Page 1

Renewables Report

Project Finance & Infrastructure Journal


2 Beyond subsidies The first subsidy free contracts awarded for renewables in Europe could herald a transformation of energy markets.

10 Fighting FIT DFIs have been tempted back for the second round of Egypt’s solar feed-in tariff programme, despite round one’s nearcomplete collapse.

4 Batteries Vs gas peakers Battery energy storage has become a compelling competitor to gas peaking power.

12 Renewables energy global league tables The leading companies for renewables energy sector over the last 12 months.

9 Borkum West Phase 2, Germany One of the last renewable energy projects in Germany to benefit from a fixed feed-in tariff.


Renewables Report 2017


Beyond subsidies The first subsidy free contracts awarded for renewables in Europe could herald a transformation of energy markets. By Olivia Gagan

in pricing than offshore. In Europe’s most recent onshore wind auctions in May 2017, a switch from fixed tariffs to auctions led to some all-time low subsidies awarded. The average bid amount was €57.10 ($63.70) per MWh in Germany for onshore wind, and €43 per MWh in Spain.

Some of the most common criticisms

Moving the market

levelled at the renewable energy sector are

EnBW and DONG’s German offshore

becoming increasingly hard to stand up.

wind auction bids have already had an

Claims that relying on changeable weather,

effect on other sponsors’ strategies. At an

and new technology, for electricity is too

IJGlobal renewables event in Scotland in

risky can now be countered by many years

May 2017, developers and lenders alike

of reliable performance by established

seemed unanimous that bids for future

wind and solar power plants.

energy auctions in Europe will have to

Yet a lingering argument, and

come in below the £100/€100 per MWh

probably the most compelling historical

mark, irrespective of actual costs.

one against renewables generation, is

Some market participants suggest

that it is too expensive. Why spend considerable sums of money subsidising renewables when the operational life of

that high tariffs will increasingly look like state aid.

Simon Luby

In Belgium, North Sea minister

an existing, low-carbon, high capacity

auction system on the 1 January

Philippe de Backer has called for

nuclear power plant can been extended

2017. In April its energy regulator, the

three offshore wind concessions to be

for another 10 years at a far lower cost,

Bundesnetzagentur, named the winners in

cancelled, saying the projects should be

or when brand-new gas-fired plants stand

its first offshore wind auction, one which

re-tendered in light of the prices achieved

idled across Europe?

could have far-reaching consequences for

elsewhere in Europe.

The line of reasoning that conventional forms of power are cheaper,

the European energy industry. Up to 1.55GW of capacity was on

The Renewable Energy Association’s senior policy analyst Frank Gordon says

more reliable and require less support than

offer for existing, in-development projects

the UK, traditionally an offshore wind

renewables has been used to keep burning

waiting to be awarded a grid connection

forerunner, could struggle to compete

indigenous brown coal in German thermal

and government funding. Germany

with the new price assumptions. He says

plants and has supported the creation of

utility EnBW took the lion’s share of the

of the UK, “the main price determinant

a pipeline of new nuclear in the UK. But

available capacity by stating it did not

is grid connection cost and this varies

over the past 18 months the argument

need a subsidy for its 900MW He Dreiht

considerably by location- only those with

that renewables technologies require more

project. Denmark’s DONG Energy was

the best grid and offtaker setup will be

subsidies than conventional generators has

the other winner, with three projects. For

able to be subsidy free at this stage.”

been countered by some unprecedented

two of these – OWP West and Borkum

low bids in open tender auctions. And

Riffgrund West 2 – DONG Energy made

contracts should become attractive

some planned projects are now set to be

zero-tariff bids. The Gode Wind 3 project

acquisition opportunities. The as-yet

constructed without using any subsidy at all.

was awarded on a bid of €60 per MWh.

unbuilt Neart na Gaoithe offshore wind

Depressed oil and gas prices and

These bids significantly undercut

But those already awarded higher

project in the UK, for example, holds an

international carbon reduction commitments

the tariffs seen previously in renewables,

inflation-linked, 15-year, £123.47 per MWh

in the wake of COP21 have supported

and even in conventional power: the

CfD, a tariff unlikely to be awarded again.

the economics of greenfield renewables

UK’s Hinkley Point C nuclear project,

development. But a key, and growing,

for example, holds a £92.50/$120.40 per

sustained. The energy industry seemed

driver of bringing renewables on a par with

MWh Contract for Difference (CfD), a

surprised by the German offshore wind

conventional power has been a shift by a

tariff which represents the guaranteed

bids, and the German government was

number of European countries towards race-

prices its sponsors will receive for the

too. “The average weighted award price

to-the-bottom competitive auctions, rather

electricity the plant generates.

