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p / 0 8 OPINION p / 1 4 FINANCE p / 2 4 WIND p / 3 0 GREEN BUILDING p / 3 8 INNOVATION p / 4 4 COMMUNITY p / 5 0 BIOMASS p / 5 6 WASTE TO ENERGY p / 6 6 LEGAL p / 7 4 COAL p / 7 6 EVENTS CALENDAR p / 7 7 SPOTLIGHT PETER HOGREN, PART OF THE CLEANTECH COMMUNITY IN POLAND
ON THE COVER: Catch Ewa on her way to work, by boat. More on page 18
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Cleantech is a
tango between
environment
&
business
Cleantech EDITOR WOJCIECH KOS´C´
PUBLISHER PARKER SNYDER
WRITERS JO HARPER WOJCIECH KOS´C´
ANALYSTS EVA-MARIA MACIAZEK ANDERS FRISK GRZEGORZ LANG
PHOTOGRAPHY
Dear Colleague, This morning, my editor and I had breakfast with Joanna Bensz, business development director for PM Group. Over coffee, I asked her if her company was looking at sustainability as a driver of growth. She said yes - PM Group, whose parent company is based in Ireland - sees more and more environmental business coming in water, waste, transport & energy. Cleantech is mainstream elsewhere. In Frankfurt, London, New York, Tel Aviv, cleantech is a buzzword for the tango between environment and business. Smart, sexy companies doing what’s right. The push to create a sustainable ecconomy has spurred the development of smart grid, electric cars, wind energy, biofuels, and power from waves. But you don’t have to leave Poland to find cleantech companies: Ammono, on the outskirts of Warsaw, is developing the next generation of semiconductor crystals. Carbon Friendly Solutions, also based in Warsaw, pays farmers to plant trees. Ester Eko aims to adapt gassification for the Polish market, in Włocławek. What drivers of change are motivating growth in your business? Is the environment one of them? Regards,
Parker Snyder Publisher, Cleantech Poland
4 | CLEANTECH | Q1 2012
KASIA SNYDER SZYMON SZCZES´NIAK JOACHIM COHEN ISTOCKPHOTO.COM
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ART DIRECTION AGATKA KUBIEN PAIGE WEIR
PRINTER DRUKARNIA BELTRANI
TABLE OF CONTENTS
CONTENTS
18
p/2 8
OFFSHORE, IN SEVEN YEARS? p/32 Skanska, queen of green p / 3 6 Green building pipeline
32
p/4 0 Ammono, the crystal innovator p / 4 4
INTRODUCING THE CLEANTECH COMMUNITY p/50 Połaniec 205 MW (She’s a beast) p/52
WHY BIOMASS IS NOT WORKING
p/14 The role of private equity
p/58 Waste not want not, meet Ester-Eko
p/16 What’s wrong with the EIB? p/18
EWA GRZECHNIK, AN INVESTOR’S STORY p/2 4 List of Poland’s largest wind farms
p/66 TOP 10 Cleantech law firms p/76
EVENTS CALENDAR p/7 7 Anders Frisk, on ground-source heat pumps
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6 | CLEANTECH | Q1 2012
THE AMERICAN CHAMBER OF COMMERCE (AMCHAM) is a business organization that serves and promotes its member companies. AmCham fosters positive relationships with the government and promotes the free market spirit for the benefit of business. Ul. Emilii Plater 53, 00-113 Warsaw. www.amcham.com.pl BSJP TAYLOR WESSING is an international law firm with a focus on cleantech. The legal team assists cleantech investors with a range of services, including real estate transactions and environmental permitting. Al. Armii Ludowej 26, 00-609, Warsaw. www.taylorwessing.com CLEANTECH POLAND (CTP) is media and consultancy for sustainable business. CTP connects capital to technology in Poland’s conversion to a low carbon economy. The Cleantech magazine is part of a portfolio which includes the Shale Gas Investment Guide. Ul Pustelnicka 48/22 04-138 Warsaw. info@cleantechpoland.com ENVIRONMENTAL INVESTMENT PARTNERS (EIP) is a financial advisory and investment boutique focused on renewable energy and clean technology. EIP has backed a number of cleantech companies, including: Esperotia, GoldenSUN, Greenfield Wind, Greenvironment and Green Assets Inwestycje. Ul. Piaskowa 12C, 05-510, Konstancin. www.eip.com.pl PWC provides cleantech companies with services in assurance, advisory and tax & legal. A global services company, PwC has been in Poland for 20 years. Locally, there are 46 partners and more than half of employees are female. Al. Armii Ludowej 14, 00-638, Warsaw. www.pwc.pl
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PA RT N E R’ S PA G E
“This magazine would not have been possible without the support of Adam de Sola Pool, Poland’s maverick of cleantech investment.” - Parker Snyder, Cleantech Poland
OPINION Parker Snyder | Cleantech Poland
HOT
RES Segments HERE’S THE BASICS ABOUT COAL: hard coal has a higher caloric content but availability of Poland’s deposits could be limited. Brown coal (lignite) is of a poorer quality with higher CO2 emissions. Poland’s coal reserves however are plentiful, and are estimated to last at least 100 years at today’s production rate. But Poland, along for the ride in the EU, needs to transition to a lowcarbon economy. Over the next decade there should be a noticeable shift away from coal toward renewable energy, which Polish law defines as energy from biomass, biogas, biofuels, wind, solar, geothermal and waste-to-energy. GOING ALONG, GRUDGINGLY The push toward renewables comes from Brussels. As a member of the European Union, Poland must transpose EU directives into national laws, and adopt an energy policy that would promote renewable energy while phasing out fossil fuels. The consequences of the EU approach have taken on the form of the EU’s emissions trading system (EU ETS), a consequence of the Kyoto Protocol which requires Annex 1 (rich world) countries to reduce their carbon emissions. Europe acts as a block, so Poland gets rolled into those commitments. From 2013 onward, EU ETS will give incentive to low-emissions sources at the expense of carbon-intense power production. Being dependent on coal, Poland will suffer more than other countries. A push toward renewable energy also comes from a liberal belief that Europe – as part of the rich, old indus-
8 | CLEANTECH | Q1 2012
Poland is a coal country, where about 90 percent of primary energy production comes from either hard coal or lignite. But that’s changing, quickly.
THESE VEINS RUN BLACK WITH COAL
KASIA SNYDER
“Everywhere, renewable energy is more expensive than fossil fuel based energy sources, so renewable energy production depends upon subsidies.”
OPINION
trialized world – has a moral obligation to move the global economy away from fossil fuels toward renewable energy. Otherwise the human race may face bleak alternatives posed by climate change. Specifically, the 2009/28/EC directive places a legally binding obligation on Poland to produce at least 15 percent of its primary energy from renewable resources by 2020. Current renewable energy production is about 2 GW, or approximately 7 percent of power production in Poland. Although renewables have grown in the overall mix in recent years, it is unclear whether Poland will meet its legally binding obligations. CHALLENGES TO DEVELOPMENT For one, there is little public support for renewable energy, in contrast to shale gas and nuclear, which enjoy broad-based political support and face relatively little public opposition. There’s also a cultural reluctance to embrace renewables, and for this reason, utilities have a propensity to defer tough choices which could result in electricity price hikes. Everywhere, renewable energy is more expensive than fossil fuel based energy sources, so renewable energy production depends upon subsidies. In Poland, the subsidy is provided via certificates of origin (as opposed to feed-in tariff system). The certificates of origin have been sufficient to develop the wind market and are the government’s instrument of choice to develop biogas, biomass and co-generation of heat and power. But there’s some uncertainty if certificates really work. Poland’s certificate system is based on a number of
color-coded certificates, planned to be phased in and out over the next decade. A better - altough more expensive - solution could be a decade-long feed in tariff, which rewards electricity production at least cost, and doesn’t seem to favor one technology over another. On the other hand, the renewable energy sector does make calls for the regulatory framework to differentiate between support for relative cheap and simple biomass installation and more expensive and technologically advanced wind farms. It’s not certain that the financial markets are robust enough nor willing to take on the risk to develop renewables in Poland. For instance, the wind sector alone needs about €10 billion to meet its goal of 10 GW by 2020 (current production is around 1GW). Such a huge amount of financing is needed at a time when Polish power infrastructure is severely depreciated and Polish utilities have limited capacity to make new investments, as banks will only loan on a fixed multiple of EBITDA (earnings before interest, taxes, debt and amortization).
Consultancy firm McKinsey and Company estimates the amount needed to replace or rehabilitate Poland’s aging power infrastructure at €35 billion until 2030. Including development of nuclear and renewable energy, this total could come to €50 billion. That money isn’t going to come from Central and Eastern Europe (CEE), whose capital markets are less mature than those in Western Europe. Private equity will likely come from financial markets in New York, Frankfurt and London – bankers, venture capitalist and institutional fund managers who see electricity demand growing in CEE and political will coalescing around a carbon-free future. It’s also important to understand Polish renewable energy market in the context of other developments: shale gas and nuclear energy. Poland could have a 350 year natural gas supply in shale rock formations. If shale gas production reaches commercial levels, this could change the politics of renewable energy, as Poland could cut its emissions by diversifying into natural gas.
“The best segments for investment are waste-to-energy and wind power.”
For the full text of this article and to find out which RES segments are the fastest growing, go to CleantechPoland.com and click on “Analysis.” You can also use your smartphone to scan the QR Code on the left.
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MAKING THE NEWS Some of our favorite stories from H1 2012
September 1, 2011 POLAND TO ASSESS COST OF CLIMATE PACKAGE Following a request from trade union Solidarity, Poland’s Monetary Policy Board (RPP) is going to carry out an analysis of the costs that Poland will bear having to implement the climate package. RPP said that it would commission the analysis from the National Bank of Poland’s Economic Institute. It will be the first such an assessment carried out by a state institution. The climate package is a set of measures to mitigate the effects of climate change that the European Union member states agreed upon. Part of the package is transition to full auctioning of CO2 emission permits as of 2013, as opposed to granting them for free. RPP will analyze the climate package’s impact on price growth and the impact of the price growth itself on the Polish economy in the long run. The analysis is said to be ready before the UN climate conference in Durban, South Africa, this December. Solidarity’s call was a follow up to prime minister Donald Tusk’s earlier pledge to establish a body to work our proposals for revision of the European Union’s climate package. According to Solidarity, implementing the package will cause a considerable increase in energy and heating prices, which will worsen the condition of entire economy and put a stress on household budgets.
September 15, 2011 ADM TAKES OVER ELSTAR OILS Agricultural processor company Archer Daniels Midland (ADM) signed an agreement to purchase a majority share of Elstar Oils. A Warsaw-listed company, Elstar is a leading Polish manufacturer of quality refined vegetable oils and fats for the food industry, and biodiesel for the energy market. The PLN 313 million (€72 million) purchase is subject to approval by relevant antitrust authorities. Elstar, located in northern Poland, operates a rapeseed crushing, refining, solid-fat packaging and oil bottling facility in Czernin and a fully-automated biodiesel facility in Malbork, with a production capacity of 150,000 tonnes of biodiesel annually.
September 19, 2011 ENERGA STARTS €1.6 BN TENDER FOR COAL-FIRED INSTALLATION
10 | CLEANTECH | Q1 2012
Gdansk-based energy utility Energa announced a tender for the construction of a new coal-fired plant, on location in Ostroł´ka, 130 kilometers northeast of Warsaw. The new installation will have a capacity within range of 8501,000 MW, Energa said in the tender announcement. Energa estimates the tender value at PLN 6-7 billion (€1.39-1.61 billion). The company said that it would now take it until 2012 to put the financing for the investment in place. About 70 percent of the capital needed to develop the new installation will be secured by debt while the remainder will be provided by Energa itself. The tender process that will single out the contractor for the new power plant will take about a year, Energa also said. The new power plant is expected to go online in 2016 or 2017. In October 2010, Energa signed a 20-year contract for coal supplies for the new installation with Lubelski W´giel Bogdanka coal mine. The contract is worth PLN 12.5 billion (€2.87 billion).
October 4, 2011 IKEA GROUP BUYS WIND FARMS FROM MARTIFER IKEA Group acquired two operational wind farms from Martifer Group, totaling 28 MW in capacity, and committed to buy a third wind farm, of 26 MW, yet to be developed. The volume of the transaction was PLN 385 million (€87.3 million). The operational wind farms are located in the southern part of Poland, in the Rzeszów province near villages Bukowsko and Ł´ki. The development of the third wind farm will be in a nearby location of Rymanów. The sale of Rymanów project will be finalized on the project’s completion and its connection to the grid, which is expected during 2013. IKEA Group will pay PLN 282.5 million (€64 million) now for the two operational plants, and the remaining amount in 2013, when the Rymanów project goes online. The acquisition of the wind farms will enable the production of electricity covering about 50 percent of IKEA Group’s electricity use in Poland, the company said. IKEA is also investing in photovoltaic and solar panels. Three IKEA stores in Poland – in Łódê, Gdaƒsk and Kraków – feature solar panels on their roofs to heat the water. In addition, the IKEA store in Łódê and distribution centre in Jarosty use ground heat exchangers in combination with heating pumps for air conditioning.
FINANCE
Martifer, via its Polish renewable energy company Martifer Renewables, will keep pursuing other wind projects in Poland, the company told Cleantech magazine.
October 25, 2011 EIB FINANCES TWO TAURON PROJECTS The European Investment Bank (EIB) provided two loans totaling PLN 510 million (€128 million) to utility company Tauron Polska Energia to upgrade electricity generation in southern Poland. The first loan is PLN 300 million (€76 million) to finance the construction and commissioning of state-ofthe-art high-efficiency hard coal-fired combined heat and power (CHP) unit and associated infrastructure in BielskoBiała Power Plant. The second loan, of PLN 210 million (€53 million) will support the construction and operation of a new biomass boiler at Jaworzno III Power Plant. According to the EIB, the financed projects will contribute to a higher efficiency of electricity and heat generation, and an increased usage of renewable energy resources. The new CHP plant will have a significantly higher efficiency, approximately 90 percent efficient, against 60 percent for the existing unit. The primary energy savings of the new unit have been estimated at over 25 percent. The other loan will support the construction and operation of a new biomass-fired boiler with a capacity of 50 MWe and 45 MWt and the refurbishment of a steam turbine. The electricity will be generated purely from renewable resources.
October 27, 2011 CEMEX FURTHER REDUCES ITS COAL USE
The Association of Cement Producers in Poland says that the cement sector has replaced 46 percent of its coal consumption so far. The most popular replacement for coal is refuse-derived fuel (RDF), consisting mainly of combustible components of municipal waste such as plastics or biodegradable waste. Cement factories used 700,000 tones of RDF last year, with growth to 1.5 million tons predicted shortly.
October 27, 2011 GREENVIRONMENT AND DALKIA POLSKA TO WORK ON CHP PROJECTS Greenvironment Poland and Dalkia Polska have teamed up to develop combined heat and power plants (CHP) based on Capstone microturbines. Dalkia will provide its own sales network, service team and operations facilities to market, operate and service Greenvironment CHP’s in Poland. Greenvironment will deliver the technology – the company is Capstone’s distributor in Poland – and support on specification as well as commissioning. Both companies will first establish a pilot site in order to explore the best technological and economical opportunities. The initial target projects are natural gas installations of up to 1 MW electrical installed power. Larger installations for industrial usage could be targeted at a later stage. “In Poland there exists a 3,000 MW base load potential that needs to be replaced with distributed energy supply solutions by 2020 and Dalkia is Poland’s number 1 heating market operator. We are joining forces with the biggest energy service company in Poland and look forward to a fruitful business relationship,” said Sebastian Hampel, managing director of Greenvironment Poland, as quoted in the company’s press release.
Cement manufacturer Cemex Polska will cooperate with utility company Polska Grupa Energetyczna (PGE) in development of a wind farm so as to further reduce coal use in cement production, daily Rzeczpospolita reported. The PLN 100 million (€23 million) Cemex-PGE wind project will be located in Chełm, eastern Poland. Cemex will lease land from PGE to develop the first phase of a wind farm with seven turbines, their total capacity of about 17.5 MW. The project will go online in 2015. Cemex has cut coal use in two of its Poland-operating cement factories by two-thirds to 100,000 tons annually.
BUSINESS INTELLIGENCE REPORT www.cleantechpoland.com/newsletter/ DO YOU HAVE NEWS TO REPORT? WRITE TO THE EDITOR WOJCIECH@CLEANTECHPOLAND.COM OR CALL (+48) 602 458 099
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To be praised
To be improved
GERMAN COAL UTILITY BUYS INTO WIND
CHALLENGES TO AUSTRIAN BIOMASS
STEAG, the fifth largest energy producer in Germany, is known for its efficient coal and gas fired power plants. But word on the street is that the company is moving into renewable energy in a big way. According to industry sources, STEAG is looking to buy developed or nearly developed wind farm assets in Poland. STEAG’s fully-owned subsidiary in Poland, SFW Energia, supplies municipal and industry end users with heat and electricity based on co-generation. According to press spokeswoman, Reglindis Pfeiffer, “SFW Energia aims to enter the market for for wind-based power generation by expanding its portfolio to include wind farms.” Why might that be? Healthy wind positions on a balance sheet are a hedge against future carbon price increases. STEAG has recognized this, while others, including Poland’s large coal-based utilities, have been slow to change. Instead of radically re-considering how they produce power, some have continued to appeal to the EU commission for a delay on emissions requirements. They should think again. Last year more energy generation was added from wind than any other source across the EU. As coal-fired power plants are being decomissioned, utilities like STEAG are beginning to recognize the returns promised by renewable energy. Biomass, biogas, mine gas, geothermal and wind STEAG gets our praise of the day for seeing the winds of change favor renewables.
The Austrian biomass industry has likewise bet that power production in Europe is moving toward renewable energy. But they didn’t consider rising costs when the economy gets sluggish. Owning a biomass co-gen facility is a real boon when the economy is cruising along. Inputs such as wood waste from furniture and pulp production are easily obtained, at good prices. But in 2009, Austria fell into recession (-1.7% in Q2). Wood waste from pulp and furniture became hard to come by. Less was produced as the economy grew sluggish. The cost of sourcing biomass skyrocketed, and less cash on hand meant loan conditions became harder and harder to meet. Austria can’t be blamed for a down economy, but they can be blamed for tying energy production to an input whose price is fickle. Buyer beware: biomass is based on a highly irregular commodity supply chain. There’s an irony here: the more growth, the more wood waste, the more appealing biomass plants are as an alternative to coal. But when an economy goes into recession, think again. The large biomgass co-gen facilities going online in Poland (Poaniec 205 MW), are based on wood waste from as far afield as Latin America. Financing institutions should think twice before they write those loan checks. As Austria has learned, wood isn’t cheap.
