Prospects: The 2012 Revision, Updated Feb. 2014
17
Volatility of prices of fossil fuels
Wind is a vital part of energy mix
Carbon being included in cost base for generators and users of
fossil fuels
New industry promotes economic development
Renewable sector considered a safe haven for investments
Ongoing technology innovation
Correlation of wind to fossil fuel prices
Government support and policy interventions – e.g. Feed-in Tariffs,
Renewable Obligation Standards, PTC, ITC, Loan Guarantees
EU Targets – to 2020 (and possibly to 2030)
China – 12th 5 year plan
S Africa – IRP and SARI
Targets drive volume: volume drives price
Solar PV down 70% since 2011; Onshore wind down 38% since
2008
New RES cheaper than new fossil plant
Australia (2013): new wind AUD 80/MWh (USD 83), new coal AUD
143/MWh or new CCGT AUD 116/MWh (inc carbon tax)
S Africa (Rd 3 2013): new wind ZAR 737/MWh (USD 68), projected
new coal (Eskom) ZAR 1050/MWh (USD 96)
Economic Drivers
Government Response
The Economics of Renewables
The new reality
The economics of renewablesOnshore wind, coal and gas - 2014
With thanks to Bloomberg New Energy Finance
The economics of renewablesOnshore wind, coal and gas – 2015 to 16
With thanks to IRENA
• LCOE onshore wind has fallen by 30% since 2005
• LCOE solar PV has fallen by 80% since 2005
• Recent tenders in South Africa and Morocco –USD0.03 KW/hr
• In emerging markets, off-grid diesel often the price-setter
The World’s Transition
• International policies and targets in place to support development of renewable energy
– 138 countries have renewable energy targets(1)
– 71 countries have adopted some form of feed-in tariff to promote renewable power generation, while 22 countries have implemented renewable portfolio standards (1)
• In 2013, more than €184 bn was invested in renewable energy globally (2)
• Renewable energy will account for nearly 50% of all new power generation capacity additions from 2014 to 2035(3)
• Wind and solar will make up 45% of all new renewable energy generation out to 2035(4)
___________________________1. Footnote: REN21 Renewables Global Status Report (June 2013)2. Footnote: New Energy Finance: Global Trends in Renewable Energy Investment 2913, 20133. Footnote: International Energy Agency, World Energy Outlook, 20134. Footnote: Ibid.5. Footnote: International Energy Agency, World Energy Outlook 2012; Renewable Energy Outlook
The world is undergoing a fundamental transition from fossil-fired electricity generation to renewable energy sources
Global Electricity Generated from Renewables (5)
0
3,000
6,000
9,000
2010 2020 2035
TWh
31% (5)
25% (5)
20% (5)
21
The Marginal cost of renewable energy is essentially zero,
because there are no fuel costs
Spain’s high wind penetration levels illustrate the price impact of
renewables:
When the wind blew strongest in 2013, wholesale power
cost €7.69/MWh
When there were the lowest levels of wind, power cost
€93.11/MWh(1)
As renewable penetration rises, wholesale power costs go
down, which challenges conventional generators profitability
As a consequence, utilities are losing money and being forced to
mothball gas plant (coal is still competitive compared to gas)
Major utilities declaring staggering write downs:
RWE wrote down $4.5bn in European assets
GDF-Suez announced writedown of $20bn in assets
Net income at Eon declined by 50% over course of
2013(2)
Utility share prices have plummeted
The fall of the traditional utility model
___________________________1. Footnote: EWEA blog power, Wind energy is Spain’s number one electricity provider, 3 March 20142. Footnote: The Financial Times, RWE warns of €3.3bn writedown on power plants, 28 January 20143. Footnote: The Economist, How to lose half a trillion euros, 12 October 2013
Falling power prices and losses at utilities (3)
A look ahead
Utility sized pressures
An elephant in the room…
The European conundrum
• EU imports EU400bn of fossil fuels each year
• 2020 energy and climate package designed in part to increase EU energy security
• 2030 energy and climate package “Energy Union”
• Will renewable energy and an internal market for electricity deliver security of supply, competitiveness and GHG reductions?
Supergrid
What is the Supergrid?
• EU 2030 direction of travel: -– EU GHG target– EU RES target– ? EU Interconnection target– Internal electricity market
• How to deliver?• Supergrid
• The Supergrid is a pan-European transmission network that: -
– facilitates the integration of large-scale renewable energy
– the balancing and transportation of electricity
– with the aim of improving the European market.
RENEWABLES and life beyond fossil fuels
Some parting thoughts
Wind energy is a subsidy junkie
• Global subsidies for fossil fuels significantly exceed renewables
• All new energy tech supported by Government:
– UK Nuclear – 1950s to date
– UK Oil & Gas – N Sea 1970s
– UK Renewables - 2002 to date
• Government dilemma– Tax the bad (Carbon tax)
– Support the good (RO/ FiT)
• Reduction in RES costs– Significant cost savings
– Reduction in subsidies (RO Banding)
– CfD auctions
Wind energy is intermittent and unreliable
• Wind energy is a variablegenerator
• N Grid maintains sufficient reserve capacity
• 30 GW wind in 2020 will require 6.5 GW additional short term operating capacity
• N Grid est. 2% increase in annual bills
• OR – replace with greater interconnection with other markets
Supergrid and Smartgrids
www.friendsofthesupergrid.eu
The carbon bubble
Do the economics of fossil fuel extraction still make sense?Falling demand and falling pricesIs this an asset class you still want to hold?
The electric society
Power sector business models
Energy demands of
modern society
Sustainability and climate
action
• No new fossil plant
• Carbon taxes• Large scale
variable generation
• Big grids
• “Utility death spiral”
• Utilities as energy services providers
• “Intelligent” and active consumers
• Electric vehicles and solar pv
• Domestic/local storage
• Anticipatory technology
the “we have done it like this for a century” value chain in developed electricity markets will be turned upside down within the next 10-20 years.UBS August 2014
The old order passeth…
Conclusions
• Global energy – and electricity – consumption will continue to grow
• Wind and solar energy are part of the global energy mix
• Wind and solar energy reduce costs to consumers, increase energy security and enable policy makers to meet GHG reduction targets
This is a once off transition to a sustainable future
The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.
Sheikh Zaki Yamani, Minister for Oil, Saudi Arabia 1962-86