The invisible force propelling the green energy
Whether a new type of solar panel or a biochemical process that turns algae into fuels, advances in renewable energy is often represented as a triumph of technology and innovation.
But when it comes to constructing large scale renewable energy project, the most important ingredient is a very attractive service that has existed in the world for centuries. These are loans or bonds with long maturities, ie that can be paid in five years or more, and are a crucial component in ensuring the success of start-up companies and infrastructure projects in general .
For renewable energy projects, however, the long-term financing is often the difference between an idea that remains on the drawing boards and one that really generates energy.
Most new concepts of energy generated from the start in equipment and facilities costs.
To compete with fossil fuels, which benefit from an established infrastructure and widespread economies of scale, renewable energy projects often require a combination of incentives and long-term contracts that allow the costs are spread over time.
Even with grants and contracts in place, the majority of green energy projects in need of long term loans with attractive terms that will generate interest among investors. Such is the case of wind energy projects being carried out in the state of Mexico, Oaxaca.
Last December, the IDB approved $ 102 million as partial funding of two projects, which produce a total of 318 MW of electricity when fully operational.
“Funding is literally the key to the success of this project,” said Rachel Robboy, IDB team leader Eurus wind project, a reporter for the blog Green Inc. of New York Times last December. “Without a long-term financing with affordable interest rates, the project is not financially viable in terms of shareholder return.”
Strategy Wind Power Generation in Mexico
The projects are part of Mexico’s strategy to diversify its energy supply while reducing emissions of greenhouse gases, and generates employment and income in low-income rural communities. This strategy was formulated in the legislation passed in November 2008. The plan includes the Special Programme for the Development of Renewable Energy and the Special Climate Change Program, which will contribute to achieving the country’s goal of reducing by 50 percent by 2050 emissions level reached in 2000.
The Board of Executive Directors approved a loan of U.S. $ 50 million for wind farm Eurus of 250.5 MW. The project is being driven by Acciona Energy Mexico (AEM), a wholly owned subsidiary of Acciona Energía SA of Spain. This is by far the largest wind power complex has been built larger than in Latin America and the Caribbean.
Mexico’s Cemex, a global producer of cement and concrete, is a member of Eurus project and will buy all its electricity under a purchase agreement and self-supply power for 20 years. Cemex expects Eurus and other self-supply projects to satisfy a significant percentage of the energy needs of its operations in Mexico.
The IDB will also provide an additional loan of up to $ 30 million from the Clean Technology Fund Climate Investment Fund (CIF, according to its acronym in English) for the Eurus project whose total cost will be about $ 600 million. It is anticipated that additional funds from long-term financing for the project approved by multilateral financial institutions, development finance institutions and commercial banks.
The Bank approved another loan separately for up to 280 million pesos (approximately U.S. $ 21 million) to finance a wind farm of 67.5 MW Power is developing the Valley of Mexico, S. de RL de CV, a subsidiary of EDF Energies Nouvelles SA of France. Four subsidiaries of Wal-Mart de Mexico, a major national retail chains, will buy the electricity produced by this project under an agreement of purchase and self-supply power for 15 years, as part of the goal of Wal-Mart to use 100 per cent renewable energy in its operations in Mexico.
The IDB loan, along with appropriations for multilateral and bilateral lenders, could cover up to U.S. $ 103 million total project cost of EVM, estimated at U.S. $ 190 million.
The Mexican government estimates that a total of about U.S. $ 5 billion will be spent to build these new wind farms in 2012, and will be able to meet about 4 percent of the country’s electricity demand. The construction of these facilities will generate about 10,000 jobs directly and indirectly, and about 374 permanent jobs will be created for operation and maintenance.
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