12 | CLEANTECH | Q1 2012
Environmental Investment Partners (EIP)
“We can fund up to €1 million, but to grow rapidly many companies need an additional €5-10 million. That’s why I would like to merge our local skills with those of a global fund so that we can offer follow on financing.”
ADAM DE SOLA POOL CTP: AS “PIONEER INVESTOR” IN CLEANTECH, CAN YOU TELL US ABOUT ITS EARLY DAYS?
CTP: WHAT DO YOU LOOK FOR?
AP: Companies with experience in commercializing and developing environmental or renewable energy projects or technologies; with clear business plans and historical financials but not necessarily with revenue streams; finally - companies with a desire to grow rapidly and looking to an IPO or getting sold. A very active sector is waste to energy. Frost & Sullivan recently said that the Polish waste collection market is
CTP: WHAT ABOUT INNOVATIVE TECHNOLOGY INVESTMENTS?
AP: Historically technology investments were less common in CE but now they are showing good growth. For example GoldenSun of Slovakia has just started selling a very innovative solar PV enhancement product that has a market potential circa €1 billion. In Estonia, Goliath Wind has a potentially disruptive wind turbine product. Greenvironment, has a unique delivery vehicle for its CHP turbines. Ammono, is a well known cleantech company. Telesto, has invented a game changing nozzle for extinguishing fires. So there are lots of up and coming technology investments. CTP: WHAT ARE THE BARRIERS TO YOU OR YOUR COMPANIES’ GROWTH?
AP: The traditional venture capital “valley of death” operates in CEE as well. We can fund superb companies up to €1 million but to grow rapidly many companies need an additional €5-10 million. I would like to merge our local skills with those of a global fund so that we can offer more than just start up financing. To do that requires a fund size of well over €100 million. We have worked with many large funds in the past so we are open to various modes of long term co-operation.
Country Commitments for RES Production WIND €13 bln
6.6 GW
4 GW 1.2 GW
Bulgaria Romania Poland
BIOGAS €3 bln
980 MW
195 MW 65 MW Bulgaria Romania Poland
SOLAR €1 bln 303 MW 260 MW 3 MW Bulgaria Romania Poland
2010 Actual
2020 Committed
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ADVERTORIAL
AP: We have been investing in or coaching environmental and renewable energy companies since 1998. We have founded or invested in 20 companies of which 18 are still in business. Among them, many have been listed or been acquired by larger strategic partners or both. For example in Poland, Praterm built a very successful network of district heating plants and then entered the Warsaw Stock Exchange and finally was acquired by Dalkia to become the core of its heat business. Similarly we provided expansion capital to PolAqua, later listed and acquired by Dragados. In Hungary we founded Organica and eventually sold it to Veolia. In Romania we founded GazVest that was the first private retail gas company in western Romania, and via our Continental Wind Partners (CWP) investment we helped create the largest onshore wind park in Europe at 600 MW. In the Polish wind sector we have helped to found a standalone 8 MW wind park in Lebcz, another company called Greenfield Wind and CWP.
currently €3 billion annually and will grow to €4.6 billion in 2017. A developer who can bring a project to the fully permitted stage will have no trouble selling it or financing its construction. EIP has invested in three renewable sectors: PV, biogas and wind and has more than tripled the returns on its investments. (See charts at right).
The role of private equity BY WOJCIECH KOSC
14 | CLEANTECH | Q1 2012
Apart from a handful of market behemoths, renewable energy is developing in a truly sustainable way: starting small, with private equity taking the risk that institutional investors or banks won’t.
PHOTOGRAPHY BY KASIA SNYDER
HOW MUCH IS €26 BILLION? It’s five percent of Polish GDP. It’s more than the Polish agricultural market was worth last year. It’s also eight-fold more than the Polish government’s expenditure for the environment, as planned in the 2012 budget. It also is what the Polish economy will have to absorb if it wants to meet the EU-imposed goal of 15 percent stake of energy from renewable sources by 2020. “While the government could supply some 20-30 percent of the total amount needed through support mechanisms, the rest will come from investors ready to take on risks of putting their own money into the business,” said Grzegorz WiÊniewski, chairman of the Institute of Renewable Energy (IEO). WATERING THE GRASSROOTS Energy from renewable sources is just one part of the cleantech economy in Poland, but it’s been most robust, thanks to private equity flowing into the sector and doing grassroots work before institutional investors step in. “Equity investors are important because all companies need startup capital,” said Adam de Sola Pool, partner at Environmental Investment Partners (EIP). EIP is an investment company with stakes in several companies including water treatment specialists Krevox and developer of made-to-suit wind parks Greenfield Wind. “What we’ve done is we put €600,000 into Continental Wind Partners. That gave them enough stability to attract other investors who brought another €21 million, which allowed CWP to develop the biggest wind park
in Romania and get started on the biggest wind park in Poland, the 160 MW Duszniki project, west of Poznaƒ,” Mr. de Sola Pool said. Some projects can get off the ground with investors’ involvement as little as €100,000. “Private equity players are bridging the gap that companies face during early stages of their projects, where the money needed is a considerable boost for the business, yet below the radar of banks or institutional investors,” said Mr. Pool. VC FUNDING Konrad Szwedziƒski, CEO of Clean Energy Venture agrees. “In early stages it’s all equity because the risks are too big to get leverage from institutional investors,” he said. Clean Energy Venture is a venture capital (VC) fund investing in renewable energy and clean technology. It was set up in February 2011 by its mother fund management company Spartan Capital.
growing, but, according to Mr. Pool, projects worth engagement are scarce. “I receive hundreds of projects to review every year. I turn down a very large majority of them,” he said. “If we do get involved, we allow companies that don’t have a revenue stream to move on. Such companies will eventually need much more capital to build a wind park or sell millions of units of their product. But they’re not going to get to that point without equity put into them earlier,” Mr. Pool said. EIP would typically invest anything between €100,000-500,000 to start. It then assists the company’s growth, adding capital of up to €3 million. “As the company needs it, we dribble money in, establishing our stake in it. Once the company’s capital needs exceed our upper threshold, we go out to third parties to prove the company’s case and get the big money,” Mr. Pool said. “We usually exit 5-7 years later by selling our stake to an investor or via an IPO,” Mr. Pool said. EIP has invested €30 million in environmental companies so far, bringing back €75 million in returns. “If we can’t double our money in a short time period or triple or quadruple it longterm - like five years - we won’t go in,” Mr. Pool said. According to Mr. Pool, the markets for cleantech in Poland are well on their feet, but only walking, not running. “The real boom is still ahead and we would like to be part of it,” he said. Mr. Szwedziƒski confirms his colleague’s point of view. “We’re eyeing two or three projects, totaling up to 150 MW,” he said. “Returns we’re looking for are say, PLN 15 million from an investment of PLN 3-4 million, typically after three years,” he added.
“I receive hundreds of projects to review every year. I turn down a very large majority of them.” “We provide financing or co-financing for projects between greenfield and the construction permit stages,” Mr. Szwedziƒski said. The main risks, according to Mr. Szwedziƒski, are environmental permitting, grid capacity issues, and regulatory risk. The risks, while significant, have had little impact on limiting the number of entrepreneurs wanting to give it a go in cleantech. The numbers just keep
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FINANCE
“Private equity players are bridging the gap that companies face during early stages of their projects.” -Adam de Sola Pool, EIP
Falling short Poland has never had such a wealth of public resources to finance its development. Too often, however, public money goes to preserve the status quo rather than make the cleantech economy happen here and now. EIB and EBRD may be to blame.
of potential
16 | CLEANTECH | Q1 2012
AT THE EUROPEAN WIND ENERGY Association conference in Warsaw last year, the keynote speaker said it was high time for the renewable energy to be on equal footing with other energy sectors. At the same time, he recognized that getting there without public support will remain impossible. But public support, key as it is for the development of a cleantech economy, is often lacking itself in its “green” credentials. To date there has been a steady flow of public money into sectors that the EU and its member states’ consider key stepping stones to the goal of a low-carbon economy. Besides support via governmentlevel tools like certificates of origin (the color-coded system to subsidize renewable energy production), public funding is flowing to member states through two major channels. The first channel is Europe’s two public banks, largely drawing funds from EU member states’ contributions: the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). Their mandate is to finance large investments in sectors such as power or transport.
PHOTOGRAPHY BY KASIA SNYDER
away from financing coal-fired energy installations but things have started to change. “We did finance a couple of coalfired units, namely Pàtnów II in ZE PAK or Unit 13 in Bełchatów, but we are no longer getting involved in such projects because we think that wind or biomass live up much better to the EBRD’s mandate,” said Grzegorz Zieliƒski, senior banker at the EBRD’s energy department. In total, Mr. Zieliƒski says, the EBRD’s involvement in financing clean energy in Poland now exceeds PLN 1 billion (€250 million). The EBRD and the EIB are closely watched by CEE Bankwatch, a watchdog NGO monitoring public spending, particularly in the context of power and infrastructure. According to CEE Bankwatch, both financing giants have a long way to go before their financial might gets in line with what Europe is heading for, in terms of sustainability. While CEE Bankwatch does acknowledge Mr. Zieliƒski’s pledge to keep away from financing what they consider “dirty power,” there are lots of questions to ask about EIB’s green credentials. For example, the EIB is pursuing a financing deal for the 2,000 MW Elektrownia Północ, a project from Kulczyk Investment Group. It has also financed a coal-fired CHP installation in Bielsko-Biała. “The EIB’s willingness to finance dirty projects contradicts policy agreements that the EU has committed itself to, like the climate energy pack-
WATCHDOG: “The EIB’s willingness to finance dirty projects contradicts policy agreements to which the EU has committed.”
AT THE CROSSROADS In Poland, certain lobbies are fighting among each other. The choice is to push back to the status quo, or to move forward to a diversified and efficient energy mix. The direction will partly depend on where the two main funding channels turn their output. Until recently, the EBRD didn’t shy
age or the energy road map 2050,” said Anna Drà˝kiewicz, climate and energy campaigner at Bankwatch’s Warsaw office. HELPING COHESION... NOT If other publicly-financed attempts to foster sustainability were more robust, the EBRD or the EIB would perhaps be put under more pressure. But even direct financing from the EU’s key financing tool, the Cohesion Fund, is lacking. According to Ms. Drà˝kiewicz, the renewable energy and energy efficiency projects received a mere 1 and 0.7 percent, respectively, from the Cohesion Fund for Poland. “There are goals that Poland needs to achieve by 2020, like a 15 per cent share of renewables in the overall energy mix, there also is the certificates system and a number of companies looking to invest here,” Ms. Drà˝kiewicz said. “With the Cohesion Fund being so small, a majority of projects that could be legible for this type of financial support, are not going to get it,” she said. The EU members are now agreeing to the level of financing from the Cohesion Fund in the next EU’s budget for the years 2014-2020.
EU Financing Shortfall (EUR million)
450 405 360
Applied for Available
315 270 225 180 135 90 45
Buildings 2008
RES 2009
RES 2010
SOURCE: CEE BANKWATCH/CLIMATE COALITION
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FINANCE
BY WOJCIECH KOSC
DREAM JOB: RIDING A BIKE TO CATCH A BOAT TO GET TO AN ISLAND
18 | CLEANTECH | Q1 2012
FINANCE
Swedish Capital,
Polish Spirit Most of us have to choose: the pleasure of a small village or the payoff of a big city. Ewa Grzechnik, who works on an island in the heart of urban Stockholm as an Investment Associate for Sustainable Technologies Fund, gets a bit of both. BY PARKER SNYDER PHOTOGRAPHY BY JOACHIM COHEN
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IT’S 7:45 A.M. The ducks are yawning. As the ferry pulls away, the hum of the city fades, and 26-year-old Ewa Grzechnik begins her morning commute, on a boat. For three years, Ms. Grzechnik has been taking the morning ferry to Skeppsholmen Island to scout cleantech deals, working in a team of seven ambitious, globallyminded investment professionals. Sweden, it seems, is the place to do that. In 2010, investors completed 39 equity deals – more than Norway and Finland combined. Glo, an LED lighting company, raised €18.2 million. Norstel attracted €10.5 million for a silicon carbide technology. Effpower received about €8 million for battery storage. The public sector supports cleantech investment too. Seabased, an early stage company doing research into wave power, raised some €14 million from the Swedish Energy Agency to build world’s largest wave power plant off the cost of southwest Sweden, together with Finish power giant Fortum. From her vantage point today, there’s little doubt in Ms. Grzechnik’s mind that a career in cleantech was a good decision. But the journey wasn’t so easy. Halfway into her master’s program, she considered quitting altogether.
“This was a shock, coming from an international university where everybody was very innovative. At one point, I was close to resigning, because I could not find my place there.” Then one day, Ms. Grzechnik attended an open lecture. The speaker was a young, eager professor from CERN, a particle physics research laboratory outside of Geneva. For the better part of an hour, he told a convincing story about a technology still far off in the future: nuclear fusion. “Fusion produces clean energy at low cost. It’s got nothing to do with fission. You use two nuclei and fuse them. In the end, you get enormous energy and no long-lived radiation. It’s an ideal but complex system,” Ms. Grzechnik explains. Inspired by the CERN professor,
one of her colleagues, André Heinz, who co-founded the fund in 2007. An sustainability expert by training, in the 1990s Mr. Heinz collaborated with American author Paul Hawken on the book Natural Capitalism. Held in high regard by eco-conscience professionals, the book helped to explain to Ms. Grzechnik and likeminded activists of her generation how it might be possible to achieve 75 percent greater resource efficiency at zero to negative cost. Out of college, she went to work for a cleantech fund, rather than an environmental NGO, thinking she could do more good for the planet by connecting capital to technology. “Ewa is one of the most conscientious, hard working, and fast learning people I have had the pleasure of working with; as a team, we depend on her diligence and insights when going through the many different steps of venture capital investing,” said Mr. Heinz. It’s her understanding of technology that helps her evaluate deals. For instance, Triventus, one of the fund’s seven portfolio companies, is a traditional renewable energy company focused on wind development with an aim to operate as a small utility. Innotech Solar, however, is a technological innovator, they classify and upgrade non-prime silicon solar cells for the photovoltaic industry. Smart, profitable companies define the core of the fund’s acquisitions. For a company to pass Ms. Grzechnik’s desk, they have to be revenue generating. Pemtec, who develops innovative ground source heat collector systems, grew its revenues 53 percent last year. Sweden, remarkably, has 20 percent of its residential heating market using GSHPs, a technology which uses the ground’s constant temperature to heat and cool. For every unit of energy input it delivers four units of heating and cooling. “Venture capital, for me, is the place to be. We are the only instance of unfiltered input about the earliest state of tomorrow’s startups. We have the great privilege of knowing who holds the horizon.”
“We are the only instance of unfiltered input about the earliest state of tomorrow’s startups. We have the great privilege of knowing who holds the horizon.”
I’M NO ECO-HIPPY Ms. Grzechnik had opted to study sustainability at Uppsala University in cooperation with Swedish University of Agricultural Sciences. But at one point she grew frustrated with the eco-idealism of her classmates. “At Uppsala, my understanding was that we were going to learn a lot about alternative development and new technologies, especially since the university is known for its Ångström laboratory working with PV research,” Ms. Grzechnik remarks. “To my surprise, my studies turned out to be more of philosophy classes. We spent hours and hours discussing humanity’s place in the universe and how we can save humanity by going back to a subsistence society.”
20 | CLEANTECH | Q1 2012
Ms. Grzechnik opted for courses focused on technology. She persevered, and finished her program. Her first placement, right out of college, was at Sustainable Technology Fund. It was a natural fit, since she could combine a Masters in Environmental Science with a Bachelors in Social Sciences. The fund picked her up as an intern. She’s been promoted twice. CLEANTECH IN SCANDINAVIA On the well-kept, tidy little island of Skeppsholmen, Ms. Grzechnik is reading through a deal. It’s midday. The icon on her desktop keeps pinging her with email. But she needs to focus. She’s reviewing the performance of a portfolio company, Triventus. It’s her job to assess the company’s quarterly performance to see if the company’s revenues are on target. The results of her research, she’ll discuss with
END OF RENEWABLES? This year, the online journal Salon. com published an article with a provocative thesis arguing humanity has just entered the era of “peak renewables.” The author tried to argue that because technologies like hydraulic fracturing have been improved over time, just now we have begun to recover gas and oil in tight rocks thought previously unrecoverable. The Salon thesis provoked outrage in environmental circles, whose critics counter-argued that fossil fuels are only cheap because our climate pays out of pocket. Nonetheless, the thesis seems emblematic of a point made by a University of Tulsa professor back in the 1950s: “Several times in the past we have thought that we were running out of oil, when actually we were running out of ideas. “I think we are far from ‘peak renewables.’ It’s hard to know what the EU will look like in 2030. I think more gas capacity will be deployed than most people expect, but renewable energy will become more costcompetitive and will be a good part of the future mix.” Ms. Grzechnik said. Regardless of the type of subsidy, most forms of renewable energy need public assistance to be competitive. But Ms. Grzechnik challenges the market efficiency of certain choices. Take for instance the debate taking place in Poland between feed-in-tariffs and certificates of origin (COE). Sweden, which has a COE system similar to Poland, paid around €500 million for its subsidies in 2010, which added about 4 percent to the cost of a typical utility bill. The same year Germany, spent over 16 times
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FINANCE
“Ewa is one of the most conscientious, hard working, and fast learning people I have had the pleasure of working with.” -André Heinz, Sustainable Technologies Fund
more on its feed-in-tariff system or about €8 billion. In Germany, that spending is more or less distributed evenly between the three dominant renewable energy sources: wind, solar and biomass/ biogas. But how does that spending translate to production? In 2010 there was about 55 nominal GW of renewable energy installed to date in Germany: 50 percent in wind, 33 percent in solar, and 11 percent in biomass/gas. But the system produced power in different proportions: 36 percent came from wind, 33 percent from biomass/gas and only 12 percent from solar. “You can see how the feed-in-tariff distorts the market because over 30
EWA SAYS A FEED IN TARIFF IS PREFERABLE BUT MORE EXPENSIVE
22 | CLEANTECH | Q1 2012
percent of the subsidy was spent on solar tariffs which provide only 12 percent of power,” Ms. Grzechnik explains. “But at the same time, the cost of technology, especially solar, has fallen, partly due to German investment. The feed-in-tariff works. There’s no doubt about it. It’s just expensive.” Ms. Grzechnik could be right. After all, Germany boasts both the highest renewable energy production (excluding large hydro) in the EU and the highest installed PV capacity in the world (over 40 percent of the market). “What I mean is that politicians need to know how much cost for renewable energy deployment their citizens can accept, so the subsidy is
sustainable in the long term. Swedish politicians deem 10 percent on top of their regular electricity bill is acceptable.” POLAND & CLEANTECH When Ms. Grzechnik thinks of cleantech, she doesn’t think of her native country. Not yet. She thinks of Israel, Frankfurt, Stockholm and Silicon Valley. But things are changing. Renewable energy installed to date is about 2,000 MW, mostly wind and hydro. The equity markets are growing. So in light of all that, is a return to her native country a possibility? “What I can say, absolutely? I’m not excluding the option.”
