Ice Renewables

Do I want a wind turbine?

Transcript

1. Some thoughts for Landowners
2. You want to find out if it’s worth getting a wind turbine.  You do some internet research  You look at what they say on the Farmer’s forum  You ask a friend who has one  You get a brochure from a show  You make a spreadsheet  You make a cup of tea, come back and check again So…do you want a wind turbine? ICE Renewables Ltd F.Brown 2
3. Why does it look like a good idea in principle?  It’s hard to make reliable returns from landholdings.  Diversification is a buffer against fluctuating weather and produce prices.  installing an energy-generating ‘green’ technology is one option.  considerable value can be added to land by getting permission to develop a project. Evaluating the comparative value of an investment into wind energy normally begins with some online research or a couple of phone calls, sometimes a conversation with someone who has already done it. It is easy enough to apply the NOABL estimated mean annual wind speed to the power curve or performance curve of a number of wind turbines and generate a theoretical energy output figure. Applying the Feed-in Tariff rate to the figure produced will almost always look superficially attractive, because the resulting ‘revenue’ figure on a spread sheet seems to promise untold riches. At this point it is easy to understand why many people wish to explore further. There is an accurate way to describe this process… ICE Renewables Ltd F.Brown 3
4. Wind turbine unit total Turbine size 250kW - NOABL wind 7.0m/s - Output 782,000kWh/y X 20 years 15,640,000 Tariff rate 17.5p/kWh £136,850/yr £2,737,000 Sale of energy 5p/kWh £39,100 £782,000 cost £1500/kW £375,000 £450,000 Lifetime return Return minus cost £3,069,000 Annual return £153,450 This should fit in my farm quite easily This is all I need to know about wind That’s a lot – yes, it’s right I can get this done in a few months This is what my friend told me I read this figure somewhere sounds okay – add a bit for maintenance HOLY COW! I’ll be Rich! I can retire and buy that Ferrari.. ICE Renewables Ltd F.Brown 4
5. Is it really as good as it looks?  Generally speaking,no. How much do you know about wind energy?  Wind is a mature technology well-understood by those who have the experience and knowledge required.  We know that the number mentioned above, multiplying tariff rate by performance relative to theoretical wind speed, can bear very little relation to what is possible on any given site.  returns can be very, very good – with the right project –  returns can be disappointing – when expectations are unrealistic and assessments inaccurate.  assume that it isn’t really going to be as hugely profitable as it at first seems,  the most accurate answer to the question is: it all depends… ICE Renewables Ltd F.Brown 5
6. So what does it depend on?  in simplest terms: the land you hold and the wind resource on that land.  By considering these it is possible to establish that a proposed wind turbine (or even a wind farm) meets two broad criteria: 1. It is technically feasible to get a piece of equipment up to a certain size to the location, stick it in the ground, connect it to the grid and generate energy, without causing a nuisance or loss of amenity to people living in the area 2. It is likely that undertaking the process of development, evaluation, planning and construction will result in a profitable diversification  there is no way that anyone can calculate with certainty that making a commitment to such an undertaking will produce the desired result.  There is also no way to tell you exactly how much energy (revenue) is going to come out. ICE Renewables Ltd F.Brown 6
7. I’ll be going on chance and guesswork then?  No. At least, not a bluntly as that.  There are risks, but these can be managed, so long as they are understood.  it is possible to evaluate a site’s potential ‘in principal’ (subject to later input of measured data about your wind regime) and be confident that, if a planning application can be sought and won, you will have a viable project.  All around the World, Governments, Utilities, Institutions and Investors have been installing wind projects for some years now, for good reasons.  the costs, risks and returns of wind energy generation are well-understood and represent good value, security and reliability for investment.  We have less direct experience in the UK and have been slow as a country to embrace this technology, even though it is well-known that we have an outstanding wind resource (40% of the wind energy potential of the entirety of Europe!).  In spite of this there are funds and investors pursuing projects because they know that the returns are attractive. ICE Renewables Ltd F.Brown 7
8. Can you tell me how much money I will make, then?  We can give it a good shot.  When Utilities evaluate sites for wind farms they have large portfolios, large budgets and plenty of cash flow and can afford to spend hundreds of thousands and up to three years getting the most accurate information before a decision to proceed to planning is made.  The data which is gathered is analysed in sophisticated software which factors in dozens of variables and uses tested and proven physical models (ie, physics) to produce not just the most effective design for a project, but also a highly accurate evaluation of yields, down to an error of a few per cent.  This cost is not practical for smaller projects. Some developers and owners bypass the process and the cost as much as possible in the assumption that a project will be profitable even if the margin of error is high and the expected wind regime is not accurate.  We insist on a standard of wind regime modelling, using historic data and CFD software, before we finalise a contract with a client. This allows a manufacturer to calculate their risks and costs and secure higher-level warranties of performance.  It also allows clients, banks and investors to understand with a reasonable level of accuracy what the actual earnings potential of a site will be.  The main reason that most small projects don’t undertake this process at an early stage is cost-saving and an attempt to risk ‘unnecessary’ exposure of cash at a stage when it is still not known whether a project will get through the planning process. ICE Renewables Ltd F.Brown 8
9.  What we do know is how much energy is being generated by the turbines we have already installed and how they are performing relative to their power curve and the wind regime.  It means we can confirm (and warranty in contract) that our turbines will generate power in line with the power curve for a guaranteed period of ‘technical availability’ (the time when the turbine is actively available to generate energy if there is sufficient wind and not too much).  It also gives us a good idea of how your site might perform (it can be compared to a ‘similar’ site with a comparable wind regime, etc.).  At the early stages of a project we can provide a fair estimate of expected energy output given assumptions which relate to your site.  Before contracting to supply, we can produce a more accurate evaluation which is ‘bankable’ and insurable because it is based on more rigorous procedures, so when the time comes for a decision to spend the majority of the capital cost, or to exchange or sell outright a consented project , the fair value can be established and agreed upon. ICE Renewables Ltd F.Brown 9
