Ep 17 Developing onshore wind projects in Asia and Thailand renewable electricity tender with Olivier Duguet

Ep 17 Developing onshore wind projects in Asia and Thailand renewable electricity tender with Olivier Duguet

Intro

Ben: Hi everyone. I'm Ben.

Yiou: And I'm Hi, welcome to Sustainable Energy Asia podcast. Today we are receiving Olivier Gue founder and c e o of the Blue Circle. The Blue Circle is the onshore wind developer operating in Southeast Asia and is the only foreign developer to have one capacity in the Thailand renewable energy auction in 2023.

Ben: We discussed Olivier's experience in developing wind project in Europe and UX Asia. His views on the drivers behind wind cost reduction and technological advancement. And last but not least, the key factors in winning the auction in Thailand.

Yiou: As always, grateful if you could take the time to rate and comment on the show. It helps listeners to find us.

Ben: Thanks and on with the show.

Yiou: Hi Olivier. Welcome to the show. Could you introduce yourself and explain to us how you came to establish the Blue Circle and develop Wayne projecting Isha.

Olivier: Thank you very much for inviting me and giving this opportunity today, to talk about, my favorite subject wind power and renewable energy in Asia. And, the company I co-founded, I'm still managing, 2013, 10 years ago already the Blue Circle, acquired in Singapore and developing, renewable energy first of all in Southeast Asia, but now a little bit larger in, south Asia, I would say.

 Mainly focusing on wind. But, we're still trying to get into solar, and hydro and the likes. make me, come to Asia. I've done the same in fact, in France. the years 2000 founded, one of the largest renewable only IPPs in France. focusing on wind first and then hydro and solar the idea was to one of the pioneer and, try to push, as much as we can the renewable penetration, in all the southeast Asia countries.

Yiou: That's great. So today we are going to talk first, about onshore wind project development and then to Thailand renewable energy auction. First could you explain what are the main steps to. Develop at Wayne Project.

Olivier: Very simple. We used to say we need three things. First wind, and this is obvious wind is main resource and to know this, we are mapping we have a very powerful. Digital, mapping, tools we use everywhere we go. always need to record the wind onsite with met mast, or speed or lidar. Before even going to the site, before entering a new country, we know already where, main wind spots and sweet spots are. So that's the first thing.

second one is you need the grid. You need to be able to export this energy to the main grid. So this is quite different from one country to the other example, in Thailand nearly all the projects are 30, 40 kilometers from the grid. Which is very far from any other standards. Otherwise we'll try to, select the sites, less than 10 kilometers from a connection point. The shorter the connection point, the lower the cost, so the more effective, production could be.

And then the third point is access. this is a main point. Most of the time in most of the countries in Southeast Asia, we're not installing, wind turbines where there's the most wind. Because it's impossible to access or too far from any grid or any access. we increase size of the turbines the last few years. We're talking about, rot diameters of 170 meters, 180 meters. So blades of 75, 80, 85 meters in one piece or in two pieces. And to get these equipment to the highest point This is a main challenge

So it's a combination of the three and in the most cases, it's not the most windy sites

Ben: That's really interesting. And you have very interesting experience in Europe and Asia. What is your view on the key success factor for developer in Asia? Having your experience in Europe, what's really differs between your experience in Europe and your experience here?

finally if you can, view in which country, do you think, the developing wind assets is more attractive at the moment. And I know it's changing a bit all the time in Asia, but, it will be interesting to have your view at the current moment. What are you looking at?

Olivier: Key success factor, you have to be local. to understand the local context. Especially in Southeast Asia, if you look at, the main, wind markets, Thailand, Vietnam, Philippines maybe Vietnam, most, open to foreigners, we have been the first foreigner to build a wind farming But that's the main point. For the moment, it's really a local thing, and you have to fight against the incumbents.

I would say land use, regulation and laws. The most important before being a power producer, we are a real estate company used to say not the case in solar, but in wind it's about location, location, location.

Every country has they own regulation. They own, set of rules, written or unwritten , which are very difficult to grasp. So, it took us a lot of time, to get this local rules,

the main difference, between developing projects, in Asia in Europe? think we are arriving here. Renewable energy is quite new to the region. So, regulation is very light. I would say an example in Thailand when we started, eight years ago, we had to learn that and still the case in some other countries that there is no setback regulation. So setback regulation, meaning you cannot put, wind turbines, flows to roads, tension lines, houses, villages, temples all the lights.