Greenfield
Wind
Here’s a new model for Poland’s wind business: early-stage partnering saves a year in development time and 50% of the cost.
PETER HOGREN CLEANTECH POLAND (CTP): TELL US ABOUT THE HISTORY OF GREENFIELD WIND.
CTP: WHAT MAKES GREENFIELD WIND UNIQUE IN ITS FIELD AND WHAT ARE ITS PRODUCTS?
GFW: Our wind development product is both cost and time efficient compared to traditional wind power development. We can deliver a wind park to a client in one year less time than a traditional developer and for 50 percent of the cost. Our product is custom-tailored wind power projects. We offer our clients the opportunity to enter into an early stage wind power project in Poland that is subsequently developed through a proven development model using Swedish quality metrics. The early stage projects that we offer to our clients have been fully assessed and de-risked up to a certain stage we call it Gate 3 – see prescreening in box at the right. This means that projects we can offer our clients have a completion success rate of close to 90 percent. The client joins Greenfield Wind in partnership from Gate 3 and has
CTP: WHERE DO YOU SEE GREENFIELD WIND IN A YEAR?
GFW: In one year Greenfield Wind will have ongoing partner deals of 400 MW and a project portfolio of another 300 MW ready for to sign partnerships. CTP: HOW HAVE YOU FINANCED YOUR GROWTH TO DATE AND WHAT ARE YOUR FUTURE FUNDRAISING PLANS?
GFW: Today the company is financed by its founders and business
angels. We are currently looking for growth capital to realize the full potential of our business model. We hope to provide an exit for these investors in 5 years time when we and our clients have constructed several wind parks. We should be able to deliver returns to our investors of about five times their investment.
GREENFIELD WIND BUSINESS MODEL PRESCREENING
Greenfield Wind: Includes site evaluation, land leasing, environmental assessments
6 months PARTNERSHIP BETWEEN GREENFIELD WIND AND PARTNER
DEVELOPMENT PARTNERSHIP
Greenfield Wind: Completing ground work, wind measurement and analysis, permitting, grid connections and community relations
Company Partner: Turbine selection, engineering, procurement, all technical specifications
CONSTRUCTION 42 months
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ADVERTORIAL
Greenfield Wind (GFW): Our Company was founded in 2009 by individuals coming from the wind business in Sweden and Poland. The first land leases were signed at the end of 2009 and are now under development. Today we have a portfolio of about 400 MW ready for partner deals and a team of nine people in Poland. So the growth of Greenfield Wind has been very rapid since the start.
a deep insight into the rest of the development. As the client has decision power at each subsequent stage of development, we are sure that we are crafting a wind park that exactly suits the needs of the client. This means that once a project receives building permit, construction can start immediately as no due diligence or rework processes are needed when financial close is reached. Currently we are developing over 100 MW in partnership with an Italian renewable energy company Relight. Discussions are also underway with several other corporate clients that want Polish wind parks that will offset their carbon footprint from their manufacturing activities. This sort of carbon offset wind park development was pioneered by firms like Google and IKEA and is now coming to Poland. We would like to see ourselves as IKEA of wind power in Poland: our product is locally produced, of good quality and elegant style but not expensive – and it is easy to assemble.
WIND FARMS INSTALLED As for Q2, 2011, there was about 1.2 GW of wind power installed in Poland.
Commissioned 2001 2001 2003 2005 2005 2006 2006 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011
Name
Location (commune, voivodship city)
Investor
Cisowo Barzowice Zagórze Lisewo I Nowogard Tymień Połczyno Jagniątkowo Łęgowo Lisewo II Łebcz I Łebcz II Kisielice Gnieżdzewo I Kamieńsk Darżyno Gnieżdzewo II Żurawica Karścino Koniecwałd (Sztum) Zajączkowo Wałcz Łęki Dukielskie Kończewo Tychowo Suwałki Gołdap/Wronki Inowrocław Mogilno Karcino Karnice Margonin Krzęcin Wielkopolska Dobrzyń Śniatowo Korsze Żeńsko Piecki Tychowo Lipniki
Darłowo, Szczecin Darłowo, Szczecin Wolin, Szczecin Gniewino, Gdańsk Nowogard, Szczecin Będzino, Szczecin Puck, Gdańsk Wolin, Szczecin Kisielice, Olsztyn Gniewino, Gdańsk Puck, Gdańsk Puck, Gdańsk Kisielice, Olsztyn Puck, Gdańsk Kamieńsk, Łódź Potęgowo, Gdańsk Puck, Gdańsk Żurawica/Orły, Rzeszów Karlino, Szczecin Sztum, Gdańsk Kobylnica, Gdańsk Wałcz, Szczecin Dukla, Rzeszów Kobylnica, Gdańsk Tychowo, Szczecin Suwałki/Jeleniewo, Białystok Gołdap/Świętajno, Olsztyn Inowrocław, Toruń/Bydgoszcz Mogilno, Toruń/Bydgoszcz Kołobrzeg, Szczecin Karnice, Szczecin Margonin, Poznań Krzęcin, Szczecin Kleszczewo/Kostrzyn, Poznań Toruń/Bydgoszcz Kamień Pomorski, Szczecin Korsze, Olsztyn Krzęcin, Szczecin Filipów, Białystok Stargard Szczeciński , Szczecin Kamiennik, Opole
Energia-Eco Gustaw Brzyszcz Vattenfall Wolin-North Eurowind Nowogard commune EEZ Wiatropol Dong Eolica Eurowind Eurowind EWG Elektrownie Wiatrowe Iberdrola PEP (Dipol) PGE ENEA EWG Elektrownie Wiatrowe Iberdrola Iberdrola Iberdrola Mitsui i J. Power RP Grobal IKEA RP Global RP Global RWE Renewables Polska Vortex Polska Sp. z o.o. Vortex Polska Sp. z o.o. Vortex Polska Sp. z o.o. Dong Dong EDP Renewables Eolia Renovables EON Vortex Polska Vortex Polska EDP Renewables KSM Energia RWE Renewables Polska RWE Renewables Polska TAURON Ekoenergia
SOURCE: POLISH WIND ENERGY ASSOCIATION (PSEW) AS OF MARCH 31, 2011
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I N TW E IRNVDI E W
Largest Wind Farms in Poland No. of turbines
MW per turbine
MW total
Turbine manufacturer
9 9 15 14 1 25 2 17 n/a 3 4 4 27 11 15 6 4 6 60 12 24 3 5 21 21 18 16 16 17 17 13 60 4 21 17 16 21 3 16 15 15
2 2.3 2 0.6 225 kW 2 0.8 1.8 n/a 0.8 0.8 2 1.5 2 2 2 2.5 2 1.5 1.5 2 1.5 2 2 n/a 2.3 3 2 2 3 2.3 2 1.5 2.5 2 2 2.3 2.5 2 2.3 2
18 20.7 30 8.4 0.225 50 1.6 30.6 2 2.4 3.2 8 40.5 22 30 12 10 12 90 18 48 4.5 10 42 50 41.4 48 32 34 51 29.9 120 6 52.5 34 32 48 7.5 32 35 30
Vestas V80 N90/2,3MW Vestas V80 Enercon E-40 Vestas V29 Vestas V80 Enercon E-48 Vestas V90 n/a Enercon E-48 Enercon E-48 Vestas V80 GE Energy 1.5 Gamesa G87 Enercon E-70 E4 Enercon E-82 Nordex N 90 Gamesa G87 Fuhrl채nder FL1500 GE Energy 1.5 Vestas V80 Nordex S77 1500 REpower MM92 Enercon E-82 Nordex N90 Siemens SWT-2.3 Vestas V90 Vestas V90 Vestas V90 VESTAS V90 Siemens SWT-2.3-93 Gamesa G90 Nordex S77 1500 GE Energy 2.5 Vestas V90 Vestas V90 Gamesa G90 GE 2,5 MW Gamesa G90 n/a n/a
TOTAL MW
1197
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Anatomy of a deal Spanish PE fund Taiga Mistral teams up once again with Krauze’s Petrolinvest to harness the power of Polish wind.
26 | CLEANTECH | Q1 2012
I N TW E IRNVDI E W
B Y J O H A R P E R
WARSAW-BOURSE listed oil producer Petrolinvest, controlled by one of Poland’s richest men Ryszard Krauze, and Spanish private equity fund Taiga Mistral, are going ahead with a third wind power project at Pomorskie Farmy Wiatrowe (PFW) in the northern Polish region of ˚uławy. The wind they believe is blowing in the right direction. “We already are preparing our second fund for Poland and want to replicate what we’ve done in the first,” Mikel Garay, CEO of Taiga Mistral, part of the Santander group, told Cleantech Poland. The fund, specifically targeting wind power projects in Poland, is aiming to raise 300 million euros. The project, structured into two phases will be connected to the local electricity network belonging to Gdansk-based Energa. Construction of first phase (40 MW), Mr. Garay said, will start in the first quarter of 2012. The second phase (24 MW) is to be constructed by 2013. Mr. Garay noted that total CAPEX for the first phase is EUR 75 million and will be EUR 35 million for the second phase. Taiga Mistral’s share in both phases is 75% and Petrolinvest’s 25%, he added. The Spanish fund said it plans to exit the investment within 2–3 years, and has secured a guarantee to repurchase shares of Petrolin-
vest in drag-along clause when exiting from the investment. “All these projects have been already purchased and are under development, the first wind farm of 40.4 MW has already been constructed in Kobylnica and the other investors to be announced this autumn with the start of operations of the second fund in 2012,” Garay said. These are greenfield projects and part of Taiga’s ongoing investment in wind power in Poland, it’s third fund since starting in 2008. EBRD ON BOARD Taiga Mistral will be responsible, he added, for developing the project and securing financing. Apart from the Spaniards, the European Bank for Reconstruction and Development (EBRD) is also on board for the project. “The EBRD will be one of our main investors and have already committed to participate in our second fund with €20 million as equity,” Garay said. The involvement of the EBRD is part of the bank’s strategy to invest €300-400 million in the Polish energy sector over the next two years, the director-general in the EBRD Riccardo Puliti said recently. In July Petrolinvest bought from its main shareholder, Prokom Investments, a 100% stake in PFW for PLN 36.9 milliion (€8.3 million). In return,
Poland is fast becoming one of the most attractive wind energy markets in Europe. In 2005 it had less than 100 MW, but by 2011 around 1,352 MW.
Prokom acquired shares in Petrolinvest at an issue price of not less than PLN 10 per share. PFW holds a portfolio of windfarm projects in Żuławy totalling 94MW. The pipeline consists of three projects — 40MW, 24MW and 30MW — which are being developed on 423 hectares of PFW-owned land. According to Bertrand Le Guern, the president of Petrolinvest, the ˚uławy region offers some of the best wind conditions in Poland with approximately 3,000 full-load hours annually. Mr. Le Guern has said that revenue from the exploitation of a single wind farm with a capacity of 40 MW will be €11.1 million per year, with the first proceeds from the sale of the projects (€37 million) within 18-24 months and €18.5 million a year later. The next two years will bring in approximately €77.7 million, he said. Petrolinvest says the land property remaining after identifying the plots for the turbines, with the total area of around 420 ha, is subject to put/call option to transfer it to foreign investors for a price of around PLN 16 million (€3.6 million) in cash. Poland is fast becoming one of the most attractive wind energy markets in Europe. In 2005 it had less than 100 MW, but by 2011 around 1,352 MW. According to the Ministry of Economy, Poland’s total installed capacity may reach 6.65 GW by 2020, although the Polish Wind Energy Association (PSEW) offers a more optimistic forecast with the total installed capacity accounting for 13 GW. The PSEW estimates that by 2020 the wind energy production may correspond to 17% of overall electricity production in Poland and in 2030 it may reach 29%.
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Moving
into
view BY WOJCIECH KOSC
28 | CLEANTECH | Q1 2012
Legal regulations are starting to align in favor of offshore wind development, but first projects won’t see daylight in a few years still.
THE POLISH OFFSHORE wind sector still remains just a possibility in an otherwise fast-growing wind sector. The constant breeze from the Baltic Sea that Polish holiday goers enjoy hasn’t yet been put to work other than pleasing the beach crowds. What these holiday goers have had to say has mattered a great deal in the slow-to-start development of offshore wind. In a recently approved amendment to the law on marine areas, the minimum distance from the shore that a wind turbine could stand was determined at 12 nautical miles (19 km). The previous proposition of five miles was thought to spoil the view and deter tourists, local seaside authorities argued, heedless to the fact that moving turbines to at least 12 miles offshore would grossly limit available space for such developments. The amendment introduced other changes to the regulatory environment, however, that the nascent sector has welcomed. BETTER PERMITTING One of the key changes is that permits for construction of artificial islands and other infrastructure out in the open sea will be valid for 30 years. The extended validity period replaces the old regulation, according to which the permits were valid for mere five years, a clear example of the law’s glaring in-congruence to the changing world, as a typical off-shore wind farm takes between seven to nine years to develop. Obviously, a 30-year period doesn’t mean that developers will be able to sit on their permits forever. With a permit in place, construction has to start within three years or the
permit will expire. Offshore wind projects themselves will have to be operational in six years from the start of their construction. These, and other changes that the new law on marine areas has brought about, are said to speed the development of offshore wind farms in Poland. The Ministry of Economy also promised that a “stable support system” for offshore wind farm will be introduced in the upcoming new law on energy from renewable sources. There are great hopes attached to the potential exploitation of the Baltic Sea’s winds. Even if the amendment in question did limit the potential acreage where offshore installations could be located, Poland’s economic zone of the Baltic Sea still offers 3,590 square kilometers of suitable areas, or 36 percent of what’s available in the entire sea. The Baltic Sea is one of the most international seas in the EU, bordered by Germany, Denmark, Sweden, Finland, Estonia, Latvia, Lithuania and Russia. Generally, international maritime law allows country economic rights to within 200 miles (320 km) of their shoreline. Just how many megawatts could fill the Polish offshore acreage depends on the density of installations, as well as what investors and developers will have the capacity to finance. According to Juliusz Gajewski from the Marine Institute from Gdaƒsk, the density could be 1, 2, 5, and 10 MW per square kilometer of available area. “The first alternative [1MW/square km] most probably will not happen unless the political willingness towards renewable energy disappears. The fourth alternative [10 MW/
square km] shows potential of energy production on an order of magnitude similar to nowadays production of electricity in Poland, however there’s no way off-shore wind could be considered as replacement of conventional electricity production,” Majewski said recently in Gdaƒsk, during an industry conference. BLOW AWAY NUCLEAR? The overall potential of the Polish offshore wind sector is estimated at 0.5-1.5 GW in 2020 and 5-6 GW in 2030. Assuming the latter scenario, Poland could generate 22 TWh of energy annually or more than 50 percent of what Poland has to produce from renewable sources in 2020, according to the National Renewable Energy Action Plan. The capital required to make those scenarios happen is €2.25 billion in 2020 and up to €7.5 billion in 2030. The offshore potential is big enough for some green advocates to call for taking advantage of the Baltic winds so that other, perhaps more controversial and less sustainable, energy sources won’t be developed. This summer, Greenpeace’s Polish office and the Heinrich Boll Foundation commissioned a report on offshore wind in the context of nuclear power development that Poland has been pursuing for some time now. The report, compiled by the Renewable Energy Institute, concluded that nuclear and offshore wind power need not to be complimentary. In fact, an effort to develop 5.7 GW of offshore wind power (roughly equivalent to the 2 MW density scenario by Mr. Gajewski) would render the nuclear project unnecessary. “It would be cheaper, cleaner and create more jobs.”
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I N TW E IRNVDI E W
“Green advocates call for taking advantage of the Baltic winds so that other, more controversial and less sustainable, energy sources aren’t developed.”
Raising the green
premium
Certified property may soon be all there is on offer for investors seeking new buys. But are compressing yields going to move down even more for green buildings? BY WOJCIECH KOSC
POLAND’S MARKET of commercial real estate investment is finally getting out of the pit that the global financial crisis threw it into three years ago. Recent months have seen an increasing number of buildings change hands. Developers with projects un-
30 | CLEANTECH | Q1 2012
PHOTOGRAPHY BY KASIA SNYDER
derway to be certified for sustainability characteristics are talking about big expectations to ride the new wave of investment interest - at a premium, too, owing to green credentials their buildings will have. Investors brought €1.8 billion to the
market in 2010, the volume to date in 2011 has already exceeded €2 billion and the year is expected to close with €3 billion of transacted property buys. Poland, together with Russia, is the hottest property investment market in entire CEE region.
