20 Oct 2022
Building our region’s renewable energy capacity
“The current energy transformation is so massive that I think NIB, together with EBRD and EIB, has a huge role to play in providing long-term and reasonably priced financing,” says Veiko Räim, CFO of Enefit Green.
Enefit Green is the biggest wind energy producer in the Baltics with a most diversified production portfolio. The Estonian company produces energy from wind, sun, biomass, mixed municipal waste and operates a capacity of 457 MW.
NIB is part of financing new wind power generation capacity in Lithuania and Estonia with a 12-year loan of EUR 80 million, signed with Enefit Green in January 2022.
“NIB has a huge role to play. Hopefully when partnering up with regional banking institutions, NIB is a really good partner for Enefit Green and we value this cooperation and hope we can do a lot together,” says Räim.
Enefit Green has its home markets from Finland through the Baltics to Poland. The renewable energy producer owns and operates total of 22 wind farms, 38 solar power plants, 4 combined heat plants, a pellet plant in five countries.
“Our ambition is to grow. We see that all our home markets need renewable energy capacity in wind and solar primarily and we would like to build out our opportunity in these markets,” says Veiko Räim, CFO of Enefit Green.
The biggest shareholder remains the Estonian government owned Eesti Energia, of which Enefit Green is the renewable energy arm. Enefit Green’s shares were officially listed on the Main List of Nasdaq Baltic Stock Exchanges on October 21, 2021, offering 66,000 investors an opportunity to contribute to the green transition.
During this summer, Räim and the management of Enefit Green renewed their strategy to better respond to the changed environment brought on by the war in Ukraine and the pressing need to increase energy security.
Previously, Enefit Green targeted its renewable energy production capacity to be 2.4 times larger at 1,100 MW by 2025.
“Now, given the power prices and the need for new production capacities, we see we can do more and grow to 1,900 MW capacity by 2026, which is four times larger than we are today. We have extended and added projects, and some we have brought forward – and we still see opportunities to grow,” Räim says.
Enefit Green is aiming for 50% wind and 50% solar in its portfolio, as solar is a bit cheaper to invest in than in wind farms.
“Our investment plan for 2022–2026 is 1.5 billion euros, so this is the amount of money that we expect to spend on capex, including the turbines and general construction work. It is a sizeable investment, but we see it as a reasonable estimate at this moment,” says Räim.
He says they see upward inflationary pressure from construction and connecting materials. However, prices on solar panel are slowly coming down as are transport costs from China
“In terms of wind, the turbine prices have increased about 10% year-on-year, and we are also seeing a considerable increase in general construction costs in the Baltics,” Räim says, adding that his company has started to split up the constructions in different parts and procure these separately.
“We already see benefits from that.”
Offshore wind takes time
The 2026 plan targeting a production capacity of 1,900 MW does not include offshore. Nevertheless, Enefit Green is currently looking at two offshore windfarm developments together with Eesti Energia. Located in North-west Estonia near the island of Hiiumaa, the first one is owned by Enefit Green and is still in the planning phase. The second one is still owned by Eesti Energia, where Eesti Energia has signed a memorandum of understanding (MoU) with Ørsted to jointly develop an offshore windfarm in Liivi Bay between Estonia and Latvia. This development is currently in the environmental impact assessment stage of lengthy processes.
The company say expects at least one of those offshore projects could be realised in 2028, at the earliest.
“With a few years of construction beforehand we can probably make an investment decision during 2025–2026. So, you know this is ongoing preparatory work because both these are sizeable 1 GW projects, meaning a 2.0 billion euro investment depending on the exact size. There is still a long way to go, so our focus at Enefit Green today is still on onshore,” says Räim.
According to Räim, everybody that are able to build wind farms would like to do that as fast as possible as the market is signal there is money to be made.
“On the other hand, there is the wish that wind farms will be more accepted by local communities and the government. The government is also interested in bringing more capacity online faster.”
However, there is also a second side related to Eesti Energia and other fossil producers in the region.
“Given the lack of gas and potentially extremely high price of gas over the winter period, I believe anything that can produce power will be operated during this winter. In the short term it may not be beneficial for environmental goals, but it is a necessity. However, in the long and even medium term, I believe this crisis will just speed up the transition to renewable sources of power.”
What are your views on the green transition versus energy independence?
“From a purely renewable energy development point of view, of course energy independence and additional renewable capacity do not conflict. Because the capacity that we are bringing online is inside the country, it does not depend on any fossil fuels or any external influence, so I think the current focus on energy independence is telling all renewable energy developers that we need more capacity and faster. I think this is the theme all around Europe, irrespective of whether one is transitioning away from coal, from gas or from nuclear. So renewable capacity is essentially needed all over.”
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