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Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
by Jerome a Paris
Mon Dec 21st, 2009 at 02:11:20 AM EST
As Copenhagen ends, unsurprisingly, in confusion, I have the opportunity to give you a more positive tale, and show you it is possible for people - including even bankers amongst them - to work towards a more sustainable future without endangering our way of life.
 The Vader Piet 30MW wind farm on the island of Aruba.
This wind farm is quite remarkable in a number of ways:
(part of the wind power series)
Bumped by afew
- at around 60%, it has one of the highest capacity factors in the world, with 50% more power output per turbine than European offshore windfarms;
 it is a windy place...
- it is now providing 20% of the island's overall electricity needs, replacing dirty and expensive fuel-oil in the process. At night, it can produce up to 60% of the demand. And thanks to a highly regular wind regime, this is very stable and predictable production; (even though they pushed for this project to happen, the local power company had quite a shock to see 'for real' how big a portion of their system the windfarm has suddenly become - as is still frequent, utilities have trouble taking wind seriously, but it this case the reality was quite compelling);
 see how the blades bend under the strength of the wind (the second one was switched off temporarily for visits, thus its different orientation in this picture).
- the utility will save money on fuel imports and, more importantly, will actually end up with cheaper power: it buys the electricity from the wind farm at a fixed price over 15 years which is roughly equivalent to what it costs to produce electricity from their traditional (dirty) generators with oil prices at $45/bbl. Who wants to bet on oil being consistently under $45 for the next 15 years? In fact, the prime minister of the island, who was present at the inauguration, used the opportunity of that ceremony to announce lower power prices for the poorest households on the island...
 the windfarm is situated in a very isolated part of the island, invisible to everybody but it adds to that area's spectacular vistas.
- and the reality is that the windfarm has received an enthusiastic welcome by the population of the island - the project team was telling me about how they were people all along the road clapping them when they were transporting the machinery to the site (not a trivial task, as the videos below show):
turbine unloading
turbine transportation through the island both videos by antholejuez on youtube
- and, finally (and this is where I come in), the windfarm was financed at the top of the financial crisis last year. I told the story in a diary then ( How to keep on financing wind farms when banks have no money left.) but it's worth underlining here that one of the most dangerous consequences of the crash is that traditional banking - lending to the economy - has been, and still is, directly impacted and curtailed, as the result of lack of liquidity and heightened risk aversion by banks (which are just as stupid and gregarious in systematically cutting off credit as they were enthusiastic at shoving it onto clients before). So it was an especially proud moment for me to see this project, because we really made a difference at the time, saving the wind farm from a potentially damaging delay, and saving very real economic activity on the island and amongst the suppliers (which are mainly European).
erection works - same source. Wind is a capital-intensive but low risk activity where simple and stable financing structures are both necessary and useful - construction costs need to be spread out over a number of years for power generation costs to make sense, technical and operational risks are understood and very small if you have a competent project company, and the revenue profile is highly predictable, thus making it possible for lenders to provide a large part of the initial cost at a fixed price without requiring any benefit sharing, making this cheaper than equity and keeping the ultimate power price down. This, called "project finance," is the boring kind of banking that makes the economy run but is sadly seen as unsexy or useless whenever new funny products are invented in the capital markets and create opportunities for bonus-generating bubbles... I've already been set aside as dreary 3 times in the past 15 years: emerging market bonds were all the rage in the mid-90s (until the Asian crisis), then the dot-coms were 'it' (until the crash), then the grand multi-product bubble of the past decade, with its mortgage-backed securities, collateralised loan obligations, credit default swaps and the rest. And having being bailed out, they're at it again, while project finance is still suffering - and wind or solar projects get built slower than they could as a result.
 It's real! It's generating power! It's very high!
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