Arriving here we are seeing that some, players, were not taking into account any of these international standards. For example, in the Philippines, we have been, very surprised, to see people literally living with their houses and family and their feet and the livestock at the bottom of the turbine. Which in the rest of the world. It's forbidden. It's not possible. It's for security reason. And then we have been fortunate enough to have been heard there is now a set a setback regulation in Thailand, we are totally sure and convinced that these regulations will come and have to come because it's for the sake developing and having, well accepted projects.

finish on, your third question on the countries, would say the most, attractive for wind developer in the region today is the Philippines. We're starting to see a lot of activity mainly because President Marcos have changed the foreign, ownership regulation, so we can be now a hundred percent, foreign owned, when you're working in, renewables.

And that's, one of the reason, the market, is, getting, a lot of traction, and will be one of the most attractive in the region.

Yiou: that's interesting. I think now we can look at the technology and costs. Since early two thousands, wind turbines have increasing in size and become more efficient at power generation recently big data and, artificial intelligence have. Demonstrate great potential in resource forecasting.

I think over the last decade we have seen significant technological advancements in onshore wind, and it is often claimed that the cause of wind energy has decreased. we are very curious. How do you see, how much have the cost been reduced and what are the drivers behind those reductions?

Olivier: You're right, from the outside, it's still the same. You have one MAs with, three blades on the top, spinning, with the wind, slowly. From far you can think it's, exactly the same as, 20 years ago.

 In fact, you're totally right that, technology is evolving a lot going toward more favorable to Southeast Asia. Why? Because, next frontier. Of wind energy onshore, is low wind sight

so to increase the size of the market, we have to go to places where there is less wind speed, less wind. You used to class with, class one, class two, class three in terms of wind speeds. Now we are talking about class four, meaning lower and lower wind speeds lower than six meters per second on average, for one year.

So, that's the new frontier. And what it means, it means that the roto diameter, the swept area by the rotor is increasing very fast.

An example, in 2017 we installed in Vietnam the largest rot diameter, of southeast Asia, with turbine of 114 meters rot diameter. we were the first ones in Asia to install the largest rot diameter with 158. So you see that in three years time, we gain nearly 30 meters of blade length. And it's not over. It's gonna continue.

So it's increasing why, to extract more energy out of the same wind. means also that the megawatt install, the generator on top of wind shell is also increasing. 2017, we were talking about new, two megawatt something turbines. In 2000, And now we are talking about installing six megawatt turbines.

All this, technology. Changes are driven by the need to reduce cost and to be even more competitive tomorrow. We still have to be competitive against, fossil fuels. But I hope everybody's listening to this are convinced that the renewable energy are the cheapest. We are much cheaper than any other fossil fuels on the planet. So that's been the case for the last five years. And it's even more the case today, with, energy crisis, following, ukraine war. Especially for wind, we have a much bigger and much fierce, competitor with solar. In fact, we are competing, against solar and solar today in most of the cases. The lowest cost producer in renewables today. So we need to adapt. We need to compete, it's not exactly the same.

The big difference is the number of the megawatt installed because with the increase of size of the rotor, turbines are more and more effective and for the same cost of, megawatt installed, we are now able to produce 10%, 15% more. And that's where the cost decrease is. You can, take advantage of this in two ways.

 You can go in lower wind speeds. So in that case, you will have the same production as, higher wind speeds sites, so you will be as competitive with, other lower, wind speeds, sites. Or you can still, target the high wind speed, but it's more and more difficult to find.

Ben: That's really interesting. I think what you mentioned that, wind, energy asset, the overall cost has decreased, but not as much as has done solar. And, I think that has a lot to do also with the fact that, the capacity is increasing all the time.

And that leads to other engineering challenges on many part of the assets. That's also have some cost. It's a bit less scalable as we grow in size compared to, essentially solar pv where you do one thing and you just do it over and over again.

So there's one thing I want also to discuss we mentioned at the GWEC event we attended, recently in the wind sector, the world is split in two, o m side. So there is the Western oem, the big three, the ge, Siemens, Gaza investors, the Chinese one.

So there's many of them, as you win, goldwin, et cetera. And basically They're supplying developer in different parts of the world, pretty much segregated, where the Chinese is dominant in China. Then these three Western players are basically the supplier, in the western world.

