The Blog - Wind energy market analysis

Posted 09/10/2019

Ilaria Valtimora

   

Interview: Gill Howard Larsen, Global Director of Due Diligence, Renewables, UL

Gill Howard Larsen is Global Director of Due Diligence, Renewables at UL. UL is Host Sponsor at Financing Wind Europe on 31st October in London and Platinum Sponsor at our European Wind Investment Awards. We caught up with Gill to find out more about UL’s expansion plans in Europe, trends in the wind sector and Brexit.

Gill Howard

 

1) What does UL do in the wind sector?

UL is best known as the leading testing, inspection and certification body for electrical products and systems in North America. If you’re traveling to the US and look at almost every electrical appliance in your hotel room, you’ll see the UL logo, which means it has been tested and certified to UL standards and is safe to use.

In the renewables part of the business I work in, UL tests and certifies wind turbines and components through wind energy certification firm DEWI OCC. We test, certify and set many of the standards for solar and battery storage globally and in Renewables Advisory we provide advisory services including wind and solar resource mapping and assessment; energy production forecasts; wind, solar and storage due diligence; lenders technical advisor; and repowering and decommissioning technical advisory.

 

2) UL bought AWS Truepower in 2016 to expand its renewables portfolio. How is that expansion going three years later?

With the acquisition of AWS Truepower, UL really consolidated our Renewables Advisory business and was looking for the 2 + 2 = 5 effect, which we’ve definitely accomplished.

We’ve combined with DEWI in Europe and globally for a stronger team, we are in markets we were not in previously in Europe and Asia Pacific, including China, and we’re able to leverage the know-how in UL’s solar and storage business, with the appropriate firewalls.

We’re currently focused on growing our solar and storage advisory businesses, as well as growing our asset advisory and monitoring business, and growing in key markets in Europe, the Middle East and Africa, as well as Asia Pacific across all services.

For example, this year we were lenders technical advisor for EDF and Masdar on the Dumat Al Jandal Wind Project, the first wind project in Saudi Arabia totalling 400 MW which recently closed financing, and we’ll be performing construction monitoring and power curve testing. We’re also working as the Independent Engineer for financing of EDF’s North America portfolio, and are working with EDF for technical advisory work in South America and Turkey.

These are just a couple of examples. We would never have been able to do that before acquisition by UL, but we have so much more to do.

 

3) Which factors will have the biggest impact on the growth of hybrid renewables projects in Europe?

While I was growing up, my father was plant manager for a coal fired power plant in Derbyshire that provided baseload electricity and steam for a large manufacturing facility. After I left university, I helped obtain the permits and Section 36 consent to replace the coal plant with a gas-fired CCGT station, a shift from coal to natural gas. Today, the gas-fired plant is over 25 years old and no longer running and there are 2 wind turbines on the site.

As we move away from baseload coal, and if we eventually also want to move away from natural gas, wind and solar hybrid projects and storage are critical for us to provide power when we need it the most, whether the wind is blowing or the sun is shining, and when one or both are not, and we are seeing a tremendous interest in hybrid systems across the world.

Developers and OEMs understand that hybrid projects have many complementary advantages and that when you add storage it allows the owners and offtakers to start operating renewable assets in a way that is much closer to the dispatchable generation model with which utilities are so familiar. Price and production profile are critical for hybrid projects and storage to be deployed, as well as policies to encourage deployment.

For due diligence, understanding the client’s requirements and then modelling the energy production and interfaces between each technology is critical, since the revenue stream is based on this. For both solar and storage, degradation is also critical.

 

4) How does the move to corporate power purchase agreements (PPAs) in Europe affect due diligence on projects?

We first started seeing Commercial and Industrial (C&I) PPA’s in North America over 4 years ago, with Google, Amazon and others being early entrants to the market. Today, over 50% of our North America PPAs are C&I PPAs, with Google and Amazon still major players, but others such as Facebook, General Motors, Budweiser and many large hospitals are also procuring renewable energy. Last year we worked on our first C&I PPA in Europe for 2 projects in Finland which have PPAs with Google.

We expect to see more C&I PPAs in Spain and Northern Europe for example. However, there will be other markets such as Poland, Turkey, Saudi Arabia and South Africa which are still doing national utility procurement but even in these regions corporate PPAs are breaking through.

For those projects which do have C&I PPAs, additional diligence is required as the minimum output is often guaranteed by the generator. This results in additional agreements being taken for electrical supply to avoid jeopardising the corporate PPA.

In addition to this, there are risks around the creditworthiness of the purchasing entity, merchant power prices after the term of the PPA has expired, curtailment and basis risk. At the same time, in markets like Spain, Mexico or Brazil for example, a spot price market component is also being considered within new development in conjunction with C&I PPAs. A further challenge here is that forecasting becomes even more critical – both generation and price.

 

5) As Financing Wind Europe is due to take place on 31st October – ‘Brexit Day’ – we have to ask: How do you think Brexit is going to affect wind businesses in the UK? 

My husband and I were in the Arctic National Wildlife Preserve in Alaska (an area which the current US government would like to drill for oil and also a pristine wilderness where the caribou migrate, calve and raise their young), rafting down the Kongakut River with no communication with the outside world when the Brexit vote happened and we first heard about it in a tiny bush plane on our way back to “civilisation.” I remember explaining some of the drivers behind the vote to fellow members of our trip on the plane going over the Brooks Range, why my parents voted for Brexit and why my teenage nephew and niece are against it. I’m not a politician and don’t have a crystal ball, so the discussion we’re having on the day of the conference around Brexit will be different to today’s discussion.

If there is a hard Brexit, it may affect more than just the UK since so many UK financial institutions are funding projects globally, however, I do expect London to remain a major global financial hub. For the UK market, we are also seeing local banks funding renewables projects in many emerging markets and this could become more common in the UK. Permitting still remains critical for the growth of the UK onshore and offshore industry, which depends on politics. However, globally, more and more, renewable projects are becoming independent from changes in politics as the industry has become mature, with LCOE’s going down and with the shift to C&I PPAs.

Being an optimist, I’m hopeful that there won’t be a hard Brexit. I believe that compromise is usually the best “win-win” and that we’re part of a global world which very much includes Europe as our closest neighbours for the UK. It’s important that we all work together in business and politics for a clean energy future for our children and grandchildren, and to do anything otherwise will be on the wrong side of history.

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