AWATEA ConferenceAWATEA Conference Projects, Partnerships & Pitfalls

April 2010

Peter Apperley, Commercial Development Manager

So you want to build a renewable power station?station?

What are some of the pitfalls that canthe pitfalls that can occur along the way?Who can you partner

Meridian’s former CEO keen to get White Hill wind farm (picture right) under way

with to improve your chances of success?

Potential value of site steadily eroded through the development processthrough the development process

Scope/characteristics

Concept creation

ntia

l

Pre-feasibility

Commercial structure

men

t pot

en

Site acquisition

Procurement strategy

e en

hanc

em Revenue enhancement

Manufacturer selection

Resource consents

gy

Creatable value

Feasibility

Cos

t

Detailed design

Intrinsic value

Valu

e

Consent compliance and warrantyMid life

Intrinsic value

Time Graph courtesy Meridian Wind Development team

Who owns the land that you need for the project?the project?

Landowners are a keyLandowners are a key long term partner in your developmentMake sure your agreements are robust and commercially sensibleand commercially sensibleEven marine projects will need access to onshore l dlandDon’t forget Dept of Conservation concessionsConservation concessions

Te Apiti project manager David Green discussing the project with the Moars

Who else uses the resource?Who else uses the resource?

Water resources have many alternative yuses and usersCompromise required to get a mutually b fi i l l tibeneficial solution

Interislander Ferry heading into the Cook Strait

What else uses the resource?What else uses the resource?

Be prepared to spend the time and p p pmoney to understand the local ecology and the effect of your project on itWhat are the options for mitigationWhat are the options for mitigation, restoration, enhancement?

West Coast Powelliphanta Snail

Meridian’s Merlin Bird Radar

Hector’s Dolphin in Catlins, Southland – courtesy Department of Conservation

What’s in it for the local community?What s in it for the local community?

Your project will be part of theYour project will be part of the community and shares community resourcesNeed to consider local benefitsNeed to consider local benefits - what can your project give back to the community? P ibilit f i t ithPossibility for co-existence with locally-owned ventures

White Hill Wind Farm Mountain Classic – courtesy of Southland TimesSalmon farm on Tekapo canal – courtesy of Mt Cook Alpine Salmon

All Blacks, animators and artists aren’t necessarily going to be your friendsnecessarily going to be your friends

Don’t assume that all opposition toDon t assume that all opposition to your project will come from those who are locally affectedUse of emotive imagery and highUse of emotive imagery and high profile campaigners can turn your project into a political football

Courtesy of SaveCentral.org

Wind turbines in Queenstown - Courtesy of Animation ResearchMendocino Wave Energy Moratorium march – 29 Mar 2008 from http://mendocoastcurrent.wordpress.com/page/9/

Sometimes the best thing you can do is stop and cut your lossesstop and cut your losses

Can you stage your development process in some way to reduce upfront costs and risks?If not the risk of continuing may be too high

Simulations of Project Aqua impacts on Waitaki river flow and proposed canal

Technology moves onTechnology moves on

How much flexibilityHow much flexibility for technology change?

Makara wind farm proposal in 1997 (ECNZ)

Quartz Hill land only

40-70 x 250-750kW wind turbinesBlades: 25 35m• Blades: 25-35m

• Towers: 40-50m• Generator: Variable pitch

asynchronous

Output: 30MW, 120GWh pa

ECNZ Makara Wind farm Proposal – from 1997 Fact Sheet

Technology moves onTechnology moves on

Premature consentingPremature consenting might have shut down a more valuable option

Project West Wind – commissioned 2009 (Meridian)

Quartz Hill and Terawhiti Station

62 x 2.3MW wind turbines• Blades: 41m• Towers: 68m• Generator: Full Power Converter

Project West Wind – Photo taken by Ray Brown Dec 2009

Output: 143MW, 570GWh pa

How will you connect to the grid?How will you connect to the grid?

