April 13, 2024

Building new wind and solar projects is increasingly difficult, but this German village may have the answer

Sprakebuell is something of a model village for the energy transition – with an above-average number of electric cars, a community wind farm and renewable heat from biogas.

ANNOUNCEMENT

The gusts of wind that cross the agricultural region of northern Germany bring a lot to the village of Sprakebuell: sea fog and rain, the occasional migration of storks and the faint smell of manure in the newly fertilized fields.

And perhaps best of all, money – from the sale of electricity generated by the wind turbines that dot the flat, green fields that stretch to the North Sea. A slice of the money goes to the residents themselves, with local buy-in making this windy agricultural enclave near the border with Denmark a showcase for ways to advance renewable energy projects.

It’s not easy when the headwinds of the post-pandemic global economy – including high interest rates and inflation – are holding back often costly growth. investments in wind, solar and other forms of clean energy.

This is slowing the growth of renewable energy needed to combat climate change, just as it needs to accelerate to meet an ambitious goal reached at the UN climate summit to increase clean energy capacity.

Renewable energy paying for community projects

Sprakebuell, a three-street cluster of elegant single-story houses where tractor traffic outnumbers cars, has seen new life and greater prosperity thanks to renewable energy.

Small as it may be, some of the German city’s practices offer lessons that can resonate globally.

The dividends of citizen-owned wind farms don’t make the recipients rich. Instead, the money is a little extra touch, a financial buffer “which is very important for us because it gives us a certain freedom,” said Astrid Nissen, 44, who with her husband runs a dairy farm with 150 cows on the outskirts. of the village.

Milk prices fluctuate wildly, but the steadier income from wind farms is “something we can rely on, something we can use to plan,” she said, with occasional shouts coming from the barn behind her.

The whoosh, whoosh, whoosh of the turbines – inaudible in the village center but noisy up close – contributes around €400,000 a year in taxes. This paid for a new playground, a bike path and even free piano lessons for Sprakebuell’s children.

When it comes to new projects, global obstacles include higher financing costs that make them more expensive to finance, high prices and clogged supply chains for wind turbines and blades, and a “not in my backyard” resistance to parks. wind.

Interest rate hikes by the U.S. Federal Reserve, European Central Bank and others have economists at University College London warning of “green collateral damage” and calling out high borrowing costs intended to combat inflation as ” terrible news for the green transition.”

Consulting firm Wood Mackenzie found that “clean energy has witnessed one of the most difficult years in its short history,” with calls from the government for more generating capacity. not completed in Germany, Spain, United Kingdom and Italy.

The situation is even more dire for lower-income countries in places like Africa, where borrowing costs for the higher initial investment required for renewables were already high and have increased further.

How do Sprakebuell community wind farms work?

In Sprakebuell, the number of family farms has decreased from 26 in 1960 to the largest three today. It was about to be merged with a neighboring village 30 years ago. Now, it is home not only to farmers, but also to people who work half an hour away in the city of Flensburg.

Sprakebuell residents put a 20% down payment on the construction of a wind farm and local banks lent the remaining 80%. The first wind farm had 24 participants; the last one had more than 150 as the news spread.

Nissen and her husband started with an investment equivalent to just over 5,000 euros more than 20 years ago. The dividends helped pay for a new calf pen, a front loader to haul animal feed and two workers.

“That means sometimes we have a weekend free, sometimes we have a holiday – and without staff this is impossible,” she said.

Not everyone participates, but all residents see benefits. There is a sharing electric car in the city center that anyone can book via a smartphone app for 2.50 euros per hour.

ANNOUNCEMENT

A small grocery store has opened with an attached cafe and a restaurant serves lunch daily – signs of new purchasing power. Some similarly sized villages in the region have neither.

“Renewable energy projects are visible in the landscape and for me it is very important that local people identify with these projects,” said Christian Andresen, whose company, Solar-Energie Andresen GmbH, developed the wind farms and solar installations.

What’s holding back renewable energy projects?

Andresen’s projects illustrate factors that can advance renewable energy. One is the of the German government guaranteed price for electricity over 20 years, which gives banks confidence that they can lend and be repaid.

Another is low-interest-rate loans from the government development bank, KfW. But even those rates have increased, from 1% a few years ago to more than 5%, Andresen said.

High interest rates hurt renewables much more than fossil fuel projects. Most of the cost of renewables is upfront in the purchase price of wind turbines or solar panels, while the costs to operate them going forward are negligible – the wind blows and the sun shines for free.

ANNOUNCEMENT

This makes the cost of the loan a much more important factor in whether the project will be profitable.

It’s the opposite with fossil fuels: a natural gas-fired power plant is relatively cheaper to build, while the real costs arise later when purchasing the gas.

Added to this is inflation, which has increased the cost of building facilities, and equipment shortages due to congested supply chains.

These were some of the reasons cited by Danish company Orsted when it canceled two large wind farms off New Jersey. Swedish utility Vattenfall has also halted an offshore project in the UK.

The S&P Global Clean Energy Index of stocks of companies with clean energy-related businesses fell 26% last year, even as broader market indexes reached record levels.

ANNOUNCEMENT

In the U.S., higher rates have been a “speed bump” for some renewable energy projects, said David Shepheard, North American energy and utilities partner at global consultancy Baringa.

“Returns are depressed in the current rate environment” but are improving, he said, with the Federal Reserve expected to cut rates three times this year.

The overall picture is nuanced, with renewables slowdowns by major oil companies easing supplier logjams, while domestic content requirements for U.S. subsidies add to supply chain delays for some projects.

‘When I share, it’s a pleasant noise and a beautiful view’

In sub-Saharan Africa Africa, where half the population does not have access to electricity, renewable projects face even steeper challenges in terms of financing. With lots of sunshine, solar power is an obvious option, but Africa’s 1.2 billion people have a fifth as much solar power as cloudy Germany.

Borrowing costs are much higher than in rich countries, while government subsidies are uncertain due to political upheaval and countries already deeply in debt.

ANNOUNCEMENT

In Nigeria, where blackouts are a daily occurrence for about half of the country’s 213 million people, about 14 solar projects have been halted because finances are not paying off.

The government has been cautious about World Bank credit guarantees that would make projects bankable, worried that it could be forced to pay for power even if the grid is unable to supply it.

But without that, “no one will develop or finance a project with government subsidy because it might dry up,” said Edu Okeke, managing director of energy company Azura, a stakeholder in the Nova solar project in Katsina state in northern Nigeria.

The answer may be to raise the price of electricity – which the German government did last year by 25 percent. This also helps secure financing. Another is subsidized interest rates or credit guarantees as part of developed countries’ efforts to help poorer nations combat climate change.

AND where locals own Instead of large energy companies, objections to the appearance of wind farms, shadows or strong winds tend to disappear, said Andresen, the wind energy developer.

ANNOUNCEMENT

“When I participate, it’s a nice noise and a beautiful view,” he said.

Leave a Reply

Your email address will not be published. Required fields are marked *