of 0.44 cents per kilowatt hour is far

than tenders offering fixed feed-in tariffs. Germany switched to a competitive

The onshore wind sector tells a similar story, albeit with a slower descent


That is, if these low prices can be

below expectations…which will lead to a reduction in funding to an extent that had

Renewables Report 2017

EUROPEAN RENEWABLES not been expected,” Bundesnetzagentur

mark for established technologies. Those

president Jochen Homann said at the time.

earlier high returns might look like a better deal for project owners rather than

“Offshore wind energy is categorically proving its competitiveness…

taxpayers, but Luby says “because of

it remains to be seen, however, whether the

subsidies, companies have been able to put

prices in the next auction will be as low.”

investment into the supply chain: the staff, the factories and the technology.”

Perhaps the industry should be less

Now, the supply chain will have

surprised by the German results. As project costs come down and trust is gained in

to provide much cheaper prices. But

specific technologies and sectors, state

“in return for lower prices, they’ll want

support should theoretically reduce. But the

forward orders,” Luby says. He suggests

relationship between the tariff a developer

that what suppliers, particularly in

bids for and the actual cost of building a project is becoming harder to establish.

Mark Muldowney

offshore wind, might lose higher prices for their services, they may gain in the

shareholders are also watching. By

increased scale and predictability of a new,

diligence at technical consultant K2

guaranteeing access to the German

super-competitive market. “When people

Management, says there is no longer a

electricity market well into the 2020s – as

weren’t sure how busy they’d be, they

clear-cut relationship between bids and

has been done with the latest offshore

would price that in. DONG putting in an

actual project cost. “Without economic

wind auctions – gives the utilities a growth

order for five sub-stations means a yard is

and political factors, we wouldn’t have

trajectory, which for listed giants, is

full for two or three years,” he asserts.

had these bid levels,” he says.

arguably as important as revenues.

Simon Luby, global head of due

Rather than renewables projects

Both are taking a punt on wholesale

Newcomers to the industry will be hardest hit, he suggests. “There will

development costs being calculated on

power prices increasing and technology

be casualties, but for suppliers already

technology, materials and man hours needed,

improving: a buy-now, pay-later strategy. It

established now, there are good forward

and bids for subsidies being based around

is worth noting that according to European

order books. There’s enough consistency.”

that, Luby says a whole host of other factors

Commission, wholesale electricity prices

are now more pressing considerations when

reached their lowest levels for 12 years in

summer’s latest CfD auction in the autumn

deciding how much you can afford to build a

2016. EnBW openly stated that it is banking

will be another yardstick for bid pricing.

project for – like holding on to staff.

on electricity prices and greater turbine

There are reports of unestablished marine

efficiencies in the time between now and

power projects bidding in at sub-£100

seen over the past year, Luby says the likes

2021 when it will have to make a final

per MWh, prices which seem bold for an

of EnBW and DONG Energy now have

investment decision on the He Dreiht project.

emerging technology.

Of the steep drops in assumed costs

large offshore wind development teams to

Mark Muldowney, managing

In the UK, the results of this

Luby says the industry, and

think of. “Sponsors are not pricing their bids

director for energy and infrastructure at

governments, will have to decide whether

on the cost of the project – they’re pricing

BNP Paribas said the lending market will

to stick with their established technologies

on the cost to them if they don’t secure the

factor this unpredictability. In a subsidy-

or whether to plough cash into new forms

project,” he says. “If they don’t win, what

free European renewables arena, “market

of electricity generation. “If offshore wind

would their project teams do for the next

price risk is going to be the overwhelming

shows it can deliver at these costs, then the

two years? Once you’ve lost specialised staff,

challenge for lenders,” Muldowney says.

savings should move across into wave and

you don’t tend to get them back.”

“To what extent will they be willing to take

tidal. However, governments would likely

it? Lenders were comfortable with tariff

have to throw a lot of money at a big

and DONG Energy’s bids – at prices that

regimes because the fixed revenues provide

project to kick-start the supply chain first.

were deemed impossible even eighteen

cover. Taking full merchant exposure is a

Or are we going to cut it loose?”

months ago, when DONG Energy said its

much bigger ask and could result in much

goal was just to reach costs of €100 per

lower gearing than we’ve seen in the past.”

Others have suggested that EnBW

MWh by 2020 – are literally staking a

Luby forsees a future in Europe where “renewables will be treated just like any other generator. To some extent this is a good

claim on the development area. One lender

Survival of the leanest

thing – it’s increasingly seen as a mature

called the bids “a €60 million option” on

Subsidies for individual European

technology, without an alternative or green

building the projects, rather than a firm

renewables projects could generate

label.” The switch from a subsidy-supported

commitment. That is the estimate of the

strong, regulated 9-10% returns just two

industry to a leaner, market-driven industry

bid bond the sponsors have to pay.

or three years ago, but these are now

has accelerated over the last year and the

expected to be more around the 3-4%

change now looks permanent.

