The experts' advice

Peter McArdle, head of renewable energy group Grant Thornton, and Michael Walsh, chief executive of the Irish Wind Energy Association give their views.

Peter McArdle:

Patrick is in good company, as many windfarm developers currently face these same issues. The passage of time has not been good for Patrick in this context, and in the first instance, Patrick must surround himself with experienced financial, engineering and legal advisors; advisors who have experience on the ground in terms of delivering built windfarms.

Each of the above issues, though challenging, can be overcome if tackled properly. To start with the first issue, Patrick should be able to secure a time extension to his planning permission on the basis of "Substantial Works" completed on his windfarm. Patrick needs his advisors to liaise with the local authority in order to establish what their definition of Substantial Works is. This can vary from local authority to local authority. Provided Patrick carries out these Substantial Works (and this does not necessarily mean works in the ground), Patrick should be entitled to a time extension of at least 18-24 months, as the delay in having the windfarm built was due to circumstances outside his control.

Concerning the second issue, Patrick knows with absolute certainty that he will get a grid connection offer. While he does not know the exact terms and conditions attaching to the offer, an experienced technical advisor will be able to estimate the key terms concerning price and delivery. Patrick should now be directing his team of advisors to talk to potential lenders. This is so a preferred lender is keyed-up to lend the 10 per cent deposit required, and to issue the Capacity Bond of €10,000 per mega watt to be installed. This all has to be executed within the tight timeframe, so that Patrick can be in a position to accept the grid connection offer once received.

Once Patrick receives his grid connection offer, he will be entitled to apply to the Department of Communications, Energy and Natural Resources for a Letter of Offer in respect of the Renewable Energy Feed in Tariff (Refit) State sponsored competition.

Patrick should have the application ready for submission on the day he receives his grid connection offer, as the quantum of windfarms which can avail of Refit is limited (1,450MW). The Letter of Offer will confirm to any licensed electricity supplier that in return for entering into a Power Purchase Agreement to purchase the output from the proposed windfarm, for 15 years, the supplier will be entitled to receive a Refit payment, which, to all extents and purposes, will amount to 15 per cent of the price paid for the power.

If Patrick aligns himself to an advisory team that already has several projects qualifying under Refit, then Patrick is increasing his chances of getting a better deal.

The turbine industry is currently a seller's market, and turbine manufacturers are totally flat out. The deal size is ever increasing, but some turbine manufacturers have not forgotten their roots and are still willing to sell to small projects. Key, however, to Patrick, is having on board an experienced, reputable, multi disciplinary team of advisors, as any turbine manufacturer who picks up the phone from Patrick will need some certainty that his project can be banked.

My experience is that some of the leading turbine manufacturers will take a 5 per cent deposit now to secure turbine delivery in 18 months time. Patrick needs to seriously consider making this payment if he wants delivery in early 2009. Also, if structured correctly, the 5 per cent deposit can be part refundable.

Finally, Patrick's energy capture report off a P90 probability is estimating a load factor of 27 per cent within the planning envelope of 75 meters. He should have the energy capture report commissioned within a planning envelope of 79 meters. This should lend itself to a 10 per cent improvement in load factor. If this is the case, Patrick should make a submission to the local authority for a minor amendment to the existing planning envelope.

In addition to the above, Patrick should consider raising BES funds in late 2008, requesting his financial advisor to prepare order of magnitude financial models, and start attending to the planning conditions such as noise monitoring, cash contribution to local authority, bonding requirements and access issues which have attached to the original Grant of Planning Permission.

Michael Walsh:

Ireland is fortunate to enjoy one of the best natural wind environments in the world. This gives us the potential to supply a significant part of our energy needs from a clean indigenous fuel. Currently there is significant investor interest from large and small players in harnessing this resource.

However, as Patrick and Maura have found, it can be quite difficult to bring a project from concept to reality due to a range of global and local challenges. Urgent action is needed to address these challenges and ensure we remain on the path towards our renewable energy targets.

Proper communication and consultation with neighbours is an essential element in the development of any infrastructure, including wind farms. Effective engagement allows developers to properly understand and address any concerns raised. The Irish Wind Energy Association will shortly publish a set of best practise guidelines for the Irish Wind Energy Industry that emphasise the need for consultation with the community.

The planning and connection processes are essential to ensure efficient overall development. Clearly some projects will not meet all the relevant criteria and won't go ahead.

However, as Patrick has found, some projects that meet all criteria may struggle as all the relevant permissions and agreements fail to align. This is likely to be a serious problem for Patrick and he should get some expert advice on the best way to try to overcome it. There are several consulting companies providing excellent advice to developers in Ireland. However, there is currently no easy answer for this dilemma and the issue of expiring planning permissions needs to be considered urgently to avoid sound projects, that meet all criteria, being shelved due to administrative reasons.

As global investment in all energy equipment, including wind turbines, has accelerated there has been a significant increase in the price of this equipment. The shortage is such that smaller developers may even struggle to get an order accepted by the manufacturers. It is essential for Patrick to start discussions with the manufacturers immediately to give himself the best chance of getting a turbine on order if he manages to overcome his other obstacles.

Private investors in the wind energy sector are keen to move forward with their projects, but their commitment has to be matched with the delivery of the substantial network infrastructure that is needed to allow continued growth of our renewable economy. The start of the CER's Gate 3 process, which kicks-off the next phase in Ireland's drive to increase the power contribution from renewable sources, is very welcome. It is vital that this process emphasises the need to deliver the infrastructure required to deliver on national renewable energy targets.

It is clear that wind power is playing the central role in meeting our national renewable energy targets. However, while many investors are keen to press forward with renewable developments, as Patrick and Maura have learnt, there are still significant obstacles to overcome.