Southeast Europe has great potential when it comes to the development of wind power. However, despite the fact that, ten years ago, the potential of the region was estimated at over 10,000 MW, a lot less has been built.
Why this is so and what we can expect from the upcoming regional conference “Days of Good Wind”, which will be held on June 13-14 in Vodice, Croatia, were the topics of our interview with Maja Pokrovac, the director of the association Obnovljivi Izvori Energije Hrvatske (Renewable Energy Sources of Croatia), which is organizing the conference.
eKapija: “Days of Good Wind” will bring together regional and European elites from the wind power industry. Who is coming?
– The conference will be attended by experts in wind power, representatives of international and European institutions, such as WindEurope and IRENA, representatives of ministries, financial institutions, producers of electricity from wind power, state and private companies, international producers of wind generators and those that develop wind power projects. The WindEurope market analyst will present the wind power industry in Europe, show the future of wind farms and show why they will be the carriers of the energy transition. Participants from the region will share their experiences with us and talk about how adequately the potential of wind power in the region has been implemented in the energy strategies of the countries. They will also say what the realistic expectations are when it comes to the development of wind power in the region in the next 10-15 years. This sort of sharing of experiences and knowledge is necessary. After years of not having events dedicated to wind power, last year, we organized the first “Days of Good Wind” conference in Croatia, and, due to the great interest, we have decided to organize the conference on a regional level this year. The wind in this region is a good wind and it deserves its place in the economy of the countries of the region.
eKapija: Where is our region when it comes to RES, especially wind power, compared to the rest of Europe?
– The countries of the region have an uneven approach to using RES. The RES sector has not been organized well enough, nor has it had strong lobbying positions in the market to be able to make considerable progress in the energy sector, which has been mostly ruled by companies dealing in fossil fuel-based energy. When it comes to a transparent approach to RES, Bosnia and Herzegovina has made the most progress. They have three independent companies, they’ve made a system where the production, the transfer and the distribution of electricity are clearly and transparently separated, whereby they have allowed for market competition within the electrical energy sector. In Croatia, we’ve done the most thanks to joining the EU. Since then, we have tripled the RES production capacities. Politically, it was truly hard to raise the fees from which the production of power from RES is financed and stimulated, but I believe that Croatia has accepted RES as an inevitable part of the future and energy independence.
eKapija: What will be the main topic of the conference, the realized investments or the upcoming ones?
– Primarily, we will provide an overview of what has been done in Croatia, the region and Europe, while placing focus on the future development in raising the usability of the wind potential in Southeast Europe. In the EU, there were 98% new investments in energy from RES in 2018 – 18.8 GW. The European document “Clean Energy for All”, along with the National Energy and Climate Plans (NECPs), which every EU state is to submit by the end of this year, require a developed framework for investments in the RES, so that the Paris Agreement would be carried out in a cost-effective way. However, investments in SEE are very low, and the development of investors’ trust is slowed down due to macroeconomic indicators.
In 2018, the region had only EUR 1 billion investments of the total of EUR 26.7 billion invested in new wind farms in Europe, making for only 4%, whereas, a year before, the share was 16%. That’s why now is the right time to take a look at what has been achieved and think about the steps that we need to make on our common road to meeting European RES goals. Wind power is one of the cleanest and most ecologically acceptable energy sources. In 2018, it had the most installed capacities in the EU, making up 48% of the total installed capacities. With 362 TWh produced in 2018, wind power covered 14% of the power demands in the EU. Europe has reached the record amount of EUR 65 billion of investments in the construction of new wind farms, project refinancing and the acquisition of companies, as well as in public sector investments through fund raising. The year 2018 was a record-breaking year when it comes to corporate contracts on direct purchase of electricity from wind farms as well. The conference will be a place where we will talk about how countries of the region can follow the good practice – creating synergy through wind power.
eKapija: In our region, the era of feed-in tariffs is coming to a close, and the states of the region are introducing auctions, in line with their national strategies and action plans. Will the upcoming conference be an opportunity for an exchange of knowledge about this topic?