For EnBW and DONG,


Renewables Report 2017


Batteries Vs gas peakers Battery energy storage is a compelling competitor to gas peaking power. By Davion Hill, Paul Gardner and Raymond Hudson of DNV GL Energy storage has reached a point where it is competitive with

project, and two AES projects (at 30MW and 7.5MW each).

traditional generation for peaking capacity applications, and the

[3] These projects were awarded after an emergency 100MW

value proposition only gets better as costs continue to plummet

approval of energy storage to meet the gas shortage and

across the sector. Solar system costs are half what they were even

peaking capacity crisis. [4] These projects demonstrate how

three years ago, and this cost decline is a snapshot of a decades’

77.5MW/310MWh of storage are performing the equivalent

long march down the cost learning curve. Energy storage system

service of 100MW of gas peakers according to the state’s initiative.

costs have reduced aggressively as well at 8-15% each year,

The energy storage capacity contracts obligate up to four hours

driven by similar factors. Solar and storage are both dropping

of discharge during a 10-year energy storage resource adequacy

in cost and achieving unprecedented growth in an increasingly

agreement signed between the developer and the utility. [1]

combined manner.


The Aliso Canyon natural gas storage facility leak set a precedent for storage replacing the function of a natural gas

At $562/kWh installed, the AltaGas project demonstrates that AC

peaker. AltaGas and Greensmith partnered on the 20MW/80MWh

systems (prior to interconnect) have been delivered for $300-400/

Pomona energy storage facility which was reportedly installed

kWh assuming an approximate 1.5x multiplier for EPC costs. In

for $40-45 million. The resulting installed cost is $562/kWh.

a recent Twitter campaign, Elon Musk of Tesla declared 100MW

The system was rapidly constructed and commissioned in a

of storage systems could be delivered to South Australia at

four month period. [1] The total power rating of energy storage

$250/kWh [8]. While bold, this declaration is not inconceivable.

projects to address Aliso Canyon is 77.5MW, comprising the

Battery costs have been declining at 8-15% per year for the last

AltaGas/Greensmith Pomona project, the Tesla Mira Loma

decade. [9] Applying this historic cost reduction rate and using


Renewables Report 2017

ESS VS. PEAKER Greensmith’s demonstrated costs to AltaGas, the same systems

capacity factors, the mean non-discounted cost for gas peakers

could be delivered for $255-$368/kWh a year from now, $216-

and ESS are within 15% of one another over the lifetime, even

$338/kWh in two years, and $183-$310/kWh by 2020.

though the capital cost of the ESS can be 2-2.5x higher. This

These low costs are consistent with announcements from

analysis is based on a system with 20-100MW power rating

LG Chem in 2015 that it would supply battery cells to GM at

(56MW mean) and two to four hours of operating duration

$145/kWh, and Tesla’s claim that it can offer cells at less than

(mean three hours).

$190/kWh. [2, 5] These low costs are possible with vertical

These estimations may be conservative as the installed ESS

integration of the Energy Storage System (ESS) from cell to

$/kWh mean cost is near $1100/kWh, which is about 2x the cost

system, and an EPC that is comfortable implementing a storage

that AltaGas just demonstrated. The fuel cost for the turbine is

project. If the EPC is highly efficient, ESS costs above $400/kWh

2.5x the electricity import cost of the ESS. The permitting cost

can be managed with even lower transactional EPC costs to

is also 4x higher than the ESS. The lifetime cost is the sum of

achieve low project cost. In short, low ESS costs are achieved with

O&M and CAPEX (broken out into relevant components in the

experienced project teams. Some of the speculation about higher

table). The hours per year are based on the capacity factor. The

energy storage costs in the market comes from firms that do not

system cost is based on CAPEX (&/kWh or $/kW) and the BOS

have the experience, are unable to achieve volume, or do not have

multiplier. The turnkey cost in $/kW and $/kWh is based on the

good visibility on their transaction costs.

system specification, and the kWh/y and system energy are based

Such reported high prices are unique cases – not the

on the system size and its utilization rate. The permitting cost is

norm – but are nonetheless contributing to market uncertainty.

based on gas peaker case studies and the fact that ESS permitting

Uncertainty can affect O&M costs as well, inflating the number

has a demonstrated 4x faster permitting period.