LOOKING TO SELL It’s not uncommon for office property developers - office buildings are the bulk of what’s being certified in Poland these days - to execute buildings and build revenue stream from leases. But the majority of firms developing office projects in Warsaw now happen to be hard-core sellers. It’s likely that offloading their certified developments will constitute a new benchmark for the investment market, not just in terms of capital rates, but also what will become investors’ preferred choice. This year to date, several commercial property projects have been confirmed to be under development to obtain certification. At various stages of development there are developments like the second phase of Austrian developer UBM’s Poleczki Business Park (LEED Core & Shell Gold), the second phase of Skanska Property Poland’s Green Towers in Wrocław (LEED Core & Shell Platinum and EU GreenBuilding), Avestus Real Estate’s Enterprise Park (BREEAM Very Good) or Capital Park’s Eurocentrum (LEED Core & Shell Gold), reportedly the biggest precertified office development to date in Poland (for a more complete list of existing and ongoing certified office property projects, see page 36). Total amount of leasable office space in certified projects under development is at least 190,000 sqm, which makes about 40 percent of all office space in the Polish office pipeline now. “One must remember that certification can have different levels or apply to different aspects of a building,” Kinga Nowakowska, general director of Capital Park, said. Still, she says,
it’s only one direction that new office developments will take, which is to certification. The next step will be that certified buildings will, on delivery, form a substantial part of projects marketed by developers to investors.
ski adds. Przemysław Felicki, associate director at real estate brokerage firm CB Richard Ellis’ capital markets department, suggests that conclusions on the impact had better be drawn once the investment market picks up for good. “It’s still rather shallow, both in terms of transaction volume and the actual number of properties - certified or not - available,” he said. Once the market does pick up, however, the very amount of certified properties available for sale will have funds compete for them. “Given the same standard of offices, comparable location and quality of tenants, it’s likely that certifiation could make a crucial difference at funds’ investment committee meetings,” Felicki said. He also adds that there already are funds from such fund management companies like Deka or GLL - both active in Poland - with investment mandates dedicated to green properties only. “
THE CAP RATE GAME According to a market report from property brokerage firm CBRE, the market has seen capital rates compress across all property sectors. They stood at 6.25 percent for prime office properties in 2010. At the top of the pre-crisis market, investment funds would buy offices at less than 5.5 percent. Will mid-fives soon become reserved for certified prime office projects? Nowakowska might be wary to bet whether certified properties will be sold to investment funds at such a premium. “It’s non-certified buildings that will sell for less, thus opening a capital rates gap against the certified ones. The gap could be 0.5 to 1 percent. It’s a lot of money,” she said. “It’s the certified office buildings that will become the mar(EUR million) ket’s benchmark against which 5000 other properties Retail will be valued,” 4000 Office said Jarosław 3000 Zagórski, business development 2000 of Ghelamco. Ghelamco has 1000 fully embraced certification - no new Ghelamco 2005 2007 2009 project will be 2006 2008 2010 without a certificate, Mr. Zagór-
Poland investment volume
SOURCE: CBRE
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GRE IN ET N EBRUVIILED WI N G
“Certified office buildings that will become the market’s benchmark against which other properties will be valued.” -Jarosław Zagórski, Ghelamco
QUEEN OF GREEN
SOURCE: SKANSKA
32 | CLEANTECH | Q1 2012
The LEED or BREEAM certification labels are becoming mainstay in Poland’s office property market. Skanska Property Poland is at the forefront of change, already thinking up steps deeper into the green development. BY WOJCIECH KOSC DEVELOPMENT OF OFFICE properties in Poland is showing some feeble signs of recovery. When (and if) it takes off for good, which is expected in 2012, office buildings certified for sustainability will form the core of this new development wave. Even if took only a few years - the first office project trumpeted as green was in the works in 2003 - but it’s
PHOTOGRAPHY BY KASIA SNYDER opment firm, and until recently, the company’s environmental manager. According to Ms. Zawodna, green developments’ chief advantage is the price tenants pay for energy. Skanska paid up to 70 percent more energy than the company’s current seat, she says. With tenants most cost-conscious in years, as they, too, had to live through the difficult post-Lehman Brothers era, cutting down on energy bills is major incentive to move to certified offices. The two standards most used by developers in Poland are the US standard LEED (Leadership in Energy and Environment Design) or UK-originating BREEAM (Building Research Establishment Environmental Assessment Method). Skanska’s most immediate of Warsaw office project, Green Corner of 27,500 square meters of leasable space, will use energy from renewable sources only, including the building’s own photovoltaic installation. Green Corner will also ulitilize construction materials coming from local suppliers, while no drinkable water will be used for cleaning or sanitary purposes. Rain water or so-called gray water, previously used for washing hands for example, will be used instead. Owing to those advancements, Green Corner will be the first
“The earlier stage that the certification requirements are taken care of, the smaller extra cost.” been a long road that office property development has gone. Eight years ago, Dutch developer Grontmij Real Estate tried a green development, only to sell it on to Slough Estates. The new owner abandoned the green assumptions and developed an ordinary office project. Marketing green solutions as a way to save a third of energy costs had no appeal when confronted with higher rental costs that the same green solutions inevitably imposed. SHARPENING THE EDGE Despite having to weather the financial crisis of late 2000s, office developments boasting green credentials are no longer developers’ costly whim. They’re a tool that’s sharpening developers’ competitive edge. “When we moved to our current, LEED-certified office, I ran a comparison of costs between the new office and the previous one,” said Katarzyna Zawodna, regional director at Skanska Property Poland, a property devel-
office project in Warsaw to receive the LEED Platinum certificate. The project will go online towards the end of 2012. Zawodna, together with the company’s environmental team leaders: green business manager Katarzyna Unold, and green business coordinator Justyna Adamczyk, claims that the LEED-certification will be a standard feature for all of the upcoming office developments. “The most efficient way leading to certification and eventual improved performance of a building is to make sure that it’s designed for certification on the drawing board already,” said Ms. Unold. “Also, the earlier stage that the certification requirements are taken care of, the smaller extra cost,” she said. For Green Corner, she says, the extra cost is 3-5 percent of the PLN 170m (€38.3 million) total that Skanska will have to bear. It’s not negligible money but nothing that would hinder Skanska from offering market-level
WWW.CLEANTECHPOLAND.COM | 33
GREEN BUILDING
Green tide rising
Greenvironment
CHP
micro turbines
With an operations center in Berlin, Greenvironment can fine-tune their combined heat and power plants remotely. This strategy gives them a competitive advantage to open up a 3,00 MW market.
P E T E R D O R N E R , C O O | M AT T I M A L K A M Ä K I , C E O | M I C H A E L G AW E N D A , C F O
ADVERTORIAL
CLEANTECH POLAND (CTP): GREENVIRONMENT IS ABOUT TO CELEBRATE 10 YEARS ON THE MARKET, WHAT HAS HAPPENED DURING THAT TIME?
Matti Malkamäki (MM): Greenvironment was founded in 2002 and quickly established itself as a pioneer in micro-turbine combined heat and power (CHP) generation using natural gas. In 2003, the first biogas installations were commissioned. Two years ago, Greenvironment established a build-own-operate model with two joint venture companies in German regions of Saxony and Thuringia. To date, Greenvironment has 109 turbines on 39 power plants installed with a total installed electrical capacity of 13,2 MW. In 2010, the company went public on the Frankfurt Stock Exchange. In 2011, we plan €20 million in sales growing to nearly €50 million in 2012 and we are considering getting listed on the Warsaw Stock Exchange. CTP: WHAT MAKES GREENVIRONMENT UNIQUE AND WHAT ARE ITS PRODUCTS?
Peter Dorner (PD): Greenvironment is both an independent power producer (IPP), an IT company, and a
PETER DORNER, COO
34 | CLEANTECH | Q1 2012
technology innovator. Greenvironment plans, builds and operates cogeneration heat and power plants (CHP). The company offers CHP plants in a power range of 30 kWe (electrical) to 4 MWe. It is a market leader in the use of innovative microturbine technology in electricity generation from biogas and natural gas. Microturbines benefit from high availability, low maintenance requirements, low emissions, favorable EEG and KWKG bonus compensation and flexible heat utilization. All Greenvironment CHP plants are operated and monitored from our operations centre in Berlin, Germany and this is a key factor in our high performance. Using the Company’s proprietary SCADA software system, local heat and electric utilities can create a true virtual power plant concept. The generating plants can be finetuned to follow almost any pattern of power generation. Thus, Greenvironment combines aspects of an IT company and an IPP energy company. CTP: WHAT IS THE SIZE OF THE POLISH MARKET FOR CHP AND MICROTURBINES?
PD: We see Poland as a 3,000
MATTI MALKAMÄKI, CEO
MW market. Under the new Polish legislation, all new buildings with heat consumption of more than 50 kW need to be coupled to a district heating network, or use renewable energy sources or still install a CHP plant such as ours for their own needs. This opens up a multi million euro market annually. CTP: WHAT IS YOUR STRATEGIC VISION?
MM: By the end of 2013 we will be a major player in the distributed energy sector with at least 100 MW of installed capacity. CTP: HOW HAVE YOU FINANCED YOUR GROWTH TO DATE AND WHAT ARE YOUR FUTURE FUNDRAISING PLANS?
Michael Gawenda (MG): So far we have obtained financing through joint ventures with municipal utilities and equity financing. We are now preparing a securities prospectus that could also be used for a secondary listing of our shares on other European stock exchanges, including the Warsaw Stock Exchange. Furthermore we have the option to place a corporate bond or raise money for a Greenvironment fund structure.
MICHAEL GAWENDA, CFO
rents to potential tenants. Green Corner will be located on edge-of-center Chłodna street, on the fringes of the Polish capital’s city center and the headline rent that the developer proposes to potential tenants is €19 per sqm. “Tenants recognize the advantages of being located in a sustainable building but it can’t much come at a higher leasing cost,” Ms. Zawodna said. DEEPER INTO THE GREEN Other projects - five in total, their size exceeding 100,000 sqm - that Skanska will certify with LEED Platinum or Gold, are in the works in Łódê, Wrocław and Katowice. There, given
that the office stock isn’t even close to half a million square meters, certified developments will weigh a lot. But even in the biggest market, Warsaw, the amount of certified space that the company will add to the market that’s still somehow limping is having other developers follow suit already. New projects that are being developed to meet certification standards include, in Warsaw, ones from LHI, which will certify its Chmielna 25 project with LEED Gold, Ghelamco that will BREEAM its Mokotów Nova, or HB Reavis that will also use BREEAM standard for its Konstruktorska Business Center. According to Skanska’s Adamczyk,
the company is already thinking of getting one step ahead of the competition. “Our next project in Warsaw, Atrium 1, will be a so-called deep green project that will get much closer to standards of passive buildings than even the LEED Platinum ones,” Ms. Adamczyk said. Atrium 1 will use ground heat exchanger system instead of heat pumps, free cooling or adaptive lighting to bring the energy use as close to zero as possible. That next step will cost the developer an extra 10 percent in costs while offering massive energy savings - a reversal of what green development was a mere decade ago.
WWW.CLEANTECHPOLAND.COM | 35
GREEN BUILDNING
“A deep green project gets much closer to standards of passive buildings than even the LEED Platinum ones.”
GREEN BUILDING PIPELINE The following projects have been completed, or plan to be completed by 2014. All green built. Existing PROJECT
GLA CITY
Katowice Business Point Sterlinga Business Center Trinity Park III Crown Square Marynarska Point Deloitte House Park Postępu Rondo 1
17000 13300 32000 16000 26000 20000 34000 64000
Katowice Łódź Warsaw Warsaw Warsaw Warsaw Warsaw Warsaw
Zebra Tower Oddział Deutsche Bank PBC Biuro Skanska w Deloitte House Oxygen Park Synergy Business Park Green Wings Green Day Malta House Business Garden Wrocław Wilson Office Park
17800 Warsaw N/A Warsaw N/A Warsaw 18300 Warsaw 40000 Wrocław 9000 Warsaw n/a Wrocław n/a Poznań 120000 Wrocław 15000 Poznań
DEVELOPER STATUS PLANNED / INVESTOR COMPLETION Ghelamco Hines Ghelamco Ghelamco Skanska Skanska Echo Investment MGPA
existing existing existing existing existing existing existing existing
BREEAM (very good) BREEAM BREEAM (very good) BREEAM (very good) EU Green Building EU Green Building EU Green Building EU Green Building LEED Gold LEED LEED Gold LEED Silver BREEAM BREEAM (very good) BREEAM( very good) LEED Gold LEED Gold LEED Gold LEED Gold
2012 2012 2013 N/A N/A 2014 2013
Atrium One Silesia Business Park
existing existing Skanska existing Yareal planned Ghelamco planned E&L Real Estates planned Skanska planned Skanska planned SwedeCenter planned Globe Trade planned Centre 18000 Warsaw Skanska planned 46,000 Katowice Skanska permitted
Business Garden Poznań Eurocentrum Office Complex Chmielna 25 Konstruktorska Business Center Warsaw Spire Enterprise Park
80000 70000 7000 48000 96000 15200
2013 2013 2013 2012 2014 2012
LEED Platinium EU Green Building LEED Gold LEED Gold LEED Gold LEED Gold BREEAM BREEAM (very good) BREEAM (very good)
Senator Mokotów Nova University Business Park
22500 41000 36000
2012 2011 2012
BREEAM (very good) BREEAM (very good) EU Green Building
Platinium Business Park - V, VI
Ph V 12000 90000 Corius - 9100 18000 21000 27500 10,640 9000
2012
LEED Gold
2012 2012
LEED Gold LEED Gold
2012 2012 2012 2012 2012
LEED Gold LEED Gold LEED Platinium LEED Platinium LEED Silver
Business Garden Warsaw Okęcie Business Park- Corius, Solano Green Horizon Poleczki Business Park II Green Corner Green Towers Concept Tower SOURCE: CUSHMAN & WAKEFIELD, OCTOBER 2011
36 | CLEANTECH | Q1 2012
Poznań Warsaw Warsaw Warsaw Warsaw Kraków
SB Gruppe
CERTIFICATE
SwedeCenter permitted Capital Park permitted LHI permitted HB Reavis UC* Ghelamco UC* Avestus Real UC* Estate Warsaw Ghelamco UC* Warsaw Ghelamco UC* Łódź Globe Trade UC* Centre Warsaw Globe Trade UC* Centre Warsaw SwedeCenter UC* Warsaw Globe Trade UC* Centre Łódź Skanska UC* Warsaw UBM/ CA IMMO UC* Warsaw Skanska UC* Wrocław Skanska UC* Warsaw Concept Develop- UC* ment
2013 n/a
*UC: under construction
Carbon Sink THERE ARE TWO WAYS to reduce carbon emissions. One is to emit less carbon by switching to low emission fuels. The other is to “suck” carbon out of the atmosphere, which trees do well. Both of these actions aim at reversing climate change but only one has financial incentives significant enough to get businesses interested. Whereas certificates of origin are in place for low-carbon energy (the fuel switching part) no subsidy in Poland is sufficient enough to get farmers to plant trees (the carbon sucking part). CO2 Reduction Poland, a Polish subsidiary of a Canadian stockexchange listed parent Carbon Friendly Solutions has found a way to get farmers to plant trees by selling a “voluntary carbon benefit” in the market. Corporations, it seems, are hungry to buy them.
Imagine this: an entrepreneur invents a device to reverse the worst effects of climate change. This device is all natural, can be installed anywhere, reproduces itself on its own, and sucks CO2 from the atmosphere. Look no further, it’s already been invented.
emissions reductions) which go for about €3.5 ($5) per VER. According to Mr. Strojnowski, CO2 Reduction Poland is the only company in Europe who is trying to certify forest voluntarily. If true, it would seem progress in promoting forests for their carbon offset value has been minimal.
PAID TO PLANT TREES “The carbon benefits of forests were first discussed in legislation that dates from 2004. But generally, the legislation only says what you can or can’t do to your forests,” Mr. Strojnowski adds. Economical usage (read: logging/ pulping) is restricted to forests that have matured at least 60 years, a time frame beyond most investors. Financially, it’s better for a farmer to plant hay, rapeseed or barley than a tree with no commercial benefit. With the voluntary carbon market, however, planting and keeping trees could be beneficial. Mr. Strojnowski and his team travel throughout Poland getting farmers to sign an agreement. The agreements stipulates that the farmer will plant trees and he or she won’t cut them down. “Once the project gets approved, the farmer gets a one time payment. If the farmer transfers ownership, the responsibility to maintain the forest resides with the new owner,” Mr. Strojnowski says. To date, CO2 Reduction Poland has aggregated about 4,800 hectares of private land in post-agricultural, degraded condition. On this land, they expect to have planted some 25,000,000 trees. According to Mr. Strojnowski, the company’s project will increase carbon stocks in the soil by about 20,000 tons of carbon per year and remove about 38,000 tons of CO2 per year from the atmosphere. Projected over a 40 year time period, the project could provide a benefit of 1.5 million tons of equivalent CO2 (tCO2e).
“There are no incentives for farmers to enhance afforestation and reduce deforestation.”
THE CARBON BENEFIT OF FORESTS Enter Sławomir Strojnowski’s office in the Mariensztat neighborhood of Warsaw and here’s what you’ll see: a giant map of Poland covered in red markers. According to Mr. Strojnowski, country manager of CO2 Reduction Poland, each of the red pins represents a farmer who has signed up the trees on their land. The pins are scattered throughout northern Poland, where the company is most active. CO2 Reduction Poland has been working for nearly six years to put a forest certification project together. In August, they announced that their “northern Poland afforestation offset project” has been certified by Conestoga-Rovers & Associates. The project totals 1.5 million VERs (voluntary
38 | CLEANTECH | Q1 2012
“The [UN Kyoto Protocol] REDD program aims at keeping the forests from being cut down. Our mission is to increase trees being planted,” Mr. Strojnowski says. The Reducing Emissions from Deforestation and Forest Degradation (REDD) program aims to preserve forests for their carbon benefit - or in other words - pay foresters to leave the trees in place. In Copenhagen in 2009, the REDD framework was elaborated but has yet to be put into practice. In Poland, planting new trees and protecting existing ones are both mitigation actions that could help the country reduce its carbon footprint. But neither receives sufficient subsidies to reward foresters and farmers for planting and protecting. “Without sufficient subsidies, there are no incentives for farmers to enhance afforestation and reduce deforestation,” Mr. Strojnowski says. “The scant subsidies exist for acreage less than 20 hectares (49 acres) and they’re just not enough.”
BY PARKER SNYDER
As a point of comparison, the lifetime carbon benefit of the project is about 5 percent of the annual emissions of the Bełchatów power plant, meaning it would take 20 forestry projects of a comparable size to offset Bełchatów’s emissions for a single year. (Belchatów power plant was recently rated by the World Wildlife Fund as the 11th largest emitter of carbon dioxide in Europe). However, that’s only if project gets certified, and only if the trees stick around for 40 years. CARBON BENEFITS ABOUND Carbon Friendly Solutions is not confining their carbon-mitigation efforts
PHOTOGRAPHY BY KASIA SNYDER
to forests alone. The company has also entered the market for sourcing biomass for power plants. One of their portfolio companies, Carbiopel Eco Stream Power, plans to construct a pellet facility capable of converting biomass into pellets for use in a new biomass power block at Połaniec. Much of the biomass will be sourced in bulk from Ukraine and locally from suppliers within 50 km (30 miles). Carbiopel will offer their biomass pellets for the new power block. Mr. Strojnowski says energy from coal can be obtained at 25 kJ per gram, whereas biomass only 17 kJ per gram. At current prices coal goes for
PLN 600 (€138; $195) a ton, whereas biomass for 400 PLN ($144) a ton, making biomass marginally competitive per unit of energy. Seeing markets for carbon offsetting in multiple segments, Carbon Friendly Solutions could see their business grow from 2013 onward, when Polish producers will have to pay to emit CO2 under the EU emissions trading system. Forests can help us out of a problem man created; green leaves depend on carbon dioxide in the way human lungs depend on oxygen. So why not take advantage of an all-natural carbon sink that’s been around since time memorial?