– It’s important for financial institutions to believe in the premium system and for it to be set up in a way that enables long-term planning of projects’ money flows. At the conference, we will hear about experiences with auction and premium systems in Europe and their influence on the flows of financing. This is a very important topic and it will be the backbone of both the lectures and the panels. Almost all of us are in the same position, as no country in the region has implemented an auction or a premium model, which we need to implement, and that’s why our European colleagues, WindEurope, will present the good practice of the premium model in EU countries at the conference. The extent to which this field has progressed is shown by the corporate procurement of renewable energy, which has a key role in accelerating the transition toward clean energy in Europe. The demand and the interest of buyers are not in question, and with the coming into force of the Directive on Renewable Energy, the states need to ensure a regulatory framework, which will enable companies to make bigger investments in renewable energy through agreements on direct purchase of energy from renewable energy sources (CPPA), which is an increasingly present business model in Europe. It enables corporations to reduce the emission of CO2 and manage the shifting costs of electricity, and furthermore, through the CPPA, corporations can maintain a fixed price of a kilowatt-hour over longer periods of time.
eKapija: The financing of wind farms is always an interesting topic, considering that projects are mostly financed by demanding institutions like the IFC and the EBRD, and their representatives will be present at the conference. What trends should we expect when it comes to the financing of future projects?
– Investment risks are much more easily assessed by experienced financial institutions such as the EBRD and the IFC, so we will keep on relying on their readiness to finance. Local financial institutions and funds in the countries of the region mostly finance projects thanks to the support of their parent organizations, which are outside our region, such as Erste, Intesa, UniCredit. The problem of our markets’ being undeveloped is crucial and it is necessary to reach a point of understanding between investors and financial institutions through negotiations in order to overcome the risk of inexperience in implementing an auction or a tender model. In B&H, the main problem is the project financing model, which is a usual model in the development of wind power projects. Due to state-related risks, banks don’t support the private sector through project financing, but go for the usual models of corporate financing. As wind power projects are financially demanding, because they require large financial funds, this form of financing can only be afforded by electrical power companies, which is mostly what we’re seeing anyway, and the projects carried out in B&H are mostly owned by power companies.
eKapija: Is it true that turbine producers are also preparing for the so-called second round of building wind farms in the region?
– Producers are ready for tendering models and competing under market conditions. This conference will provide an opportunity for direct talks between developers, investors in projects and producers of turbines. It’s important for turbine producers to learn about the specific features of this area, as we have two key differences compared to northern EU, where most of these producers come from, and these are the dominant wind in the Adriatic coastal area and the continental wind in Vojvodina. These differences also define the technical characteristics of turbines, which the producers need to prepare for, and which will eventually influence the price of the equipment.
eKapija: In the past two years, several wind farms have been built in Serbia, with a total capacity of 400 MW. What about the other states in the region?
– Roughly, there are slightly under 900 MW in permanent operation, around 400 MW undergoing a test run and around 500 MW being built or planned in the region.
This region is also interesting for its large potential. Ten years ago, there was a study which said that the potential of wind power was above 10,000 MW, and due to being economically undeveloped, we have unfortunately built much less than that. Investors have recognized the potential of the countries of the region and they expect those projects to be realized through the premium model. The premium model enables less developed economies to develop and implement wind power projects, as they are not too much of a burden on end-users, who finance the development of RES through fees.
eKapija: It seems that the states individually, and the region as well, are very interesting to turbine producers.
– As I said, the wind power potential is enormous. Now that the financing models have changed, it stands to reason that turbine producers would recognize this area as a place they will be able to sell their products. To what extent they will realize their expectations depends on how successfully we present the quality of our projects.
eKapija: To what extent is interregional cooperation in the field of wind power possible? Fractal and Zagrebtrans have displayed considerable expertise in realizing wind farms in Serbia and the region, and experts from Serbia also work in other countries of the region. The wind knows no boundaries?
– It is possible to a large extent and quite logical as well, because the companies which have worked on developing projects since 2007 have acquired considerable experience in development, design, building and transportation. There are also companies which are ready to offer the transfer of technology and knowledge throughout the region, in cooperation and partnership with internationally strong companies. Companies from Serbia carry out successful projects, mostly in the domain of environmental impact studies, in cooperation with internationally strong companies in implementing environmental protection, which is very important. Energy and wind power are politically conditioned and each country has its own development policy in that field. The multiple benefits of the production of domestic renewable energy – economic, environmental and strategic – should be considered as well.
eKapija: In addition to good wind, what would you wish for the participants of the conference until the next gathering at the Global Wind Day?
– Until the next gathering, we want at least 400 MW of new wind power to be installed in the region, because the potential is there and so are the projects. Our politicians need to understand that wind is an inevitable source of clean energy, which can be used today without an excessive burden on citizens in terms of large incentive fees, as wind power is very quickly entering the zone of market cost-effectiveness even without incentives. At the next conference, we will talk about what the first auction went like and at which price wind power projects can be carried out, whether we are competitive in the market and what kind of incentives would make us even more competitive. I believe that at the next “Days of Good Wind” we will be happy to say that this year’s gathering created a synergy which produced good energy!