by as much as 2x. O&M costs for ESS are also highly variable but

Outputs (mean values)

are cited to range from $7-$13 per kW-y. [10, 14] This translates

Lifetime Cost ($)

to $0.0008-$0.0014/kWh, which are lower O&M costs than a


conventional gas peaking asset when including fuel costs. Gas peaker plants have a much more established history and





730 730

System Cost



Installed CAPEX







therefore more certainty on transactional cost, however the project

Turnkey $/kW

costs still vary depending on the system complexity. Their estimated

Turnkey $/kWh

capital cost ranges from $671-$2467/kW with the average price


40,880,000 40,880,000

near $1000/kW. [10, 11, 12, 7] It is fair to assume a capital cost of

Fuel Cost/y



$671-$1230/kW with a balance of system (BOS) cost factor within

Energy (MWh)



a tight range from 1-2x. Similarly the O&M costs for gas peakers


are frequently cited between $7-$16/kW-y (which translates to


approximately $0.0008-$0.0019/kWh). [7, 10, 12]

$877,333 $219,333

Table 1 Mean values of the analysis for gas peaker vs. ESS cost and performance metrics using quoted values from the reference list.

Peaker system considerations Energy Information Administration (EIA) data indicates that natural gas peaker plants have a utilization factor of 5-15% on

It is shown in Figure 1 that using today’s prices, there

average. [7] The capital cost of the equipment is estimated across a

are scenarios where the lifetime ESS cost will win over the gas

broad range because it may or may not include project development

peaker cost in seven years when the 20th percentile ESS case is

costs, EPC fees, and other costs associated with infrastructure,

compared to the 80th percentile gas peaker case. The percentiles

interconnection, land, permits, and other costs. DNV GL typically

are generated using a range of values from minimum, mean, and

assigns a conservative 1.5-2.5x “balance of system” (BOS) factor

max values for inputs as indicated in the cited references. The

for ESS to account for these costs. The gas peaker is fueled by

probabilistic analysis computes all possible outcomes from the

natural gas at $2-$13/MMBTU, while the ESS requires electricity

range of values and then systematically tests the sensitivity of

from the grid to charge at $0.02-$0.03/kWh. [13] Under ideal

the output by varying each input while holding the others fixed.

conditions an ESS system can achieve round trip efficiency (RTE)

This analysis supports what was witnessed in Aliso Canyon;

above 80% for most Li-ion systems, though in real world operation

competent, vertically integrated, high volume ESS project teams

the RTE may be 65-80% depending on temperature, system power,

brought cost efficiency with rapid permitting to compete against

and parasitic loads such as cooling. Gas turbines, on the other hand,

a difficult gas peaker project. While the Aliso Canyon crisis was

are incrementally advancing beyond 60% peak efficiency.

a unique case, permitting, fuel supply, water for cooling, and emissions considerations will always cause additional costs for gas

Cost comparison: Gas peaker vs. ESS peaker

peakers (this is true across the nation and not just in California).

The analysis below demonstrates that for equal power ratings and

This analysis and the Aliso Canyon precedent demonstrate


Renewables Report 2017

ESS VS. PEAKER speculation that the shale boom has led to stable, low prices in the


natural gas market for decades to come, but history shows that has never been the case. The 20th percentile scenario for the ESS


includes low system CAPEX as well as low increases in wholesale Lifetime cost ($m)


electricity charging costs and the balance of system factor which is illustrated in Figure 2. This figure demonstrates that the capital


cost of the ESS has a strong effect on the lifetime cost, which


includes the associated costs from EPC activities and fuel cost.


Other considerations Some gas peaker plants need to operate on standby, which

50 0

increases the fuel cost. This standby load may be 20% of the peak rated power of the gas turbine. [6] An ESS, however, requires no 0


10 Project life (y)

Peaker 80th ESS 20th



Peaker 20th Peaker Mean

ramp-up time and standby loads are only attributed to cooling or system support functions at less than 5% of the system power.

ESS 80th ESS Mean

It is noted that gas peakers are estimated to be permitted and constructed over a period of 48 months. [12] Energy

Source: ???

storage systems built to address Aliso Canyon were permitted and constructed in as little as four months. [4] Permitting and

Figure 1 Projected cumulative lifetime cost for ESS vs. gas peakers

construction costs for ESS are about 25% those of natural gas

using 2017 prices (20th percentile values, 80th percentile values,

projects because of reduced emissions and other environmental

and mean).

permitting requirements. Because energy storage is a flexible asset, it may also be able

that ESS peakers are a likely cost-effective alternative to any

to perform additional grid services besides peaking capacity that

challenging gas peaker project.

will change the payback on the project. These include frequency regulation, voltage support, and smoothing/time shifting of solar

The 80th percentile gas peaker case includes capital costs

or other renewable energy generation.