WWW.CLEANTECHPOLAND.COM | 39
I N N O VAT I O N
“The REDD program aims at keeping the forests from being cut down. Our mission is to increase trees being planted.” -Sławomir Strojnowski, CO2 Reduction Poland
Laser Vision BY PARKER SNYDER
40 | CLEANTECH | Q1 2012
One day, not long from now, your iPhone will function as a movie projector. When you snuggle into bed to watch the latest Hugh Grant rom-com on the wall of your bedroom, you may have a company on the fringe of Warsaw to thank.
PHOTOGRAPHY BY AMMONO
ROBERT DWILINSKI had an idea. Grow a crystal, slice it into pieces, and use the pieces to grow other crystals. It’s not a new idea at all. It’s rather a common technique for growing crystals for use in semiconductor electronics and solid-state lighting. But Mr. Dwiliƒski did it with a less common material - gallium nitride (GaN) - and this feat has caused quite a stir in the electronics world. Ammono may one day introduce the market for crystals used the next generation in semiconductors. AMMONO, EXPLAINED As early as 2007, no one had even heard of the small Polish company. In July of 2010, Mr. Dwiliƒski’s story then appeared on the cover of IEE Spectrum, an imprint owned by the largest technology association in the world. Since then, he’s been something of a crystal-growing rock star. Why does Mr. Dwiliƒski believe that the future of semiconductors is gallium nitride? It has much to do with laser optics, a potential market for his technology. When a beam of electrons comes into contact with a gallium nitride crystal, visible light gets produced in the green and blue
spectrum. Because gallium nitride crystals produce their light at relatively low heat, they are thought to be suitable for the next generation of LEDs (light emitting diodes). Gallium nitride crystals could be embedded in ordinary consumer electronics, such as mobile phones. The iPhone of the future, for instance, could use gallium nitride in movieprojector technology. These crystals might also be used in car electronics to extend battery life. For these reasons, the technology may be a building-block in Europe’s conversion to a low carbon economy. But Mr. Dwiliƒski isn’t convinced his gallium nitride crystals should be sold as an environmental technology, although he recognizes they may enable the next generation of fuel-efficient cars and energy-efficient lighting. For the time being, he just wants to grow his business. Cleantech Poland spoke to him at the Eurecan European Venture Capital contest, for which Ammono won first place in the cleantech division. SMALL COMPANY, BIG AMBITIONS Mr. Dwiliƒski is CEO and co-founder of Ammono, a company seated on the outskirts of Warsaw in the village of Niepor´t. He and his staff of 50 or so employees have been producing GaN crystals since 1993, the year they proved this certain crystal could be obtained in small quantities at high quality. At a glance, synthetic crystals in semiconductors seem to be ubiquitous. Take a drive through Warsaw’s city-center, and at the main roundabout, there’s a large LED screen made by Samsung. According to Mr. Dwiliƒski, the screen is made up of
millions of LEDs based on synthetic sapphire. Ammono is developing crystals based on gallium nitride, which he sees as a preferable alternative. LED television screens are just one of the market segments he’s targeting with his crystals. The biggest market, according to Mr. Dwiliƒski, is in electric vehicles, for use in models such as the hybrid Toyota Prius or the GM Volt. Conventionally, electric cars convert direct current into alternating current through the use of a power inverter. Inverters limit the range of electric vehicles because the electronics, based on silicon, need expensive and heavy cooling equipment. According to Mr. Dwiliƒski, an inverter base on gallium nitride technology would “double the battery life” of a hybrid or electric car. He estimates the potential car market at several million gallium nitride wafers per year, as each car consumes a wafer. At current prices, a 4-inch (102 mm) wafer based on gallium arsenide, a competing technology, costs about €141 ($200). A wafer based on gallium nitride exceeds €3,500 ($5,000) for a 2-inch (51 mm) wafer - nearly 80 times the price. Mr. Dwiliƒski believes gallium nitride would be commercially viable at $1000 for a 2-inch wafer, and as Ammono ramps up production, economies of scale would bring the price down further. CRYSTAL-CLEAR HISTORY Mr. Dwiliƒski was inspired by a lecture from Izabella Grzegory, a professor with the High Pressure Research Center at the Polish Academy of Sciences. Ms. Grzegory went on about the outstanding qualities of a family of nitrides whose properties were well-suit-
WWW.CLEANTECHPOLAND.COM | 41
I N N O VAT I O N
“Gallium nitride crystals may enable the next generation of fuel-efficient cars and energy-efficient lighting.”
“Competing technologies rely on hydride vapour phase epitaxy, which can produce crystals quicker, but of a lower quality.” ed for electronics. That lecture was the seed of inspiration that led Mr. Dwiliƒski to pursue GaN crystal production. Later Mr. Dwiliƒski did his PhD studies under Maria Kamiƒska at the University of Warsaw. In founding Ammono, he was joined by Leszek Sierzputowski, a chemist, Roman Doradziƒski, a theorist, and Jerzy Garczyƒski, an autoclave technician. By 1993, the four research scientists had produced microscopic deposits of gallium nitride, a promising development, because when the crystals were exposed to a laser they lit up via a process called photoluminescence. This meant that the crystals were relatively free from defects. Mr. Dwiliƒski’s chose the ammonothermal process (from which Ammono gets its name): a bulk gallium nitride poly mix is suspended in an autoclave filled with ammonia gas. Autoclaves are machines that regulate temperature and pressure. Over time, the gallium nitride feedstock gets deposited layer by layer on seed crystals, replicating whatever
SOURCE: IEEE SPECTRUM MAGAZINE
42 | CLEANTECH | Q1 2012
base structure to which it adheres. Good seeds are important because they form the base, and that’s why Ammono spent years developing super-high quality crystals. Early on, Mr. Dwiliƒski wanted to scale production. However, with no domestic venture capital to fund operations, Ammono had to cooperate with Nichia Corporation, a Japanese firm, who retains 30 percent ownership and a stake in the intellectual property. The crystals Ammono produces today include 2 inch (51 mm) diameter bulk C-plane substrates and non-polar M-plane. Ammono also produces Aplane and semi-polar gallium nitride wafers. The polar/plane designation refers to the atomic orientation of the crystal. It was the 2 inch crystals that caught the attention of the electronics industry. THE $10 MILLION QUESTION Until 2007, Mr. Dwiliƒski was rather quiet about his activities, partly because Polish scientific circles tend to
eschew publicity, but also because Mr. Dwiliƒski had to sign for non-disclosure with Nichia Corporation until his crystal technology had matured. Today, he’s seeking private equity or debt financing. Because crystal production depends on the autoclaves - the more autoclaves, the more crystals Mr. Dwiliƒski says he’d use €7 million ($10 million) to develop production capacity of his 2-inch wafers. The Ammono campus covers 4 ha (10 acres), which is ample enough room for the 8 manufacturing halls housing 20 autoclaves which Ammono aims to build. Ammono isn’t the only ones racing to develop the next generation of synthetic crystals for use in semiconductors and lighting. Competing technologies rely on hydride vapour phase epitaxy (HVPE), which can produce crystals quicker, but of lower quality. Mitsubishi Chemical Corporation, Asaki Kasei and Momentive Performance Materials are among the companies at work on a competitive product, but according to Mr. Dwiliƒski, they are still early in production.
FINANCE
Golden Sun
Here’s a bright idea: incident light coming from the sun gets a boost from an innovative solar solution. A set of reflecting mirrors improves power output at returns of better than 20%.
PETER ZUPA CTP: TELL US MORE ABOUT THE SUNLIGHT BOOSTER?
Peter Zupa (PZ): We may be the first €1 billion Slovak solar company. Our product, just released onto the market in October 2011, increases photovoltaic (PV) yields by 20+ percent and is a useful retrofit for every existing ground mounted PV system. We just made our first contract to install a 2 MW retrofit system. GoldenSUN Slovakia was founded as a commercial spin out from a Soviet era military R&D base focused on innovative uses of mirrors and light. We naturally gravitated to solar applications. We have three distinct technologies we are working on: • SunLight Booster, • A small scale (less than 1 MW) concentrated solar thermal product (CSP) that would be useful for remote military bases, drilling platforms, off grid applications, and disaster relief as it can be parachuted onto site, • A special engine system that is not yet ready for more public disclosure.
PZ: It is always a challenge to raise money for development of new highly innovative products. However, we showed in the past that our creative team is able to attract funds from R&D grants as well as venture capital investors. So far we have cooperated with business angels and venture capital investors from Slovakia, Czech Republic, Saudi Arabia and United States. However, there is always a need for additional cash to accelerate our product development. Especially now, as we are transitioning from a prerevenue stage to a post-revenue stage, we need capital. Thus, we welcome interest from other investors. CTP: WHAT ELSE SHOULD KNOW ABOUT GOLDENSUN?
PZ: That we bring sun to you and that you can find out more about us at www.goldensun.sk and www.sunlightbooster.com. We also welcome visitors at our test site in Nedakonice, Czech Republic with a prior appointment.
CTP: WHERE DO YOU SEE GOLDENSUN IN A YEAR? AND IN FIVE YEARS?
JZ: In next five years our goal is to commercialize our next two technologies. CSP should be ready for market in 3Q 2012 and the engine system in 2013. With all three products in the market we may be a €1 billion company and ready for listing on a stock exchange. We are eager to achieve that milestone.
WE
2800
Sunlight booster increases power productivity
2400 2000 1600 1200 800
With booster Baseline power
400 0 7:00
11:00
15:00
19:00
ADVERTORIAL
CLEANTECH POLAND (CTP): WHAT MAKES GOLDENSUN UNIQUE AND WHAT ARE ITS PRODUCTS?
Jan Zupa (JZ): SunLight Booster is a retrofit solution for ground-mounted (PV) plants that increases their electricity production by 20-30 percent. The solution uses a system of mirrors, which are installed between the rows of PV panels in the plant. These high technology mirrors are moving in such a way that they reflect and deliver more solar radiation onto the PV panels, hence enabling the panels to produce more electricity. The photography shows our pilot installation at the 2,05 MW PV plant in Nedakonice, Czech Republic. We have operational data from this site that we can share with customers and we are eager to start selling this product. At this time we are seeking sales representatives in well established PV markets as those are the locations with high feed in tariffs and thus can benefit the most from our retrofit. Our plan is to make the SunLight Booster generate €100 million or more annually in sales over the next three to five years.
CP: HOW HAVE YOU FINANCED YOUR GROWTH AND WHAT ARE YOUR FUTURE PLANS?
Introducing the
CLEANTECH COMMUNITY
Speed networking: each person gets a card, numbered 1-6. Then for 30 minutes, everyone rotates through the room, looking for a person with their number. If it works as it should, you go home with ten new business contacts. PHOTOGRAPHY BY SZYMON SZCZESNIAK
PETER HOGREN WITH GREENFIELD WIND
44 | CLEANTECH | Q1 2012
COMMUNITY
HEMISPHERE BAR, INTERCONTINENTAL HOTEL
KASIA SNYDER WITH KASIA CHWALBINSKA-KUSEK
DOROTA PŁOSKOWICZ, A PARTNER WITH THE LAW FIRM BIEǸKO PŁOSKOWICZ
PETER TURO, MŁODE ORŁY
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ADAM DE SOLA POOL OF EIP WELCOMED BY PARKER SNYDER OF CLEANTECH POLAND
AGATA HINC, DEMOSEUROPA
46 | CLEANTECH | Q1 2012
THE GREENFIELD WIND TEAM
COMMUNITY
MARIUSZ PAWLAK OF ESTER EKO AT LEFT WITH HIS COLLEAGUES
ZBIGNIEW MODECKI OF BALTIC WIND AT CENTER LEFT
ADAM SOCHACZEWSKI OF GAS PLUS TALKS WITH MACIEJ CHYZ OF PWC
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DOROTA PŁOSKOWICZ AT LEFT AND DOROTA BIEǸKO AT RIGHT, LAW FIRM PARTNERS, EXCHANGE CONTACTS WITH OTHER GUESTS
PATRYCJA KUJAWA OF LNG ENERGY AT CENTER LEFT AND MAGDA PAVLAK OF CDM AT RIGHT
48 | CLEANTECH | Q1 2012
KONRAD SZWEDZIŃSKI OF CLEAN ENERGY VENTURES LISTENS TO THE SPEAKER
COMMUNITY
PETER TURO AND CRAIG SMITH IN CONVERSATION AT LEFT
CEZARY KRASODOMSKI OF CISCO SYSTEMS EXCHANGES GREETINGS DURING SPEED NETWORKING
ADAM DE SOLA POOL OF EIP AT LEFT TALKS TO CRAIG SMITH, PUBLISHER OF BIZ POLSKA & PETROLEUM CLUB MAGAZINE
GUESTS MINGLING DURING SPEED NETWORKING
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Połaniec: she’s a beast
BY JO HARPER
50 | CLEANTECH | Q1 2012
GdF Suez Energia Polska ups the stakes in biomass energy production in Poland, but how will it be fed?
FRANCE’S GdF Suez Energia Polska and US energy engineering company Foster Wheeler are on course to complete the world’s largest power unit fired solely from biomass, on the site of an existing coal-fired power station in Połaniec, in south-east Poland. The project is slated for completion by December 2012 and will cost in excess of PLN 1bn (€260 million). The first stage has just been completed and the planned capacity of the power plant increased to 205 MW from 190 MW. With the unit, GdF aims to achieve top spot on the Polish market for renewable energy production. The firm is also building a 20 MW wind farm in Jarogniew-Mołtowo and plans to develop several others. The Połaniec investment, according to GdF Suez and Foster Wheeler, will contribute to reducing emissions of sulfur dioxide, carbon dioxide and dust into the atmosphere. According to the internal analysis of the companies, biomass burnt in the unit will decrease CO2 emissions by more than 1.2 million tons per year. GdF’s deputy head of Polish operations Robert Zadora said that GdF will shut down an existing 225-megawatt coal-fired unit in November to make way for the new plant. The Polish and Finnish subsidiaries of Foster Wheeler will jointly design and deliver the new installation. ONE MILLION TONS The unit will use about one million tons of biomass a year, producing 1.2 TWh (terawatt hours) of clean energy, the French company said. Together with planned investments in wind farms GdF, aims to produce 1.5-2.0 TWh hours of energy from renewables in 2013.
The project will see the replacement of a coal-fired boiler with a new circulating fluidised-bed (CFB) boiler designed to combust 100 percent biomass. This so-called Green Block will be fuelled with wood biomass and straw pellets. The existing steam turbine and generator will be refurbished and allow the production of around 200 MWe. The electricity generated will be sufficient for the needs of more than 400,000 households, according to estimates from the French company. The CFB technology will enable effective CO2 reduction in power generation through large-scale 100 percent biomass utilisation, according to Jarosław Mlonka, president & CEO of Foster Wheeler Energia Polska, the firm’s polish subsidiary. The boiler will burn wood chips in combination with 20 percent of agricultural derived fuel such as straw pellets or crushed briquettes, sunflower pellets, fruit husk pellets, and crushed palm kernel shells. The firm, a subsidiary of France’s GDF Suez Group, chose the location because of its wood and agricultural biomass production potential, although there is some worry that the amount of biomass the installation will need may be hard to source. And if sourced from too far away, the project’s green credentials become questionable, according even to some voices from within the biomass sector. “From the overall environmental point of view this is a nonsense project,” said Henryk Pyrka, secretary of the Polish Chamber of Biomass. ”Biomass energy plants should be ten times smaller using local sources on a sustainable basis. There is no such
an amount of biomass a hundred kilometers around that means vehicle transportation from a very long distance. We believe this will not be from Indonesia or Africa,” Mr. Pyrka said. Robert Zadora, deputy head of Polish operations for GdF Suez contests her point of view. According to Mr. Zadora, “The annual quantity of fuels consumed by the plant has to be compared with the potential of available fuels in the area of influence of Połaniec which, according to a recent evaluation, is more than sufficient. The plant will be cost effective thanks to its size and to its efficiency and the company will not subsidize the new plant from other operations.” He did note however that the investment costs of this biomass power unit are much higher than those of an equivalent gas or conventional coalbased power unit. The time of return depends also on the operation mode and on the cost of fuels. The ‘discounted payback period’ could be less than 10 years. Zadora said GdF Suez financed the project from the beginning, although it was also weighing up an alternative form of financing involving an investment bank. “This is being evaluated but no decision has been taken yet,” Mr. Zadora added. Regardless of its true environmental footprint, the completed unit will contribute to Poland’s obligation to produce 15 percent of its electricity from renewable sources by 2020. “Our [circulating fluidized bed] product technology provides solutions for effective CO2 reduction in power generation through large-scale, 100 percent biomass utilization, which is an important part of Poland’s energy future,” said Mr. Mlonka.
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IN B TI O ER MVAISESW
“From the overall environmental point of view this is a nonsense project.” -Henryk Pyrka, Polish Chamber of Biomass
Carbon debt
unpayable
Flaws could well be found in just about every sector of green economy, but burning biomass for energy seems to have too many shortcomings. It’s time for a new approach before carbon debt that sourcing biomass is creating becomes unpayable. B Y W O J C I E C H K O S C THE NEGATIVE ENVIRONMENTAL impact of biomass use could render the benefits null and void. It’s a recurring theme present in two other articles in this issue’s section on biomass. An oft-quoted example is GdF Suez’s power plant in Połaniec where a coal-fired installation is giving way to the world’s largest biomass power unit. Biomass, unlike wind or solar power, is a resource that has to be grown or collected from forests or industrial installations where it’s a waste product (as in furniture manufacturing plants). In order to feed biomass to boilers, biomass has to be shipped to them.