10. Down to brass tacks then, what’s the bottom line?  Get a Feasibility Study on your land holding. Someone should visit your site and do desktop analysis and initial constraints studies.  If the feasibility study results in you feeling you would like to proceed, you need to prepare all the materials and engage in detailed consultations and surveys leading to a rigorous and sound planning application, then submit it.  The budget for this does vary, because different sites need different amounts of work and surveys, and planning offices can vary in their demands. ICE Renewables Ltd F.Brown 10
11.  You must treat this budget and expenditure as speculative risk capital spend at this stage.  We can control the quality of submissions and the rigour of our applications, but we can’t account for local political conditions which can cause delays and obstruction to development.  It is in our interest as well as yours to deliver success so we always consult, discuss, present and follow through on our commitments in planning development.  When we reach the stage that you have planning permission to install a turbine, the value of your land and your project takes a big leap forward.  Your project is theoretically valuable but will only generate revenue for you or a buyer after a turbine is installed. ICE Renewables Ltd F.Brown 11
12.  Which turbine you can install will partially depend on the results of the planning development work and site logistics.  Though it is true that ‘the bigger the better’ for revenue and returns, there are several limitations which might apply which mean that you choose ‘what can work for everyone’.  In principle, returns rise with turbine size.  Note also that even a small increase or decrease in the wind energy potential of a site will make a big difference. ICE Renewables Ltd F.Brown 12
13. That’s all very well, but some people don’t like wind turbines  Almost the only places where there is resistance to wind development amongst the public are the UK and USA. Even in the UK, recent polls suggest the approval / disapproval rate is 70% for / 30% against.  Although objectors frequently raise the same points to support their opinions, which are briefly discussed below, the reality is that the appeal of a wind turbine is subjective, and it is unfortunate, but a simple fact, that some people don’t like them.  As with much of human experience, this is not really about reason or fact, once we have an established personal feeling we tend to stick with it whatever the facts are.  If you have a friend, neighbour or family member with strong negative feelings about the subject, do not expect to change minds – instead, consider how important this is to you and whether you are willing to pay the personal price for going ahead. This is not the scientific or ‘official’ version, but here is an example of some things objectors often believe: ICE Renewables Ltd F.Brown 13
14.  ‘They are bad for the environment’: Not really. In terms of the impact on land and ecology, wind projects have the lowest ‘footprint’ of any renewable technology, and considerably less than erecting a building, for example.  ‘They are noisy’. Yes, they make some noise. Subjectively, the volume at 60 m distance is about the same as a dishwasher. At a reasonable distance the experience of noise is not enough to represent a nuisance, but if you expect to be annoyed by it, then sometimes you probably will be.  ‘They are ugly’. This is obviously subjective. Beauty is in the eye of the beholder. People who don’t like them see them as an eyesore, other people find their presence in the landscape a pleasure.  ‘They don’t really work’. If this was true, nobody would use them. Using the measure of ‘cost of energy’, wind turbines outperform every other type of power producing technology apart from coal and gas. This is why Governments and Utilities are investing billions a year around the world. ICE Renewables Ltd F.Brown 14
15. Remind me then, why I want a wind turbine?  The two best reasons to want a wind turbine are that they reduce dependency on carbon emitting technology and collectively reduce the risk from future climate change, and with the current feed-in tariff support, they can provide a reliable medium-term return at a fair rate on land assets without permanently changing land use. Other reasons why we like them:  Our landscape is a man-made, worked environment. Installing a wind turbine for 20 years allows a return to be made on the land which makes it viable and reduces pressure to undertake diversification which could permanently change the environment. Because they provide a return, they help retain the fundamentally ‘green’ landscape around and beneath them.  There is great satisfaction to be gained from watching the blades turn and realise that each turn represents money. Almost all of our clients experience this.  They reduce reliance on Utility companies for energy supply and can represent a hedge against future energy price rises. Once installed, the cost of energy is fixed for the lifetime of the project. In future, if power supply becomes unreliable, they can provide energy close-to-source to supplement or replace shortfall. If you operate refrigeration or dairy units you will understand the importance of this.  They work in the UK. Extensive research over many years has established clearly that for the UK, onshore wind energy represents the best, most reliable, cheapest, cleanest, greenest way of making renewable power. ICE Renewables Ltd F.Brown 15
16. Finally, going in to a wind project is a process which requires determination, commitment and investment. Don’t waste your money and time starting a process which you aren’t absolutely sure you want to see through to the end. We are proud of the work we do, our integrity and commitment to our clients and our projects; we believe in what we do. Working with clients and companies who feel the same way is the great pleasure of professional life. This presentation is not designed to answer every question or address every detail. If you feel that you want to go down this path, we will happily talk with you about your ideas, your land, your opportunities and risks; please call. Fergus Brown BA Hons Head of Sales ICE Renewables Limited Ingeniously Capturing Energy Office: 01609 749103 Mobile: 07905 905381 mailto:fergus.brown@icerenewables.com www.icerenewables.com ICE Renewables Ltd F.Brown 16