near the higher boundary with volatility in fuel prices increasing

If these additional considerations are stacked together,

by as much as 20% in future years. Wholesale gas prices doubled from 2005 to 2006, and increased 2.5x from 2007-2008. Since

it can be seen that a gas peaker with considerable standby

2003, there have been at least four instances where gas prices

loads, potentially escalating fuel costs, and a time-constrained

doubled within a one-year window. [8, 9] There is plenty of

construction schedule is a higher cost endeavor than a battery

ESS power (MW) / ESS


System CAPEX (4/kWh) / ESS ESS duration (hrs) / ESS





ESS BOS factor / ESS ESS construction period (y) / ESS



$272,956,557.57 $251,875,023.03

Input high


Input low


Emissions range kg/min per cell / Dist


Heat rate (MBTU/MWh) / Peaker







Permitting cost ($/kW) / ESS


$256,971,698.67 $251,180,579.96 $248,333,779.11

Source: ???








Baseline = $232,318,158/.01

Lifetime cost ($m)/ESS Inputs ranked by effect on output mean

Figure 2 Sensitivity analysis of the ESS cost.


Renewables Report 2017

ESS VS. PEAKER energy storage system that can also serve additional grid functions

integration and EPC parties, and reduced transactional costs

in parallel with its peaking duty. Any head-to-head comparison

can install cost effective energy storage projects today. When

should consider the optimization of these upside and downside

ESS can serve multiple grid functions in addition to peaking, the

risks specific to the site and function.

revenue upside of the asset increases. With rapid permitting and a continuing decline in cost, ESS also has greater flexibility for

Experienced and efficient ESS teams with positive control

upgrades and expansion at the project site.

of the supply chain, established relationships between systems

References 1. Pomona Energy Storage Facility, 2017. AltaGas Press Release 2. Harrington, Kent. “Tesla’s New Battery Battery Storage Farm in California is a Big Deal” AIChE, ChEnected. Feb 21, 2017. 3. “AES to Deploy 37.5 MW of Advancion Energy Storage Arrays for SDG&E”. AES Press Release, 2017. 4. Pyper, Julia. “Tesla, Greensmith, AES Deploy Aliso Canyon Battery Storage in Record Time”. Greentech Media. January 21, 2017. 5. Abuelsamid, Sam. “LG Chem May be on the Verge of Dominating EV Battery Industry”, Oct 28, 2015. Forbes. 6. Carmichael, Charles. “The Big Question for Energy Storage – Valuation”. Oct 15, 2015. Smart Electric Power Alliance. 7. Dalal, Siddharth. “Gas Peakers Vs. Storage Batteries: End of Natural Gas is Near? Part 3.” Seeking Alpha, Dec 27, 2015 8. US Energy Information Administration, “Spread Between Pennsylvania and Henry Hub Natural Gas Prices” January 2003-December 2016. 9. US Energy Information Administration, “Monthly US Dry

Natural Gas Production and Henry Hub Natural Gas Spot Price, January 2005-March 2012. 10. McCormick, Rich. “Elon Musk Promises Australia a huge new Battery Farm in less than 100 days or it’s free” The Verge, March 10, 2017. 11. DNV GL tracked data. 12. Lazard’s Levelized Cost of Storage Analysis – Version 1.0. November 2015. 13. Newell, et al. “Cost of New Entry Estimates for Combustion Turbine and Combined Cycle Plants in PJM – with June 1, 2018 Online Date.” May 15, 2014. 14. “Comparison of Fuels Used for Electric Generation in the US”. Natural Gas Supply Association (NGSA). Accessed March 2017. 15. Energy Information Administration. “Wholesale Electricity and Natural Gas Market Data” 2017. 16. Manuel, Willie G. “Turlock Irrigation District, Energy Storage Study 2014”. September 17, 2014.


Renewables Report 2017

EUROPEAN OFFSHORE WIND DEAL ANALYSIS: This financing supports one of the last renewable energy projects in Germany to benefit from a fixed feed-in tariff. By Olivia Gagan.

Borkum West Phase 2, Germany The roughly €800 million ($870.4

2017. EWE had already agreed to join

Dreiht project. It bid without asking for

million) Borkum West Phase 2 offshore

and Zurich-based utility EWZ and Swiss

subsidy support.

wind project forms part of a set of wind

asset manager Fontavis bought a 25%

farms which have been in development

stake from Trianel in February. They

another winner having made ‘zero-

for well over a decade. Borkum bookends

financed the purchase using a Swfr200

subsidy’ bids for two of the three projects

the era of feed-in tariffs in German

million ($197.6 million) framework credit

it was awarded.

renewables: the original Borkum West

approved by the Zurich municipal council.

