Could Eastern Europe blow away established wind rivals?

Experts claim Poland, Romania and Czech Republic now promise better returns for investors than established markets in Western Europe

James Murray, BusinessGreen19 Mar 2009
wind turbines

Eastern Europe is fast emerging as an attractive location for wind energy investors increasingly concerned about returns from more established markets in the West.

A combination of good wind resources, generous subsidy schemes improving energy infrastructure, and limited local opposition will ensure that the Eastern European wind energy industry will enjoy significantly faster growth than more established markets such as Germany and Spain over the coming years, according to industry experts.

While several high profile wind investors such as BP have already switched their attentions from Western Europe to more profitable projects in the US, experts are now convinced that some firms could also begin to migrate east.

Speaking to BusinessGreen.com, Fraser McLachlan, chief executive of wind project insurer GCube, which just secured the contract to insure Europe’s largest planned wind farm in Romania, said that the company had identified Eastern Europe as a huge potential growth area.

“We are very excited by Eastern Europe at the moment,” he said. “Places such as Poland, Bulgaria and the Czech Republic all have attractive [subsidy] tariffs, improving infrastructure and good wind regimes, plus the governments are hungry for these projects to happen.”

He added that the region was particularly attractive to insurers such as GCube because it is relatively easy to ship replacement parts into the region when turbines malfunction and the focus on onshore rather than offshore developments mean relatively low failure rates.

Subsidies for wind developers in countries such as Poland and Romania are between €20 and €30 greater per megawatt hour, according to Charlie Hodges of analyst firm New Energy Finance, who added that Western European energy giants Iberdrola, Dong Energy, Vattenfall and RWE Innogy were all showing increased interest in the region.

These companies are joining established local operators, such as Czech operator CZE, the company behind the 600MW Fantanele project in Romania, in what is fast becoming a wind energy gold rush.

According to figures from New Energy Finance, Poland now boasts 472MW of installed wind capacity and has a further 15GW at various stages of development, while Bulgaria’s capacity more than doubled last year to 156MW.

Hodges added that Romania now has “arguably the most attractive wind energy tariffs in Europe” and will see its installed capacity soar when the Fantanele project starts to come online later this year.

McLachlan argued that with more projects due to come online from 2011 it was conceivable that Romania could “overtake the traditional European wind energy leaders such as Germany and Denmark within the next five years”.

However, Hodges warned that while the long term returns from wind energy projects in the region appeared more attractive than similar projects in the west there were still a number of familiar challenges for developers to overcome.

“There are certainly short term issues such as overcoming grid connection problems, while some of the banks have been burnt recently by lending in Euros to projects that operate in local currencies,” he said. “But the fundamental forces in the market remain very attractive, particularly when you consider that energy prices in Easterm Europe are converging with those in the EU 15 [group of original member states].”

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