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PHOTOGRAPHY BY KASIA SNYDER
The basic problem of biomass is, then, that the bigger the installations using this otherwise green fuel, the more biomass they need. The more biomass is needed, the larger the area where it has to be collected from and shipped to the boilers. In fact, large biomass installations are nearly certain to rely on imports. Transport of biomass over significant distances contributes significantly to biomass’ higher life-cycle emissions. Growing biomass - either as an agricultural or forestry product - might perhaps offset the transport problem, because energy crop fields supply oxygen and sink carbon, albeit slowly. In the case of forest biomass, however,
there emerges another issue. It’s stripping forest areas of the biomass materials - and not necessarily forests in the heavily environmentally regulated EU, but rather in countries suffering from lax environmental regulations and control. A debate about the issues of biomass use is currently taking place in the UK, for example. Poland, where large biomass-fired or biomass co-firing facilities are still few and far between could draw many lessons from the UK. There are 31 plants burning biomass in the UK. These are either dedicated plants or coal plants co-firing material. Another 39 are planned, according to the RSPB.
In the UK, the current solid biomass demand is at 5.2 million tons, of which 37 percent is domestic wood and 13 percent imported wood. According to a study by UK conservation group Royal Society for Protection of Birds (RSPB), however, a major shift towards biomass-fired power plants is under way. If projected biomass installations go online, the demand will surge to 48.3 million tons and the share of imported wood will increase to as many as 68 percent. Importing wood as feedstock for power installations is wrong on many levels, according to the RSPB. Wood is definitely a low carbon energy source, but it’s not emissions-free. Felling tress for biomass creates “carbon debt” as well, as emissions from burning biomass will take decades to be offset by planting new trees. Another issue is that at least some of the emissions from burning biomass are going to be unaccounted for. International guidance requires emissions from biomass to be accounted for in the land use, land-use change and forestry sector. “[Emissions] are therefore counted as zero carbon in the energy sector as [they] have theoretically already been accounted for. However, new accounting rules currently being negotiated under the United Nations Framework Convention on Climate Change will allow a significant proportion of emissions from forestry and agriculture to go unaccounted,” charges the RSPB in the study. Finally, meeting biomass demand from the energy sector is causing intensive logging of existing forests
and/or planting new trees. The latter is because plantations, if poorly sited, can also risk the destruction of other important habitats for wildlife, like semi-natural grassland, heathland, partially drained peat and bogland, and scrubland. Back to Poland again, there seems to be a widespread ignorance of the issues that mass burning of biomass or cofiring it with coal doesn’t offer that
already spent, but there’s still financing available for biomass installations from the National Fund of Environmental Protection and Water Management. On top of those regulatory developments, there’s reportedly a push in the political circles to support heating from installations using renewable energy, another potential factor in increasing demand for biomass. Some awareness is creeping into the EU agencies, however, about biomass not being necessarily efficient in mitigating emissions or likely detrimental to habitats. The European Environment Agency (EEA) investigated the potential of all EU-25 States to generate biomass in a sustainable way in 2020-2022 utilizing feedstocks from agriculture (bioenergy crops), forestry (wood) and waste. The EEA suggested criteria for each sector to ensure a more sustainable approach. For agriculture, the criteria include meeting EU targets of 30 percent of agricultural land being devoted to “environmentally-orientated farming” by 2030; establishing ecological compensation zones; choosing low environmental impact bioenergy crops. For forestry, the criteria involve respecting existing protected forest areas; leaving foliage and roots on site post-harvesting; limiting the extraction rate of residues from stem and branches; reducing the area available for wood supply by 5 percent in each member state to allow an increase in protected woodland; setting aside 5% of dead wood and large diameter trees by volume.
“Respect existing protected forest areas, leave foliage and roots on site post-harvesting, limit the extraction rate of residues from stem and branches.” much of environmental benefit if approached along the simplistic lines of “the more burned biomass the better”. The third phase of the European Union Emissions Trading System (ETS III) is getting negative reception in Poland, as well as there’s a feeling of certainty that ETS III is unavoidable. To that end, installations relying on fossil fuels are reacing to convert their boilers to run on biomass or at least be able to co-fire biomass with coal. A few other recent regulations have also been spurring demand for biomass. For example, cogeneration installations whose capacity is 20 MW or more that will go online by end of 2012 will be allowed to burn biomass consisting of up to 80 percent forest biomass. Financial support from the EUfunded so-called Operational Program Infrastructure and Environment for years 2007-2013 might have been
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IN B TI O ER MVAISESW
“There seems to be a widespread ignorance of the issues that mass burning of biomass or cofiring it with coal doesn’t offer that much of environmental benefit.”
Esperotia
Poland is still largely an agricultural country. Which means that because of EU targets, biogas from farm inputs will likely make up a large part of the country’s RES mix by 2020.
CHRISTOPHER JASIAK, CHAIRMAN
ADVERTORIAL
CLEANTECH POLAND (CTP): TELL US ABOUT THE HISTORY OF YOUR COMPANY.
Christopher Jasiak (CJ): Esperotia Energy Investments (EEI) began in 2009 to explore the biogas market in Poland. At the beginning of 2010, EEI began our first project, the development of a biogas facility in Starogard Gdaƒski. Since then, EEI has developed a pipeline of over 30 projects which we hope to develop with various financing partners. We plan an IPO in 2011 and we expect to have 20+ plants operational within 5 years. CTP: WHAT MAKES ESPEROTIA UNIQUE IN ITS FIELD AND WHAT ARE ITS PRODUCTS?
Agnieszka Król (AK): Our goal is to be an Independent Power Producer (IPP) listed on the Warsaw Stock Exchange. For investors we offer an opportunity to gain access to the rapidly transforming Polish energy market as well as a proxy for growth of the entire Polish economy. Our company is focused on the development, construction and operation of biogas power plants. We are focused only on agricultural biogas plants, meaning that the feedstock we use comes from corn, grass, greens, manure, unlike animal feedstock (e. g. slaughterhouse residuals). We want to develop two business lines: developing, constructing and operating facilities for financial partners, where EEI is either a service
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provider or a minority shareholder in an SPV; and construction and operations of biogas plants as an IPP, where EEI is a majority shareholder. Currently EEI is building a facility in Starogard Gdaƒski with a Polish energy major. We also have an initial agreement signed with another energy company to develop and build two facilities and are negotiating with still another energy company to develop, build and operate a group of facilities. Our goal for 2012 is to begin construction on two facilities where EEI will be the majority shareholder. CJ: Farmers in Poland are generally skeptical of new ideas and partners. We have developed an approach that guarantees them financial stability while at the same time guarantees us a stable feedstock supply for a fair price. We put this approach to practice in Starogard, where we are currently sourcing corn for our facility. Our approach has worked well and we plan to use it in other projects. Our goal as an IPP is to own at least 20 large facilities, of 1MW and more.
20+ operating SPV’s where we are either a majority or minority shareholder. Our goal is to have more than five percent of the market. CTP: WHAT ELSE SHOULD WE KNOW ABOUT ESPEROTIA?
CJ: We expect to become a leader in the biogas market in Poland within five years. We feel that we are in a very strong position to reach and maintain a leadership position on this market. Our shareholders and partners have the experience and knowledge to give us a competitive advantage against other players in the market.
CTP: WHERE DO YOU SEE ESPEROTIA IN THE FUTURE?
AK: We have our first project moving forward and plan to start more projects still in 2011. We will IPO EEI on the New Connect by the end of 2011 to finance new projects. In July 2011, Green Assets Inwestycje, and Environmental Investment Partners invested in us. Both of these funds quickly understood our business model and development potential. We are proud to have them and their support for our future development. In five years we expect to have AGNIESZKA KRÓL, CEO
the wood for the trees
BY JO HARPER
Finnish Metso gets in on the biomass act at EC Białystok, arguing this is a win-win for old and new energy sources alike. PHOTOGRAPHY BY KASIA SNYDER
THE FINNISH SUPPLIER of sustainable technology and services - Metso Corp - plans to convert a coal-fired boiler at EC Białystok, a CHP installation in north-eastern Poland’s biggest city, to utilize biomass as feedstock. The project will cost about €20.2 ($28) million and is expected to be in operation by December 2012. Metso has experience with similar boiler conversions in the region, including conversion of a pulverized coal-fired boiler to a wood chip and non-forest residue combustion boiler for Wrocław-based heat and power producer Kogeneracja’s installation in Siechnice. “The project will be financed from EC Białystok’s own funds,” said Krzysztof Sadowski, the company’s development director. “This is mainly from profits obtained from already working renewable energy sources with a similar converted boiler. A supplementary source of finance are funds from the ENEA group, the new owner of EC Białystok,” he said. Enea bought 69.58 percent of EC Bialystok from France’s SNET in June for 400 million zlotys (about 144.8 million US dollars).
dues, food industry residues and municipal residues. Imports will include forest biomass mainly from Belarus and agricultural biomass, mainly sunflower seed hulls pellets from Ukraine. Biomass and wind appear to be the most promising renewable energy resources for development in Poland, with an estimated potential of about 4,000 MW each. Biomass clearly has a number of advantages over coal but at present is mainly used in small and medium scale boilers in industrial settings, the common fuel used be-
technological upgrade, so called BFB (bubbling fluidized bead) conversion. “The BFB conversion gives a new life to the old boiler,” Mr. Szerszeƒ said. “Thanks to the BFB conversion the outdated boiler can be turned into a modern boiler with low emissions and high efficiency. It is therefore a cost-effective way to meet EU targets.” With other big biomass projects now also on the table, Mr. Sadowski - when asked if this heralds a significant shift to biomass production in Poland - says that there is still room for similar projects in Poland but there are also questions on biomass availability and regulations. It’s estimated that on a nationwide scale the demand for biomass in 2020 will be about 26 million tonnes of biomass of forest and agriculture origin. “At present, biomass co-firing with coal at big energy plants is the key, but we envisage changes in the nearest future, for example building 100 percent biomass installations or local usage of biomass in small decentralised systems,” Henryk Pyrka, secretary of the Polish Chamber of Biomass, told Cleantech Poland. Mr. Pyrka warns, however, against treating biomass projects as the only renewable way forward. He says that when biomass projects require biomass transport on distances exceeding 100 kilometers, their sustainability can be called into question. The world’s biggest biomass-fired power plant, a GdF Suez project in Połaniec, is facing exactly such a question. (See article, p. 50-51).
“Thanks to the BFB conversion the outdated boiler can be turned into a modern boiler with low emissions and high efficiency. It is therefore a cost-effective way to meet EU targets.”
IMPORTS WILL BE NECESSARY Sadowski says that using forest and agricultural residues as fuel will reduce the plant’s carbon dioxide emissions by 240,000 tonnes per year. Roman Szerszeƒ, Metso’s general manager for Poland, says the plant will be sourced using forest biomass and agricultural biomass from Poland and imported: forest industry resi-
ing wood pieces, sawdust, and wood shavings. The remaining advantages, Metso officials said, are SO2, NOx and dust emission reduction as well less ash. Critics suggest that this type of operation is a way of getting green credits, and a cheap way of not getting engaged in more costly, but also more sustainable, solutions. The Massachusetts Environmental Alliance has argued, for example, that biomass degrades air and water quality and increases logging, but is marginally cleaner than fossil fuels. Mr. Szerszeƒ is adamant that this is not the case. Before biomass can be burned, boilers need to undergo a
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B O IPOI M N IAOSNS
Biomass:
WHAT’S NEWS IN WASTE? Making headlines in H2 2011 September 27, 2011 UPM TO USE POLISH LABELSTOCK WASTE AS FUEL IN GERMANY CUSTOMERS OF FIBRE and biomass processing company UPM Raflatac, can send their labelstock by-products for re-use as a source of energy in a combined heat and power (CHP) plant which supplies heat and energy into the operations of UPM’s paper mill in Schwedt, Germany, the company revealed in September 2011. Polish company Drescher Euro-Label – a label printer based in Gorzów Wielkopolski, western Poland - has become the first to supply labelstock waste fuel to UPM Schwedt. According to the Polish firm, until recently, the costs of waste re-utilization were increasing by 20–30 percent every year. “After calculating the costs of waste disposal and transport to Schwedt, it turned out that we were able to reduce our expenses on waste disposal by 70 percent,” Marta Staƒczak, marketing and environmental specialist at Drescher Euro-Label, said as quoted in UPM’s release from late September 2011. “The purpose of conventional waste incineration is to reduce the volume and get rid of the waste, but UPM’s power plant in Schwedt burns solid fuels to produce heat and clean energy,” said Erkki Nyberg, director of business development for the UPM’s Engineered Materials Business Group. According to UPM, utilizing labelstock by-products as a source of energy results in less landfilled waste. It also allows label printers to dispose of their waste in a reliable and sustainable way.
October 5, 2011 EZO GETS €40M FINANCING FOR STARACHOWICE PROJECT EZO SIGNED an agreement with the Kielce chamber of commerce for the financing of an innovative waste to energy facililty. The facility, which will go online in 2013, will employ 30 people and process 30,000 tons of waste annually. The cost of the project is 70 million PLN of which 40 million is provided through the EU Innovative Economy Operational Programme. According to EZO president Maciej Fenicki, the technology provides recovery of plastic waste at a rate of 80 percent, compared to conventional technologies which are closer to 40 percent. “Older technologies are not only less efficient, but their by-product is paraffins that would still need further processing. Out technology results in sulphur-free oil that’s ready to be burned,” Mr. Fenicki said, as quoted by industry portal wnp.pl.
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The installation will also be capable of recycling waste from tetrapak type of packaging (tetrapaks are carton containers for milk or juices, made of aluminum, paper and plastic). The Starachowice project will be powered with the energy it will obtain from waste and trade the energy surplus on the market. Last year, EZO made its debut on the NewConnect, the WSE’s alternative market.
October 12, 2011 INCINERATOR CONTRACTS WORTH MILLIONS MILLIONS OF EUROS are at stake for companies that will prove capable to develop waste incineration installations that Polish cities are working on. Incinerator development contracts have already attracted a number of companies to Poznaƒ, Kraków and Białystok. Elsewhere, the race is only heating up. Local authorities in Konin (contract there is worth PLN 312, €73 million), Koszalin (PLN 418 million, €97 million), and Łódê (PLN 890 million, €207 million) are yet to announce tenders. One other incinerator will be developed in the Katowice region at a cost of PLN 1.5 billion (€350 million), but the timeframe for the project isn’t determined. Just how attractive these contracts are is clear in cities where the tender process has been going on for a while. The race in Poznaƒ (PLN 700 million, €163 million), is now between ITPOK Poznaƒ (an E.ON company), Articulus (part of Wheelabrator) and Sita-Zielona Energia (GDF Suez). In Kraków (PLN 645 million, €150 million), the short list consists of consortium of PBG Energia, Control Process and CNIM; another consortium of Budimex, Keppel Seghers and Cespa and one made of PolimexMostostal, Instal Kraków and Fisia Babcock Environment. Mostostal Warszawa and Posco Engineering and Construction are also running. The authorities of Białystok (PLN 532 milion, €124 million) are yet to shortlist contractors. There are 12 companies interested in the contract. There are consortia: Polimex-Mostostal and Fisia Babcock Environment; Budimex, Keppel Seghers and Cespa; PBG and CNIM; Bilfinger Berger Budownictwo and KAB Takuma; Hochtief Polska, ZRE Katowice and Babcock & Wilcox; Sices Polska and HERA; SNC Lavalin Polska and Baumgarte Boiler Systems; Astaldi and Termomeccanica Ecologia; as well as Imtech and Visser & Smit Hanab. Rafako, Mostostal Warszawa and Posco Engineering & Construction are bidding individually.
WA S T E T O E N E R G Y
WASTE-TO-ENERGY IN HOMES, WHERE TOO MANY PEOPLE ARE BURNING TRASH TO HEAT
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ESTER EKO’S TECHNOLOGY SUPPLIERS: MR. ROSS DICKINSON, PRESIDENT OF ENECO SYSTEMS, AND MR. ROD JOHNSTON, VICE PRESIDENT OF SALES, IN FRONT OF THEIR GASIFICATION MODULE
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W A SITNET E TR O VEI N EW ERGY
Zero Waste, Ester-Eko’s Story
You can throw it away. Or you can sort it, sell it, truck it, burn it and use second-generation heat to keep the fish in the fish ponds very very happy. BY PARKER SNYDER PHOTOGRAPHY BY ESTER-EKO
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“The great thing about a gassification plant is people pay you to get rid of their waste. We are part of the waste solution chain.” IF THERE’S ONE THING Mariusz Pawlak needs it’s a good pair of shoes. Working as the country manager of Ester-Eko, a waste-to-energy company, he’s often on the move between Gdynia (his base of operations) to Warsaw (his contract engineers) to Krakow (his environmental consultants). But all that trekking through Poland has finally paid off. In spring of 2012, Mr. Pawlak will begin construction on their first gassification waste-based power plant, in the city of Włocławek. When the plant goes online, it will process 100 tons of waste a day or about 35,000 tons annually. In a year or so, Ester Eko will produce heat and power in a facility that may earn 20 percent IRR.
however, did not change much until June of 2011, when a Polish law made municipalities “owners” of the waste. Previously various entities controlled the waste management process, sometimes local municipalities called gminas. There were gross conflicts with this model. Before the new law, when the municipality was tasked to get rid of waste, they often owned the landfills, so they didn’t have a financial incentive to invest in costly recycling or incineration plants. Now municipalities face stiff waste disposal costs called “tipping fees” if they send the waste to landfills. Since that legislation was adopted, a flowering of waste-to-energy tenders have been announced - all based on incineration.
WASTE OF A STORY Here’s a thumbnail sketch of waste in Poland: over 90 percent is landfilled, very little is recycled, and as of late 2011, next to no energy benefit is derived from the methane and hydrogen embedded in plastics, papers and food-remains. Since the early days of Poland’s membership in the EU, the European Commission has been trying to change that. Back in 2008, a directive on waste was adopted in Brussels, meant especially for the newest member states like Poland, Hungary and Latvia. In these former communist countries, waste management practices were essentially the inverse of their Scandinavian neighbors, who recycle or incinerate more than 60% of their waste stream. Sweden and Finland, for instance, recycle more than 30%. “The EU is moving closer to a recycling society,” the European Commission wrote in the 2008 directive, and as the community’s executive body, they sought to pull Poland along by the teeth. Waste management practices,
BATTLE BETWEEN TECHNOLOGY Incineration is the combustion of waste inputs. Gassification is also a way to treat waste thermally, but in an oxygen starved environment. Whereas incineration reaches temperatures of 1,000 degrees Celsius or more, gassification reactions are sustained at 600 degrees Celsius, over longer periods of time. During gassification, the combustible gases (methane, oxygen and hydrogen) are taken out of the waste stream and piped to a separate part of the plant for use in a steam turbine combined cycle. By separating combustion from thermal decomposition, gassification improves the efficiency of its waste-conversion operation, considerably. According to David Boyd, president of Ester-Eko, “Forty percent of the mass goes to a landfill from incineration, but a gassification plant leaves about five percent, and that small portion can be used in construction.” Even the second generation waste heat can be sold, for instance, to heat fish ponds.