Phase I financing in 2011 was Germany’s

Denmark’s DONG Energy was

The average award price was €44 per MWh. The lowest price bid was €0 per

The lenders for the €591 million

first offshore wind farm project financing.

debt were KfW-IPEX, SEB, Rabobank,

MWh, and the highest price accepted was

Trianel signed €550.5 million in debt

Commerzbank and ING. The project also

€60 per MWh.

commitments for that project, and it took

received support from the KfW offshore

nearly three years to close, with banks first

wind energy programme. Each lender took roughly equal debt

mandated in 2008.

An adviser on the Borkum West Phase 2 project said future German offshore wind financings might look different as a

Much has changed in offshore wind

tranches. The debt tenor is 13.5 years,

result of Germany’s lower (or zero) subsidy

since 2010, not least the comfort levels and

to match the 12-year tariff period plus

support, but did not anticipate lender

appetite banks have for the sector. Despite

construction. Pricing is 175bp over Libor

appetite to diminish. “It’s all part of the

seeking a similar amount of debt (€591

during construction and 165bp over Libor

game now – how much merchant risk can

million) in 2016-2017, the 203MW Phase 2

once the wind farm is operational.

you get banks to take?” they said. The low

project took just seven months to complete.

level of other large greenfield, ready-to-

Tougher rules ahead

finance, renewables projects will also help

The financing

Future sponsors of German offshore wind

drive demand, they suggested.

The owners of Borkum West Phase 2

projects will not benefit from fixed feed-in

are EWE (37.5%), a Fontavis/EWZ club

tariffs like Borkum. Projects which have

Next steps

(24.51%) and a consortium of Trianel and

been awarded tenders since 1 January 2017

The wind farm extension project is located

17 local municipal utilities (37.99%).

must compete for support from Germany’s

45km north of the island of Borkum in the

energy regulator, the Bundesnetzagentur,

German North Sea. Construction is set to

Giraffe launched the debt raise in

rather than being assigned subsidies. Tariffs

begin in spring 2018 and be completed by

November 2016, and it reached financial

are financed through network charges to

the end of 2019. Senvion are supplying 32,

close on 5 May 2017. Banks made

electricity consumers.

6.3MW turbines.

French advisory boutique Green

commitments in late January, and were

In the first tender under the new

Separately, sponsor Trianel is to

mandated in early February. A final

rules in 2017, up to 1.55GW of capacity

refinance its €900 million ($959.1 million)

investment decision for the project was

was on offer for existing in-development

200MW Borkum West II Phase 1 offshore

made in early April.

projects waiting to be awarded a grid

wind farm this year, it told IJGlobal.

Ownership of the project changed hands during the financing, after original

connection and government funding,

The European municipal utility has

Germany utility EnBW took the

hired MUFG to advise on the deal and

sponsor Trianel started tendering for

lion’s share of the available capacity by

wants to reach financial close by the end

additional equity partners at the start of

winning state backing for its 900MW He

of 2017, it said.

Timeline Trianel seeks advisers for phase one financing

Financial close for phase one of Borkum West II

24 September 2009

17 December 2010

Trianel sells equity in project to EWZ and Fontavis

24 February 2017


Financial close on phase two

05 May 2017

Operations expected to have begun on phase two

31 December 2019

Renewables Report 2017


Fighting FIT Development finance institutions (DFIs) have been tempted back for the second round of Egypt’s solar feed-in tariff programme, despite a near-complete collapse of round one. By Jordan Bintcliffe.


ith round two of Egypt’s solar

commented anonymously.

the programme,” according to the adviser.

These and other disputes delayed

FIT under way, its government’s

The collapse of round one

the programme and in the interim, solar

has certainly benefitted the Egyptian

2,000MW of capacity before the end of the

tariffs awarded elsewhere in the world had

government, as it looks set to pay far less

summer could yet be achieved – albeit a

made the $0.1434 per kWh for FIT 1 set

for the 2,000MW of solar generation now

year later than scheduled. Tariffs have been

at launch in 2014 look overly generous.

than it would have done if the DFIs had

ambitious target to procure

significantly reduced compared to round

“The higher tariff had been set

not pulled out.

one, which eventually saw just 150MW of

two years prior and the engineering,

capacity reaching financial close out of the

procurement and construction costs dropped

arbitration location was due to the lower

same 2,000MW target.

significantly in that time,” the adviser says.

prices set to be offered in FIT 2, Lamya Hady,

Asked whether the change of

FIT 2 offers $0.084 per kWh of

Last year saw the United Arab

sector head for private projects at the EETC

electricity produced by solar plants between

Emirates smash the record for the world’s

would only say that the authority has now

20MW and 50MW in capacity and $0.078

lowest headline solar tariff price after

found a compromise solution for round two:

per kWh for solar plants between 500KW

Marubeni and Jinko offered the equivalent

and 20MW. Round one offered $0.1434

of $0.0242 per kWh. Meanwhile, in Sub-

midway,” she says. “The venue is still in

per kWh and $0.136 per kWh, respectively.