But recently, we've seen, Chinese OEM entering some market in Europe. they have, indeed some cost advantage. They, in term of cost producing a bit cheaper. It would be interesting to have your view on these Chinese OEMs are competitive against the Western counterparts.

And do you think that the Chinese OEMs can take a significant market share in the international markets?

Olivier: We used to hear, chinese manufacturers, they have a cost advantage. they produce are cheaper than others. No, this so not true because all the three you just mentioned, the western ones, for Asia, they all produce in the same place in China. The GE turbines are manufactured, few kilometers from the goldwin ones, in the same place in China. In terms of cost, competitiveness, I think, they are playing on the same field. very big difference is that for the last 10 years, China, in terms of wind I've been the largest market , two or three times, the size of all the others combined . They had. The huge home market, to service for the last, 10 years. And so they can decrease the cost because of the size, given the size of their market and production.

So, so I think the main. Competitive advantage that they can is their own home market and the size of the home market. um, you know, Western, turbine manufacturers where they could be very big, but they have not a home market that size of China.

So they're obliged to, work on very different locations, and have a higher cost because of this. You're right that, the market is shifting. Ukraine war, changed the world of energy especially, Western energy landscape, and now Western Europe is, scrambling to build renewable energy, capacity, as fast as they can, to, compensate for the loss of gas, from Russia, So, this makes a very big difference. Offshore, onshore, all the markets on fire. You know, the EU is streamlining, regulation the permits, to allow renewable energy to, install more capacity faster, the main capacity of, the Western turbine turbine manufacturers is stuck.

 Today, Vestas or Siemen, Jesa GE or, others, they will tell you they have nothing to sell outside of Western Europe. The market is so booming, and the prices are pretty good, they don't care about, selling to other markets. So, the market is now, left alone to the Chinese, turbine manufacturers, who are starting to see their own going to a maturation phase. So they need to go international. They need to, go abroad. We are the first, in Southeast Asia, south Asia to receive these markets for This is a big market shift think most of them, not all, but most of them have, tackled their bankability and the insurability issues. They are also getting used to, international markets which is very different than China, where the turbine manufacturers have to take some more risk.

only giving away the turbines out of the factory, which is the case I think, in China. not even caring about the mast, they're not sending the turbines with the towers China. For me was very surprising the first time I heard this. And the first time I talked to them and said, well you take the turbines from, my factory and, and you take care of it. But international markets, is not working like this. If you want to sell your turbines, you have to install them and commission them and gimme guarantees, on them, because otherwise I won't buy them.

 It was quite a few years ago, so now they are used to this, and now they are just starting to realize that, international market is different. You have to give long term guarantees and long term service also to the turbine. This is very new to the turbine manufacturers, but they're learning fast .

Ben: That's interesting. And I think we had a good view on, the onshore wind technology and the development of these assets. I like to, move to the Thailand renewable energy auction. So the Blue Circle has been the only, foreign company winning capacity in the first Thailand renewable energy auction in March of this year.

year So congratulations for that. It would be quite interesting just to have, your view on your experience. So prior to the Thailand energy auctions, could you describe what was the renewable energy procurement process in Thailand and whether you were already looking at this markets, previously?

Olivier: Yes, very good question. Thank you, Ben. It's, not the end, but, the example of, the success after a long, long, development period. We've been in Thailand for the last eight years, working on these projects. It is the case nearly everywhere in the region. When there is an auction, when there is a fitting tariff, whatever is the scheme, if you're not ready long before this, it's too late.

 We have been, lobbying for wind power in the region for all these years. What was in the situation when, we arrived, eight years ago? Thailand. Was the most interesting market in the world with the highest fit tariff, it would be more than $200, per megawatt hour, so highest in the world. One of the highest of the whole energy mix of Thailand. So when we arrived and, lobbying and asking for more wind megawatts, the first reaction from the E R C and all the different, government bodies was to say, wind power is way too expensive. We don't want more. We had to explain, the price today is less than half of the PPAs that they signed, 10 years ago. So, so, and that was the, the most difficult part. Because they are not believing us. They were hearing what the tie and the incumbent players were saying, you know, we need, more megawatts, but we're at the same price.