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WŁOCŁAWEK Mr. Boyd and Mr. Pawlak have been working for two years to get the first gassification facility built in Poland. It’s taken them longer than expected, but in spring of 2012, they will begin construction. “The great thing about a gassification plant is people are paying you to get rid of their waste. We are part of the waste solution chain,” said Mr. Boyd. The Włocławek facility will consume about 100 tons of presorted waste “ballast” a day. At full operation, it will nominally produce 5-6 MWh of electricity and 15-18 MWh of heat. The heat will be sold to MPEC, the municipal district heating company, to pre-heat the return side. SNCLavalin, an engineering firm, will do the design work. The project has a total CAPEX of €22 million ($30 million); 75% of the equity has been raised. The Nordic Investment Bank and Nordea are in talks to finance the debt portion at 75 to 22 debt to equity. The project has
W A SITNET E TR O VEI N EW ERGY
MUNICIPAL WASTE THAT’S BEEN PARTLY PRE-SORTED
secured 15 year waste supply agreements, and expects an IRR on equity of around 20 percent. Ester-Eko will sell the heat at €15 per mWh and the electricty at about €90 per mWh. The electricity will be fed into the grid, and the project will obtain a grid connection agreement, a prerequisite if they wish to obtain certificates of origin from the regulator URE. RENEWABLE ENERGY? Certificates of origin are available for waste-to-energy projects, provided the input contains a minimum percentage of organics, but the current renewable energy framework doesn’t recognize gassification (nor pyrolisis). Mr. Boyd still plans on applying for certificates of origin, and has included the certificates in his pro-forma analysis, because most municipal waste streams do indeed contain the minimum 12% organics. “That’s a problem,” Mr. Pawlak. “Syngas doesn’t have a space in the legislation. Technically, only an incin-
eration plant can apply for certificates from URE.” Mr. Pawlak said. But the lack of a guarantee they’ll get certificates of origin for their gassification project hasn’t persuaded them
from future projects. To date, Ester Eko has obtained 14 letters of intent from possible partners. They target medium sized cities of about 100,000 inhabitants. “The beauty of gassification,” Mr. Boyd said, “is the five income streams - tipping fees, heat sales, electricty sales, second generation heat, and a very rich organic fertilizer.” As for the fish in the fish pond, Mr. Boyd thinks it makes good sense to find markets for all the outputs, even “second-generation” heat. What warmth remains after generating power, he aims to pipe away to keep the big fish in a small pond, smiling.
Waste Management in the European Union (2004) Greece Ireland UK Italy Portugal Spain Finland France Luxembourg Belgium Austria Germany Sweden Netherlands Denmark Poland
Landfill
Recycling
Incineration
SOURCE: DEFRA
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Chicken tails & pig feathers BY PARKER SNYDER
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Stuff the remains of the farm yard animals into a digester, then wait around. What you get out is heat and organic-rich fertilizer. The only problem is, no one in Poland has done it, yet.
PHOTOGRAPHY BY KASIA SNYDER & SZYMON SZCZESNIAK
RANDY MOTT of CEERES hasn’t built a biogas plant yet, but that hasn’t diminished his enthusiasm. Since entering an agreement with EDF-EN, the renewable energy arm of the French utility, he’s committed his company’s resources to constructing 15 biogas plants from waste, or more specifically, slaughterhouse waste, such as pig and chicken parts. But the first project, slated for April 2011, has been pushed back. “Biogas plants have a twelve to twenty-four month development cycle,” Mr. Mott said, in an interview with Cleantech Poland. “So it’s no surprise that our first biogas plant has been delayed.” Here’s a typical headache: his waste substrate supplier wasn’t picking up the phone. When Mr. Mott had one of his employees persist, he found out the owner had gone on vacation before finalizing the contract. The lack of a concrete project to date hasn’t dulled his aspirations. “Frankly, we’d like to be the biggest waste biogas company in all of Europe,” Mr. Mott says. In all seriousness, he might just do that. Like a high-speed train, Mr. Mott is putting together project after project. What remains to be seen is whether the government will build him the tracks.
FUNDING, SECURED According to Mr. Mott, the typical biogas company is quite small, exists only on paper, and will float on Warsaw Stock Exchange’s alternative market New Connect when they’ve built a single plant. CEERES, with the help of EDF-EN, aims to employ a more professional strategy. For one, the Warsaw-based company operates out of an office on Post´pu street on the outer edge of the Polish capital. The office, though furnished sparely, has employees. Six, and counting. Recently, Mr. Mott has been joined by Kinga Anasiewicz, who had been working in Denmark as an environmental and construction engineer. Ms. Anasiewicz will be a project manager on forthcoming waste-to-energy facilities. “Biogas is a good practice because it closes the waste loop,” Ms. Anasiewicz said. “But some people are scared, though they shouldnt’ be. That’s what we aim to change.” “For about €6,000 we furnished five rooms. Can you believe it?” Mr. Mott asks. This kind of prudence - the kind of fiscal austerity unknown in southern Europe - has won the hard-working American the financial backing of a large utility and a handful of private investors. Mr. Mott was joined in the CEERES venture by Neil Milne and Keith Muellers, as well as Brian Thompson, owner of a slag recycling company. These individuals retain minority stakes. Bill Fawkner-Corbett of Poland Corporate Finance connected him to EDF-EN. Under the terms of the deal, EDF-EN has agreed to provide project financing in draw-downs from a dedicated fund of €100 million, paid out at certain milestones.
“CEERES is a company with great potential with a massive opportunity in terms of the numbers of projects,” Mr. Fawkner-Corbetter said. “And EDF-EN is not their only client.” Having obtained letters of intent from medium sized cities and municipal heating companies, Mr. Mott aims at an IRR of over 20 percent. According to Mr. Mott, “The only way to do this is to do it at scale. You can’t do one project and sweat every Tuesday. Our strategy is like the carnival game - beat all the pegs on all the horses and watch to see which crosses the finish line first.” What sets CEERES up from other like-minded biogas companies is its love of waste, instead of farm inputs like corn and rapeseed, which are more difficult to secure in long term substrate agreements. But let’s face it, waste isn’t sexy and local residents think it smells. Feedback from local communities has
“I DO NOT THINK, comrades, that I shall be with you for many months longer, and before I die, I feel it my duty to pass on to you such wisdom as I have acquired. Our lives are miserable, laborious, and short. We are born, we are given just so much food as will keep the breath in our bodies, and those of us who are capable of it are forced to work to the last atom of our strength; and the instant that our usefulness has come to an end we are slaughtered.” - Major, the pig, George Orwell’s Animal Farm.
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W A SITNET E TR O VEI N EW ERGY
“You can’t do one project and sweat every Tuesday. Our strategy is like the carnival game - beat all the pegs on all the horses and watch to see which crosses the finish line first.” -Randy Mott, CEERES
prompted Mr. Mott to release a set of FAQs, assuring nearby residents: Danish biogas plants operate with strict odor laws [and] have reached a very high standard of performance. All CEERES plants are built to meet these Danish standards and to provide extremely effective odor control. Among the other pressing questions he addresses on the homepage: What is biogas? What do you need for
KINGA ANASIEWICZ OF CEERES, AN ENVIRONMENTAL AND CIVIL ENGINEER
64 | CLEANTECH | Q1 2012
biogas? How you can offer low-priced heat? EXIT, NOT (YET) SECURED In time, Mr. Mott plans to float the company on a public exchange, although he recognizes it would likely be difficult, as investor appetite is diminished in these days. When capital markets are ready, he says he’ll debut on the Warsaw Stock Exchange (WSE).
No one much doubts Mr. Mott’s enthusiasm. Nor his willingness to engage the public. Nor his enthusiasm to weigh-in on issues facing the renewable energy lobby. What really remains to be seen has little to do with politics, or regulatory frameworks, or even the price of inputs. It’s whether the pigs will go along with his plan.
Green Assets
Inwestycje
What the Polish public needs is a way to participate in the emerging cleantech economy. Now they have their chance, thanks to a new incubator providing financial capital and management coaching.
KRZYSZTOF KACZOROWSKI, CIO CLEANTECH POLAND (CTP): GREEN ASSETS INWESTYCJE (GAI) IS A NEW COMPANY ON POLISH MARKET. WHAT INSPIRED YOU?
CTP: WHAT ARE YOUR STRATEGIC INVESTMENT AREAS?
GAI: It is expected that about a third of the GAI’s investments will be in energy development, operation or maintenance companies. This includes innovators in the smart grid and transmission sectors. In these areas there are great opportunities for Polish entrepreneurs. Another third of our portfolio will be in companies offering high tech equipment and devices associated with controlling or minimizing the use of water and energy. The final third will be invested in companies offering equipment, technologies or services associated with
CP: WHAT MAKES GAI UNIQUE?
GAI: It is is unique because there is no other way for the Polish public to invest into the innovative environment and energy sectors. These small scale companies we invest in provide a growth investment opportunity often of 5 times the amount we invest or more. We plan on a New Connect listing in early 2012 and this will allow the public to participate in GAI and this sector. What also makes us unique are our people. Bernadetta has 20 years of experience in environmental investing and has over 250 projects implemented under her control. The value of these projects is over €600 million. These projects concerned air protection, industrial and hazardous waste management, water, wastewater treatment and integrated permits for industry. About 100 of those projects were from the energy sector. Most of those investments have been profitably completed by this time. Krzysztof Kaczorowski has practical knowledge of finance, investment and company management gained in France and Poland. Krzysztof has experience in capital raising, business development, assessment of operational and investment efficiency, identification and assessment of transaction risks. He
will be deeply involved with assisting our entrepreneurs to make their corporate and organizational strategies come true. GAI as a member of EFICOM group can use Eficom’s network of about 200 experts from many fields of clean technology, including smart grid technologies and energy efficiency. All these factors combined with the experience of Environmental Investment Partners as a significant minority shareholder in GAI, shaped GAI as an unique vehicle for investing in clean technologies. CTP: WHAT ARE THE EFFECTS OF THE FIRST FOUR MONTHS OF GAI’S ACTIVITY?
GAI: In this short period, the first four months of operation, the Company implemented the first investment in Esperotia Energy Investment (EEI). We have several more investments to announce soon. Please keep track of our growth and development by going to our web page: www.gai. com.pl or www.eficom.pl.
Poland’s RES targets NREAP 2010
2020
RES Power Production
9.1% 6.2%
15.5% 19.4%
Heating & Cooling
12.0%
17.0%
Transport
5.3%
10.2%
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ADVERTORIAL
GAI: The investment opportunities that we are seeing. Eficom, our leading shareholder, is a market leader in EU grant financing for environmental projects and an authorized advisor to New Connect, Warsaw Stock Exchange’s alternative market. We founded GAI as a vehicle to provide capital to innovative and entrepreneurial Polish companies. We operate as a traditional incubator providing not just capital. We are company coaches. We assist with grant funding. We provide listing and bond issuance services. All of these are coming from a single source so that Polish entrepreneurs can focus on what they are best at: being innovative.
solid waste management or recycling and waste water or sludge management. Of particular interest will be companies associated with shale gas waste water treatment and drilling muds recycling.
TOP 10 CLEANTECH LAW FIRMS
LAWYER RANK
LAW FIRM
PARTNER
BSJP Taylor Wessing
1 2 3 4 5 6 7 8 9
Weil, Gotshal & Manges Wierzbowski Eversheds Drzewiecki, Tomaszek & Wspołlnicy Gide Loyrette Nouel Chmaj i Wspolnicy K&L Gates Chałas & Partners Chadbourne & Parke
SIZE
CLIENT LIST INCLUDES Christian Schnell
50
christian.schnell@bsjp.pl
ENEA, NORD L/B, Raiffeisen,, Renerco, Saxovent, European Energy Group, EGL, NBGI Private Equity, Vestas, Alpine Energie, Epuron, PNE Wind, Starke Wind, Danish Windpower Arek Krasnodebski
Salans
CONTACT
140
Rondo ONZ 1, 00-124 Warsaw
Areva, Dalkia, Energa, Europol Gaz, Evonik, GDF Suez, Gamesa, Gazprom, GWEP, Halliburton, LNG Energy, LitPol Link, PGE, PSE Operator, RWE Stoen, Vattenfall Paweł Rymarz
tel. +48 22 520 4000, pawel.rymarz@weil.com
67
CEZ, Enea, Energa, EuRoPol GAZ, GE Hitachi, J&S Energy, Mercuria Energy Group, OPPPW, Petrolinvest, PGE, PGNiG, Polenergia, Prokom Investments, Tauron Polska Krzysztof Wierzbowski
t: 22 50 50 763, maciej.jozwiak@eversheds.pl
68
Westinghouse/Shaw, ENERGA S.A., PKN Orlen S.A., Rafako, Eolica, Weatherford, Carbon Trust, Blue Green Energy, Fortum, Biofuel Wales, RWE npower, Veolia tomaszek@dt.com.pl A. Tomaszek, Z. Drzewiecki, drzewiecki@dt.com.pl M. Kacperska KGHM Polska Miedz S.A, PKN Orlen SA, Vattenfall Heat Poland SA, PIECOBGIOAZ S.A., NWT a.s., RES Renergys Development SA, PGE S.A.
Robert Jedrzejczyk
70
robert.jedrzejczyk@gide.com tel: +48 22 344 00 00
50
Dalkia, Veolia, PGNiG, KGHM Polska Miedz, EDF, Suez SITA, Bionersis, Green Bear, Air Liquide, PGE, Polskie LNG Sebastian Fabisiak
47
fabisiak@chmaj.pl
ENEA S.A., PKE S.A., Elektrownia Kozienice S.A., Elektrownie Wodne Sp. z o.o., Energa Kogeneracja Sp. z o.o., Katowicki Holding Weglowy S.A., Kampania Weglowa S.A. Tomasz Dobrowolski
tomasz.dobrowolski@klgates.com tel. +48 22 653 42 21
45
[Confidential] [Not specified]
chwp@chwp.pl
[Not specified]
ENEA, Energa SA, PSE Operator, KGHM Polska Miedz S.A, PGNiG, Zakład Utylizacji, Elektrownia Kozienice S.A., Shell, Katowicki Holding Weglowy S.A., Dewon SA Igor Muszynski
klasocki@chadbourne.com, imuszynski@chadbourne.com,
[Confidential]
33
TOP 10 Cleantech Law Firms RANKING Law Firm ________________________________ Energy/Environmental Partner ______________________________
1
OPTIONAL
3
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Please check off any segments in which the firm PLANS TO DO work in the next five years.
B
2
Please check off any segments in which the firm HAS DONE work in the last five years.
B a io s m Cl as ea s n Gr co ee al n Ge bu ot ildi h n Hy erm g dr al So opow lar er
Contact details (to be published) _______________________________________________________________________
Clients include __________________________________________________________________________________ __________________________________________________________________________________ 2010 Revenue ________________________(EUR) Number of lawyers _________________________
The results of this survey will be published in the inaugural edition of the Cleantech Quarterly due out on November 26, 2011. Please email completed survey to: Parker@CleantechPoland.com Contact: Parker Snyder, Executive Director (+48) 517 469 881
LEGAL
HOW WAS THIS RANKING CALCULATED? INVITED
PARTICIPANTS Baker & McKenzie BSJP | Taylor Wessing Chadbourne & Parke Chalas i Wspolnicy Chmaj i Wspolnicy Clifford Chance CMS Cameron McKenna DLA Piper Wiater DMS DeBenedetti Majewski Szcześniak Drzewiecki Tomaszek i Wspolnicy DZP Domanski Zakrzewski Palinka Gide Loyrette Nouel Grynhoff Wozny Wspolnicy Hogan Lovells K&L Gates Koksztys Kancelaria Mamiński & Wspólnicy Miller Canfield Norton Rose Salans SK&S Wardyński i Wspólnicy Weil, Gotshal and Manges White & Case Wierzbowski Eversheds
Thank you for completing this survey compiled by Cleantech Poland Sp z o.o. with registered address at ul. Pustelnicka 48/22, 04-138 Warsaw | NIP 1132817017, KRS 0000364423
A survey was sent out to 25 firms
1 point was awarded for each past segment
Future segments decided ties
Overall ties went to larger firm Investors can find a Legal Portal at www.cleantechpoland.com/legal or scan this QR Code in your smart phone FOR A LEGAL REFERAL WRITE TO PARKER@CLEANTECHPOLAND.COM OR CALL (+48) 517 469 881
Does solar need a permit?
Investors in the solar sector could face uncertainty about construction permit requirements and impractical land use regulations.
BY E VA - M A R I A M AC I A Z E K
68 | CLEANTECH | Q1 2012
PHOTOGRAPHY BY GOLDEN SUN AND KASIA SNYDER
I N TL E ER GV A ILE W
ACCORDING TO POLISH LAW, THIS SOLAR PV DOES NOT NEED A PERMIT. OR DOES IT?
IN PRINCIPLE, assembly or construction of any facility can be initiated only after obtaining a construction permit. This simple rule is subject to varying interpretations in the case of solar collectors. Doubts may arise whether solar collector installations are civil structures and whether obtaining construction permit to build them is necessary. According to the construction law, a civil structure should be understood as a facility, which isn’t a building or a small architectural object. The definition also includes a list of examples of civil structures. It is assumed that this list is not exhaustive. According to the definition, civil structures could be free-standing industrial installations or technical equipment, public utilities networks, as well as construction elements of technical equipment (boilers, industrial furnaces, wind farms and other equipment). Therefore solar panels can be treated as technical or other equipment, which are not directly
mentioned in the list. There are also regulations in the construction law that contain a catalogue of construction works conducted in regard to facilities, which are exempt from the obligation of obtaining a construction permit, for example free-standing solar collectors. So solar collectors are subject to building per-
culture or forestry status. Photovoltaic installations and equipment are light constructions, not permanently fixed to the ground, easy to remove and in fact not much prohibiting agricultural production. The Polish administration, however, has a different point of view: the status of land has to change, even if only a part of the land is used for purposes different than agriculture or forestry. Changing the status of the land requires an update to the local master plan. If there is no local master plan in force, the land’s agricultural or forestry status is removed by a decision of the appropriate authority. If photovoltaic project is going to take place on agriculturally valuable soil, at least 0.5 hectare in size, classified as I, II, or III class soil, then removing agricultural status of such land must only take place via changing of the local master plan. If there is no local plan, it has to be put in place first.