Saharan Africa, Neoen and First Solar bid

Cairo and the seat in Paris.”

DFI involvement is essential for

$0.0602 per kWh for a Zambian project

any financing under the programme. The

in mid-2016.

risk profile of the Egypt’s relatively young

“This was meeting with the lenders

Eventually three solar projects reached financial close in FIT 1 despite the

With billions in debt from a

lack of DFI involvement. FAS Energy, Elf

solar industry alongside the lower tariffs

range of international DFIs lined up,

Energy, and Infinity Energy Management

calls for relatively cheap debt pricing

procurement authority Egyptian Electricity

individually closed on projects with

– generally only possible with DFIs or

Transmission Company (EETC) decided

50MW of rated capacity each.

commercial lending backed by guarantees.

in June 2016 to change the location of

A number of DFIs withdrew support

arbitration back to Cairo.

for FIT 1 projects last summer. The lenders

“And that was when the DFIs

were uncomfortable with a clause in project

decided they didn’t want to go ahead with

Tempting DFIs and sponsors back for more Egypt managed to bring developers back

documents calling for any disputes to be heard at the Cairo Regional Centre for International Commercial Arbitration.

Average tariff prices achieved in recent solar tenders in the MENA region 0.16

“Every financing we do – whichever


jurisdiction is concerned – we need


from ours and the one of our borrower,” Emmanuelle Matz, head of Proparco’s energy and infrastructure division says. “This ensures we have the benefit of objective decision making when there is any issue between the two parties”. But although Cairo launched FIT 1 with the clause in the documents, “after

$/kWh bid

arbitration in a different jurisdiction

0.1 0.08 0.06 0.04 0.02 0 2011

discussions with the DFIs in February 2016 it was changed to an international venue,” according to an adviser who

2012 Dubai

2013 Abu Dhabi

2014 Egypt






Source: IJGlobal


Renewables Report 2017

EGYPTIAN SOLAR to provide cheap debt: “Lenders need to reduce their cost of lending through lower interest rates, lower contingencies, and guarantees,” said one. For projects without a DFI, commercial lenders are likely to need added comfort, Amit Singh senior associate at Synergy Consulting comments. Synergy advised Infinity in FIT 1, which financed its project with Bayern LB under coverage from Euler Hermes. “Having an insurance premium

Emmanuelle Matz, Proparco

results in higher effective lending rates because of upfront insurance premium,”

Amit Singh, Synergy Consulting

Singh said. “With the revised round 2 to the second round by automatically

tariffs, the projects might not be able to

the FIT program can be followed up by

pre-qualifying any who had projects

support such expensive debt. As such, we

a competitive tendering process. Jordan’s

awarded under FIT 1. The EETC

expect most of the projects under round 2

renewables programme is a successful

also offered to reimburse developer

would be backed by DFI financing.”

example for this.”

costs incurred under the cost sharing

Acwa Power is understood to be

And Hady at the EETC has confirmed

agreement for those developers walking

financing its projects with the European

to IJGlobal that Egypt will switch over to a

away from the programme.

Bank for Reconstruction and Development

competitive bidding or auction process once

and a commercial bank under political

FIT 2 has been completed.

The DFIs were similarly pacified by Paris being named as the international seat for arbitration in the project documents.

risk cover.

“There are no plans for FIT 3.

Despite any efficiencies that can be

Once the projects under FIT 2 have

Further comfort was provided by a

made, or how cheap they can push the

reached financial close we will report to

Ministry of Finance guarantee on offtake

financing however, sponsors are going to

the Egyptian government’s cabinet on

payments under the project’s power

have to except lower returns for FIT 2.

what has been achieved so far under the

purchase agreements (PPA).

“The reduced round 2 tariff has

FIT programme,” Hady comments. “The

resulted in lower equity returns for the

cabinet will then make a decision based

thinner margins for sponsors. To make

investors,” Singh comments. “However,

on how much of the targeted 2,000MW

project bankable, they will need to reduce

the returns are similar to other comparable

capacity has been achieved.”

the cost of construction and operation; the

market projects in the region.”

The lower tariffs will translate into

cost of debt; and expected internal rate of

“It’s unlikely we will need FIT 3 however as we’ve already received

return, one developer said after the new

Fixed tariff future?

commitment letters from 35 bidders” and

tariff announcement.