 And we were saying, no, to be competitive and to be acceptable, we have to be competitive with gas. We have to be competitive with others sources of energy. And now the real price, the market price of Windpower is way less than a hundred dollars per megawatt hour.

And when we were saying this half of the price, that they used to pay, they were shocked and not believing us at all. So it took us eight years to convince them we couldn't do it and we can do it at a much lower price.

It was not a bid on price. So the price was set. At, acceptable, price for them and for us, developers around around, eight, US cents. what could be seen at the real price, and the real cost of, renewable power, wind power in Thailand today.

 That was the main obstacle. we have been fortunate enough to be heard by E r c, the government of Thailand in fact, they accepted to open, 1.5 gigawatt of PPAs new wind. Capacity, just to see if it's working. If we can do it at that price. So they will watch, the sector and we'll see if, we are able to deliver, because they are much more behind. on the road to net zero in Thailand, we are planning to another round of another 30, 30 to 2047 gigawatts.

 Additional to install at least it's seven to 10. So we must not miss this one point, the first 1.5 and demonstrate that we can do it at that price for and deliver.

Ben: Okay, so now it's up to you to deliver as we mentioned, it wasn't like an option based on the tariff. There There was a feed-in-tariff and, but there were, a set of detailed criteria. The bidders need to meet could you just run us on the key criteria and the key requirements, that that you have been able to prove to the authority to have the capacity awarded.

Olivier: Yes, very important has been a long road road coming from abroad, I don't want to, condensate on saying this, but, wind projects have to be supported by the whole community, it has to give back to the community where they're, implemented. We think that everybody, the whole community, the whole village, the whole land owners around, not only. Below the turbines, around the turbines, but the whole community must benefit from the project.

We sign reservation equipment and send and then leases for all the site, paying the land used by the project, for the access road, the, overhead lines, underground lines, and turbines and crane pads. also the land underneath our, equipment.

 We sign everyone and we make sure that everyone will get paid by the project at the end. So not the same price. Of course. The less impacted you are, the less, price that you will get, every year. But everybody will get something.

And I think that's the way to develop wind projects for the community and with the community and at the ship plot of the community. That's what we introduced in in Thailand. We were the only one to do it. And I think we are still one of the very few to do it. And we emphasized that to ERC We understood exactly what we were talking about because there have been court cases, six years ago, against wind projects, in central,

So they implemented this as a main point in the scoring system. And that's the reason why we got, good scores, on our projects compared to others.

 It's a long process. We have teams on the ground, so fantastic job from them. And we have to be local. We are locals in Northeast Thailand. We are part of the community and the future project they're gonna see will run for the next 30 years and will be part of the community and give back to the community.

Yiou: Yeah, it seems like localization is, cornerstone in this process. So what are the best and worst memories you can share from your time working as a developer in Asia?

Olivier: That's always a great question. I have a lot of stories of the wild West, sentiment, an example, one of the very first time, in Vietnam, eight years ago, we were looking to invest in projects, which would have been already under construction or at advanced stage of development.

 So we met with, this T guy Vietnamese lawyer. Speaking good English, very good credentials. He said we had a project under construction in south of Vietnam. So, very impressed on the paper. Very good. everything fine. We did our duty gens, everything was fine. The last, DD point was the site visit. So we organized the site visit. Six cars. for our people, our lawyers, our engineers, they are lawyers, they're engineers. We go to the site, gorts at the entrance, construction and the way, at the turbine but there was already a small building the O N M facility. And they are starting to work on the connection line. It was, 50 people maybe, working. so pretty impressed. So we came back to the hotel saying, maybe we'll invest in this one. And I just had a feeling wanted to look at it, by myself, just to check.

 So the next day when everyone, were back to O Chi Min, I went to site alone, when I arrived there I was very shocked, to see everything was abundant, everything was stopped. Nobody was there. And literally, the shovel we have seen just the day before in the hands of, workers were still there, just on the ground. But nothing was moving and nothing was happening. We came back and we happened to learn that in the seller of the project have hired, actors to act as if they were, working for the project so they have done a little bit of forefront investment, but that was all movie theater. It was all just for the set. Absolutely all fake. Nothing was moving, nothing. No financing was in place and no investments were being made and were very far from construction. I don't know if it's the best or worst, but, we learned a lot.

Yiou: Thanks Olivier for being on the show.

Olivier: Thank you very much.