“The status of land has to change, even if only a part of the land is used for purposes different than agriculture or forestry.” mit, with an exception of free standing solar collectors. IT’S EITHER - OR A significant part of Polish territory is occupied by agricultural or forestry production areas. Investments may be carried out on such real estate, outside of city’s administrative limits, as long as the land’s legal status is changed. Investors in photovoltaics might think that due to the specific features of their projects, there should be no need for the real estate to lose its agri-
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Great expectations The government says the new law on renewables is just about to be released for public consultation by stakeholders in the sector. They’ve been saying the same thing for a while. BY WOJCIECH KOSC
70 | CLEANTECH | Q1 2012
PHOTOGRAPHY BY KASIA SNYDER
“WE’RE DISAPPOINTED,” said Krzysztof Prasałek, head of the Polish Association of Wind Energy after the Polish government further postponed publishing the draft law on renewable energy. “Public consultations were to begin by October latest,” Mr. Prasałek said on the draft law, which should have been adopted a year ago. WAITING FOR THE DRAFT During a recent conference on the new law, organized by a renewable energy sector employers association, Janusz Pilitowski, head of the energy department at the ministry of economy, talked about “creating a mechanism to progress from the current system to the new one.” The closest he got to details was when talking about an important feature of the new law - that it will support micro-installations, operating independently of the grid operator, so that a more decentralized system of power supplies emerges. That was still just talk, of course. Some of the less patient - or having more to lose by waiting - businesses have already started to let go of Poland as a prospective market, one biogas sector insider revealed at a conference earlier this year. Patience of the renewable energy developers and investors has been tested indeed. So has been the European Union’s, because - as is with everything to do with environmental policy - Poland’s new law on renewables has never been the government’s own idea. Poland committed to push through the new law on renewable energy by end of 2010 in a EU-required and binding policy plan, called the National Renewable Energy
Action Plan (NREAP). According to the document, Poland should achieve at least 15.5 percent share of renewable energy in overall energy consumption in 2020. Within that goal, renewables should account for 7.05 percent in heating and cooling sector, 19.13 percent in the energy sector, and 10.14 percent in transport. At some point in 2011, the Polish government even upped the overall 2020 target to 16.78 percent. But the more modest goal from the NREAP will be almost impossible to arrive at without the new law on renewables, according to renewables sector.
sources of energy, requiring different investment outlays, like co-firing biomass with coal or photovoltaics,” said Michał Siembab, director of EWE Zielona Energia. Siembab and Hogren spoke in a survey, commissioned in October 2011 by BSJP Taylor Wessing law firm and carried out among the companies from the renewable sector by MillwardBrown SMG/KRC. Difficulties also include unpredictability of green certificates’ value and the risk of their value dropping in the nearest future, grid connection issues, administrative barriers and the length of the land planning procedures. If the public consultation process results in solving sector woes by reaching a compromise - where everyone gives up a little so that everyone wins in the long run then Poland’s renewable future might just become realistic. Because, as Grzegorz WiÊniewski, head of the Renewable Energy Institute likes to put it, the proper regulation isn’t there for the businesses. It’s for sustainability.
HOW TO RIGHT THE WRONGS The catalogue of grievances that the industry has been addressing to the political policymakers entails virtually all elements of the investment and operational processes. “The system in Poland is not predictable and transparent enough compared to other countries, like Sweden, where you can credibly assess whether your project will take off or not as early as in the pre-study phase,” said Peter Hogren, CEO of GreenPlanned Investments in Renewable Energy field Wind. (2012 - 2013) “We’re not Project Size 2012 2013 TOTAL going to move anyway for25 49 74 < 1 MW ward without 25 23 49 1 - 5 MW establishing a coherent sup30 21 51 5 - 20 MW port system. 50 29 79 20 - 50 MW The current system of 18 50 - 100 MW 19 37 certificates of 2 7 > 100 MW 5 origin doesn’t account for TOTAL 154 143 297 varied types of renewable Source: BSJP 2011 Survey
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I N TL E ER GV A ILE W
“The system in Poland is not predictable and transparent enough compared to other countries, like Sweden, where you can credibly assess your project’s chances in the pre-study phase.” - Peter Hogren, Greenfield Wind
Derogation
Nation BY GRZEGORZ LANG
72 | CLEANTECH | Q1 2012
Rather than face the music, the Polish government wants the EU to excuse them from CO2 emission requirements. Not only is this a bad idea, but itâ&#x20AC;&#x2122;s coming during the EU presidency, when Poland should represent a broader ideal. PHOTOGRAPHY BY KASIA SNYDER
I N TL E ER GV A ILE W
ON SEPTEMBER 30, 2011, hours before final deadline, the Polish government submitted to the European Commission a list of power installations that Poland considered legible to temporarily escape the new CO2 regime. In April 2011, when the new Polish law on system of trade in allowances was decided in the Polish parliament, ClientEarth foundation claimed that points regulating legibility of installations to receive free allowances were in conflict with the European law. ClientEarth is an NGO advocating more stringent approach to emissions from coal. BSJP Taylor Wessing argues that ClientEarth’s opinion is based on a misinterpretation of the EU directive establishing European Emission Trading System (ETS). The new CO2 regime introduces an obligation to buy all CO2 emission permits via auctions. The obligation is part of a mechanism facilitating modernization of electricity infrastructure and, from 2013, will replace the current system of free emission permits that states allocated within national CO2 emissions caps. The ETS has been evolving since it began in 2003 with entry into force of the Directive 2003/87/EC and its further modifications. The ETS is arranged in so-called phases. The current phase is phase 2, to last between 2008 and 2012. The new CO2 regime, with auctioning of permits, will be the ETS’ third phase and will last from 2013 to 2020. The ETS’ third phase will see the elimination of national emission caps. There will be a single EU-wide cap on emissions instead, reduced by 1,74 percent annually to eventually
bring down CO2 output by 20 percent against the base year of 1990. Before full auctioning takes over, some permits will continue to be granted free of charge, in line with the Directive 2009/29/EC, which amended the original 2003 Directive. The Directive 2009/29/EC contains Article 10c, allowing a possibility to allocate free allowances to certain power-generating installations, provided that a set conditions is met. Basic conditions are that free permits could be granted to those powergeneration installations that were in operation by 31 December 2008 or ones not online yet, but their investment process physically initiated also by end of 2008. Additionally, it must be demonstrated that the investment decision wasn’t influenced by the prospect of receiving free emission permits. To prove installations’ legibility,
installation project is considered underway before December 31, 2008 if “preparatory works” were initiated on a construction site. What is and what isn’t underway by the end of 2008 deadline has created some controversy in Poland. In a much publicized case, ClientEarth argued that the Polish law aimed at circumventing the general principle that free allowances should not be allocated to electricity production. Granting free allowances to installations begun before end of 2008 is a way to allow some member states with energy systems in need of modernization, like Poland, to do just that: upgrade the systems so that there will be fewer emissions in the long run. Member States resorting to the option must submit modernization plans to the European Commission. The Commission itself is well aware that new coal fired power installations getting free allowances does represent a deviation from the overall policy line, having officially said that it “represents an exemption from core principles of [the ETS directive].” Each and every case must be justified and will be scrutinized by the Commission. The “free” allowances imply specific obligations as well, for example that the value of free emission allowances will have to be mirrored by the modernization investments. The whole set of new directives, regulations, communications and guides which constitutes framework of the ETS’ and one must consider that there are plenty of exceptions and technical details - most often the result of the negotiations between the member states themselves and the Commission.
“Hours before the final deadline, Poland submitted a list of power installations to be exempted from CO2 requirements.” member states should provide evidence that construction work was physically started onsite and was visible by 31 December 2008; or a contract for the construction of an installation in question was signed before 31 December 2008 between an investor (often the operator of the plant) and a general contractor. More specifically, the Polish law on emissions trading from April 2011, stipulates that free allowances may be allocated to installations with capacity below 20 MW and generating electricity for sale to third parties. As for getting free allowances granted to an installation that seeks them, the Polish law says that an
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Old King Coal, alive & well B Y J O H A R P E R
74 | CLEANTECH | Q1 2012
EU’s largest coking coal producer lashes out at the bloc’s ride to a low carbon economy. The ambitious investment program of Jastrzebska Spółka Weglowa suggests the ride will be long and bumpy. PHOTOGRAPHY BY KASIA SNYDER
JAROSŁAW ZAGÓROWSKI, CEO of Jastrz´bska Spółka W´glowa (JSW), Poland’s listed coking coal miner, is not a big fan of the EU’s decarbonization policy. “It is very painful for us, and it could weaken the EU’s competitiveness on global markets. The regulations should be tailored to each nation’s needs,” he said. Zagórowski believes that coal will remain the main source of power in Poland for many years to come. “At this stage shale gas is at a very preliminary stage, nuclear is 20 years off, and renewable energy is tiny,” Mr. Zagórowski said. “The question is what happens to the income from the certificates to green energy companies. The secondary market seems to be doing well out of this, and the traders, but does it really work to reduce emissions?” Mr. Zagórowski said. The certificates that Zagórowski refers to are a way of encouraging the larger energy producers to shift towards renewable sources by rewarding those seen meeting emissions targets. The target is 15 percent of all power produced in the EU to come from renewable sources by 2020. Zagórowski’s questioning the sense of the certificates and cutting down CO2 emissions might not be a bad one. Only that that JSW, one of Europe’s largest coal companies, might be expected to hold a skeptical view of regulations that many think will result in phasing out coal from the energy mix in the EU. CARBON INTENSITY The CO2 intensity of the Polish economy has declined significantly over the last 20 years, but is still much higher than the average among European IEA member countries. The EU’s Power Perspectives 2030,
the second phase of the EU’s Roadmap 2050 report from the European Climate Foundation, which was released in early November, for example, proposes “a complementarity between a diverse portfolio of renewable energy sources and flexible gas-fired plants to drive power sector decarbonization in the next two decades”. Poland’s energy mix is currently dominated by coal, which accounts for 55 percent of primary energy supply and over 90 percent of electricity generation. The country’s nuclear energy program envisages at least three nuclear units by 2030, with the first to become operational by 2022. JSW itself operates five coal mines with total reserves of 552 million tons of coal. It appears, however, that JSW thinks nothing of the upcoming downfall of coal, or is convinced that the downfall is never going to happen. JSW’s chief financial officer Marek Wadowski says that the company is in talks with 12 banks about a five- or seven-year PLN 1 billion (¤235 million) bond issue program. One of the banks that JSW is talking with is Spanish, two other Polish and the remainder are international banks with operations in Poland, Mr. Wadowski said. FLUSH WITH CASH “We are cash rich at the moment and feel that this is the ideal time to take advantage of our strong position. The bond issue program would be part of a possible acquisition spree in the mid-term, maybe via joint ventures,” the CFO said. JSW will invest over PLN 1 billion (¤235 million) in energy projects by 2015 to meet its demand and diversify the company’s revenue sources. The company will strive to develop power generation and make it one of
its main revenue sources alongside coal and coke production. One of the main energy projects is a PLN 635 million (¤143 million) fluidized bed combustion block of 700 MWe (electrical) at the Zofiówka heat and power plant, which will help JSW achieve its goal of full energy independence by 2015. JSW’s capex was about PLN 500 million (¤120 million) on acquisitions in the third quarter of 2011, buying an 85 percent stake in Victoria, a coking plant, and an 85 percent stake in heat distributor PEC Jastrzebska in the southern Polish city of Jastrz´bie Zdrój. “We have set PLN 1.5b per annum capex for the next 5 years, and [JSW-owned unit] Spółka Energetyczna Jastrz´bie (SEJ), might need about PLN 700 million in investment,” Zagórowski said. JSW’s ambitious investment program could mean that other companies along the coal industry’s food chain are considering buying into JSW a good business idea. One such company is W´glokoks, Poland’s state-owned coal exporter. W´glokoks, itself in preparations for an IPO, reportedly purchased about 360,000 of shares in JSW, paying PLN 100 per share, which means it had spent about PLN 36 million (¤8.13 million). Recently, JSW stock traded at about PLN 90 (¤20.3) per share. Following the buy-in, W´glokoks may only have 0.3 stake in JSW, but according to unofficial informaton from the market, the company plans to exert a bigger influence on JSW by placing its representative in JSW’s board of executives. If the road to low carbon economy excites coal companies themselves to such investment strategies, of what use is the road?
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I N TCEORAVLI E W
“Shale gas is very preliminary, nuclear is 20 years off, and renewable energy is tiny.” - Jarosław Zagórowski, Spółka Weglowa
EVENTS
CALENDAR Our spring calendar is heavy on equity. That’s for a reason. Poland, to meet its ambitious RES targets, will need an influx of private equity and bank financing. Its a €15 billion market by 2020.
February 28
May 22
REFF GERMANY, the Renewable Energy Finance Forum, is a ten-year running event that brings bankers, equity investors and technology leaders together in one room. This year’s event will focus squarely on Germany’s decision to de-commission nuclear power and replace it with clean alternatives.
THE POLISH WIND ENERGY ASSOCIATION’S annual wind energy conference. Although you won’t like the drive from the city center to O˝arów Mazowiecki, it’s worth going to meet the likes of vendors Vestas, GE and Enercon, or to hear the Institute of Renewable Energy give its annual survey on wind power.
FEBRUARY 28 - 29, 2012, Berlin, Germany at the Mövenpick Berlin Hotel.
MAY 22-23, 2012, Warsaw - O˝arów Mazowiecki, Conference and exhibition - a few of the topics: wind integration, offshore wind.
www.euromoneyenergy.com
www.psew2012.pl
April 16
June 18
THE CLEANTECH GROUP puts on two forums - one in North America and one in Europe. Munich will host this year’s Cleantech Forum event, a must for equity and venture capital investors. Go there to meet Cleantech Poland, and to hear about cleantech in the CEE, as we aim to broaden the scope to include Europe’s eastern-most countries.
THE EUROPEAN BIOMASS CONFERENCE will be in the Milan Convention Center in Italy. For those who have taken the position that biomass in large co-fired facilities is not beneficial to the environment, go there to make your voice heard. This is a huge conference: more than 800 presentations.
APRIL 16 - 18, 2012, Munich, Germany, Cleantech Forum Europe, here technology companies pitch to investors.
JUNE 18 - 22, 2012, Milan, Italy at the convention center MiCo; abstract for speaker presentations due on January 30, 2012.
www.cleantech.com/upcoming-events
www.conference-biomass.com
76 | CLEANTECH | Q1 2012
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In this column, insiders will be invited to comment on cleantech. Anders Frisk, investment director at Sustainable Technologies Fund in Sweden, shows how ground source heat pumps could win markets outside of the Nordic countries.
BY ANDERS FRISK A PERFECT opportunity for cleantech venture capital investors has yet to deliver. The geothermal heat pump (GHP) is a proven sustainable technology with a huge potential to cut energy costs and reduce CO2 emissions globally. The GHP is a clear case of what Nordic venture capital is made to look for – a valuable local technology in need of capital to start an aggressive sales expansion. Venture capital has steered clear of GHP opportunities, however. Lack of interest comes from a weak business model holding the market back. Recent GHP business model innovations taking place elsewhere might be just what the Nordic market needs to take off. GHPs take advantage of the fact that the Earth’s temperature two to three meters underground is constant at 10-15°C. A GHP is a heat exchanger, using a grid of tubing with a circulating mix of water and glycol to extract this heat from ground. The tubes are drilled into bedrock or covered with soil and although the GHP depends on electricity to work, it typically extracts four times more heat energy than the consumed electrical energy.
PHOTOGRAPHY BY STF in other parts of the world. The technology is proven and fills a market gap. The latest CO2 abatement report from Mckinsey & Company identifies heat saving in buildings as one of the least costly ways to achieve a large reduction of CO2 emissions. But the predominant GHP business model seems unfit to capture this opportunity. At the moment, a typical GHP company mainly targets smallhouse installations. But in the large-scale market, venture capital needs to look for new business models. Today, the largescale market is undeveloped because it’s unclear who the customer should be. Owners of commercial real estate seem like good candidates, but aren’t. They treat heating as an operating
like a mainstream market that venture capital-backed company should target. But a revolution of the GHP business model that venture capital should look for is happening right now. BECOME THE UTILITIES Geoxperts, a Canadian GHP company, started to turn itself into a utility last year with the help of GHP technology. Today, Geoxperts aims to fully own its installations, and just provide its customers (real-estate owners) with heating as a service, as any gas or electricity utility would do. The value proposition to clients relies on unprecedented pricing reliability. Thanks to the level of predictability with which Geoxperts generates its heat, it can provide clients with a fixed long-term energy price, independent of international markets or grid constraints. The GHP company benefits from this model in several ways. With full control over all installations, the company can increase its energy yield by fine-tuning the system. It can also build remote monitoring systems handled by expert staff, creating economies of scale and responding rapidly and accurately to heat pump failures. In all, a GHP company with the business model of a utility attracts mainstream real-estate owners previously out of reach for the technology; it has numerous ways to increase its margins; and it will probably build proprietary knowledge. If this business model could be coupled with scandinavian GHP know-how, venture capital and GHP companies in the region could really break new ground – literally.
“A revolution of the GHP business model is happening right now .”
NORDIC, NOT WORLD In most markets, the GHP technology only provides a small portion of total heating. In the Nordic region, however, it is mainstream of small house heating. With 300,000 installations in Sweden (the world’s highest per capita penetration) GHPs are the country’s largest source of heat for small houses. The potential seems vast for promoting Nordic-like penetration rates
expense to be purchased from a utility in the form of heat or fuel, and then pushed on to end-customers. They are unlikely to invest in a complex and expensive heating installation. If the customer is not the realestate owner, a utility isn’t the right customer, either. From a utility’s perspective, GHPs are small-scale and not rational so long as centralized generation is profitable. That leaves two obvious niche customers: energy service companies, who could invest in GHPs on behalf of property owners through an energy performance contract and institutions that are both end customers and real-estate owners, such as hospitals and municipality-owned companies. Still, these two niches don’t look
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SPOTLIGHT
Breaking New Ground