In the past the industry has seen

signed 10 PPAs, Hady says.

“Returns are tight,” says

countries opt for a FIT scheme as a

Competitive auctions can create

Pascal Martese, executive director of

platform to introduce their renewable

other issues, however, and Egyptian

acquisitions and project finance at

energy procurement programmes before

authorities will need to be mindful of

Acwa Power which is developing two

switching over to other methods.

structuring it in ways that avoid them.

50MW and one 20MW project under

“This is a good option to attract

Competitive price tenders can create

FIT 2. But they are also “sustainable

initial interest from the international

a “great reliance on only a select few

and robust in the long-term interest of

developer and lender community and

number of large generators”, Jean-Pascal

all stakeholders”.

also to build up the required capacity at

Boutin, a partner at law firm Eversheds

a faster pace,” Singh comments. “The

Sutherland says.

Engineering, procurement and construction costs for solar have already

offered FIT rates might be higher than the

dropped considerably across the globe,

tariffs which you can get in competitive

technologies is not encouraged by a

in part because of bankruptcies in both

tenders, but it helps in establishing the

competitive price alone, unless the

module manufacturing and developer

required processes, bankable project

competition is ring fenced for each

segments that has seen panels flood the

agreements and instilling confidence in

technology,” and where localisation sits

market and brought tariff prices down.

developers and lenders.”

and how it is scored compared to price

Developers have also asked DFIs

“Once the market has been tested,


He added that “diversity of

also plays a role.

Renewables Report 2017


Bond arrangers Total $(m) Transactions

Rank Company

Total $(m) Transactions


Mitsubishi UFJ Financial Group

2,468 48



1,911 9


Sumitomo Mitsui Financial Group

2,370 42



1,405 5


Mizuho Financial Group

1,545 23


Mizuho Financial Group

1,246 4



1,429 33


Mitsubishi UFJ Financial Group

1,099 4


ING Group

1,254 23


Bank of America

845 6


Deutsche Bank

1,253 11


Credit Suisse

750 1



1,243 25


Morgan Stanley

667 6


Credit Agricole Group

1,095 18


Royal Bank of Canada

667 3



1,074 23



623 5


Societe Generale

991 18


Key Bank

480 2

Financial advisers Rank Company


Total $(m) Transactions


Green Giraffe

4,586 10

Rank Company


Credit Suisse

3,650 4


European Investment Bank

900 4



3,460 4



703 9



2,461 2


Inter-American Development Bank

426 7


Deutsche Bank

1,943 1


Eksport Kredit Fonden

379 4


Amsterdam Capital Partners

1,943 1


Korea Development Bank

264 5



1,858 2


Overseas Private Investment Corporation 212 5


Sumitomo Mitsui Financial Group

1,575 3


Japan Bank for International Cooperation 198 1


Leucadia National Corporation

1,530 1



154 4


PJT Partners

1,530 1



154 5


Bank of America

1,530 1


International Finance Corporation

147 3

Legal advisers Rank Company

Total $(m) Transactions

Insurance advisers Total $(m) Transactions

Rank Company

Total $(m) Transactions


Norton Rose Fulbright

9,400 38


Marsh Insurance

3,822 9


Allen & Overy

9,278 15


Jardine Lloyd Thompson

3,439 4



8,284 16


Willis Towers Watson

2,031 10


Clifford Chance

7,422 20


Averbo Risk Solutions

1,236 1


Watson Farley & Williams

5,669 32


Benatar & Co

1,236 1


Latham & Watkins

5,272 23


Moore McNeil

504 1


Herbert Smith Freehills

3,934 22



424 2


Milbank, Tweed, Hadley & McCloy

3,824 13


Crotty Group

178 2


Jones Day

3,789 13


White & Case

3,123 7

Sponsors Rank Company

Technical advisers Total $(m) Transactions

Rank Company

Total $(m) Transactions


Duke Energy

4,747 3


Mott MacDonald

8,737 18


China Three Gorges Corporation

4,230 3



3,812 12


Southern Company

3,870 4



1,836 11



1,868 7



1,530 1


Nextera Energy

1,856 7



1,351 4


Sustainable Power Group (sPower)

1,737 4


OST Energy

1,103 8


Arclight Capital Partners

1,594 3



1,067 3


NRG Energy

1,569 10


Enertis Solar

768 2


Partners Group

1,411 2



683 2


Pattern Energy

1,316 7

10 Aurecon

675 2

*data relates to transactions closed between 1 June 2016 and 31 May 2017


Renewables Report 2017

Renewables Report

Project Finance & Infrastructure Journal

IJGlobal Renewables Report 2017  

Beyond subsidies