Th i f j t illThe size of your project will determine whether you connect into the local lines company or Transpower

CREST – Kaipara200MW staged

TranspowerIn most cases there is insufficient line capacity near the coast – so connection distances could be

New RenewablesOcean CurrentWave

connection distances could be significantRequires easements and consents which add cost and time Neptune –consents which add cost and timeEarly engagement with lines co’s and Transpower importantTh t k l d tl

pCook St1MW prototypeFuture 900MW?WET NZ

2kW WEC prototypeThe network may also need costly

strengthening Map of NZ Grid courtesy of Transpower

prototype

What works at distribution voltage may not at transmission voltagesnot at transmission voltages

New technologies can get caught out by Grid Codes thatby Grid Codes that were designed for conventional generatorsgeneratorsMake sure your proposed project is p p p jgrid compliant with the rules of the system operator orsystem operator or has dispensation

Meridian’s CalRenew 5MW solar project under construction

Suppliers and contractors are a key partner in your developmentpartner in your development

Your choice of equipment supplier willYour choice of equipment supplier will be a key factor in the long term success of your projectPick the right contractor arrangement for the level of risk you’re comfortable withwithThe more risk you try to offload, the higher the overall priceo e a p ce

TBM assembled in Deep Cove (Manapouri 2nd

Tailrace Tunnel) – Fletcher Dillingham Ilbau Alliance – courtesy of tunnelandminingnz.co.nz

Signing of turbine supply, logistics & civil construction contracts for West Wind – representatives of Meridian, Siemens Wind Power, Deugro & Higgins Construction

Construction consent conditions –breach them and you may be shut downbreach them and you may be shut down

Make sure your ycontractors are well aware of your consent conditionsY ill b li bl if thYou will be liable if they breach them and it could end your project

Small hydro development stalled and fined for breaching resource consent conditions

What are offtake providers prepared to pay for your output and what are their alternatives?your output and what are their alternatives?

Wholesale Electricity Price (real $/MWh)Forward wholesale prices

6080

100120140

ProjectionForward wholesale prices driven by the long run marginal cost of available

ti j t

0204060

990

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generation projectsOfftake PPAs driven by the supplier’s view of above not

19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

GDP: Very Low Grow th Emissions Price: $50/t Emissions Price: $75/t

Emissions Price: $100/t Reference Courtesy of Ministry of Economic Development Energy Outlook 2009 Ed.

supplier s view of above not by the unit cost of your projectTh l di t fThey may also discount for location, transmission risk, reliability, intermittency,

Courtesy of Options Choices Decisions 2006 by Meridian

y, y,length of PPA term

Maybe you might want to joint venture or alliance with your offtake provider?or alliance with your offtake provider?

Joint ventures can be hard work if you Ross Island Windfarm, Antarctica commissioned Feb 2009Developed by Meridian in Alliance with Antarctica NZJoint ventures can be hard work if you

don’t have common goals Expect high legal bills and an

Developed by Meridian in Alliance with Antarctica NZ

expensive project if everyone tries to de-risk themselvesA cooperative alliance framework mayA cooperative alliance framework may be preferable

Vi l i l ti f 330MW M th i d f Vi t i 50 50 j i tVisual simulation of 330MW Macarthur wind farm, Victoria – a 50:50 joint venture development between Meridian Australia and AGL Energy.

Who will underwrite your development?Who will underwrite your development?

Do you have sufficient balance ysheet or need to issue new shares?JV Partnership with an energy or i f t t ?infrastructure company?Project financing? Long term financing based on projected g p jcashflows of the project rather than balance sheet of sponsors

“City Banker”– Courtesy http://kennedy121.wordpress.com

Courtesy http://www.tradeindia.com/fp306248/

Project-Finance-Consultancy.html

ConclusionsConclusions

Renewable generation projectsRenewable generation projects are difficult and can take a long from inception

Pelamis courtesy of www.new-energy-portal.com

Many pitfalls along the wayKey to success or failure is in the strength of the partnerships instrength of the partnerships in each facet of the developmentGood luck!

Tidal stream generation simulation courtesy of www.libertyparkusafd.org

Questions?

White Hill wind farm