“If you cut us,” said Jim Barry, CEO of Dublin-based renewables developer NTR, “we bleed development.” One aspect of development is foremost in Barry’s thinking today. “When you overlay the risk profile of launching new technology in 2010 against the state of financial markets and the general macroeconomic context,” he said, “you have challenges.”
NTR has more than 30 years of experience with development challenges. Founded as an Irish toll road developer in 1978 (NTR stands for National Toll Roads), it has worked on everything from bridges to car parks. Some projects succeeded and some did not, but development is “deep in the DNA of this company,” Barry said.
In 1999, NTR decided to develop utility-associated startups where they saw structural growth opportunity. “In electricity,” Barry said, “we went into wind.” That piqued the company’s curiosity for two reasons. “One, it opened us up to the forces reshaping the energy industry, which are climate, energy security and, more generally, sustainability. And we learned a lot about the electricity industry.”
The first surprise came with the building of NTR’s first 12-megawatt wind farm in northwest Ireland. “We had to go out and create a fully integrated, $75 million supply business in order to be able to give ourselves a contract in the wind farm for the electricity.”
Cuillagh in Dunegal was the first merchant wind farm in the world. From the experience, NTR learned the wind business from towers in the ground to electricity markets. It made them, Barry said, “a much better electricity developer.”
By 2007, Airtricity, NTR’s wind development subsidiary, was a major international wind player, the biggest offshore wind developer in Europe and the biggest onshore wind developer in Ireland and the U.K.
Then came the next surprise. They discovered they were paying excessively to own the wind projects versus “what anybody would do to fund the businesses.” They saw the European move to offshore wind coming and decided they “did not have the balance sheet.” So NTR sold Airtricity to big utilities.
Looking to reinvest, NTR founded Wind Capital Group and went back to “classic” (onshore, moderate-size) wind development in the U.S. Midwest. Surprisingly, Barry said Wind Capital is now making plans to build wind projects in the Southeast, where conservative opponents of wind in the U.S. Senate claim the resource is inadequate.
Seeking out further utility-scale renewable opportunities, NTR began looking into solar power plant technology. It discovered Stirling Energy Systems (SES), a builder of the innovative and otherworldly-looking dish solar power plant technology. “My mantra for years was, ‘We don’t do technology. We’re project developers.’ But we took a view that if we wanted to play at the utility scale in solar, we would need to take a proprietary interest in technology,” Barry said. “Otherwise we’d be waiting a long time.”
Three things about the SES concept attracted NTR. “The economics, number one. Second, no water. Third was the modularity of the technology.”
What was difficult about solar power plant development, NTR came to understand, were the inordinate delays associated with permitting and transmission access. That’s why NTR chose SES. “What we loved about the projects, was that they were at the top of the queue on grid and on the California Energy Commission’s and BLM’s hierarchy.”
The decision has paid off with very recent final approvals for the 709-megawatt Tessera project in California’s Imperial Valley. But the surprises have not stopped. For NTR, development may not be possible, because the U.S. Department of Energy (DOE) has been very slow in rolling out loan guarantees necessary to make Tessera economically viable.
Without loan guarantees, financing may not be available even though the final approvals make it possible to get construction underway by the end of 2010 and thereby to obtain a Treasury cash grant for 30 percent of the project cost under provisions made available in the 2009 Recovery Act. “The reality is the DOE loan guarantees are the gate keepers,” Barry said. “The industry is very challenged to get shovels in the ground on the back of that impediment.” Developers need both the cash grant and a loan guarantee. “This is big capital stuff,” Barry said.
Discussing the more general challenges still facing utility-scale wind and solar, Barry singled out the lack of supportive “policy cohesion.” The state of the world economy, he said, “has made it very challenging for our policymakers to make the case over the long term.” Therefore, he said, renewables are “easy for politicians to ignore.”
Barry described himself as “pretty cynical” and added “there’s no point getting frustrated. It is what it is. It will take dramatic events to shape or reshape policy.”
He is in Washington, D.C. once a month. “The big problem we have in the democratic system is the influence of money.” There are politicians, he said, “who are not interested and will play the single tune after whoever pays the piper.” There are those, he said, who are “interested but really can’t get their head around it and end up confused and tend to go with the sense of a silver bullet, what seems like the easy solution. The third category is those that actually invest the time to really understand. That would be the narrowest data set.”
For the time being, Barry expects development to be slow, like the economy. “I would expect that the next two or three years would be a time of consolidation in the industry, and we have the opportunity to pick up some great assets very cheap. But then it will pop again -- and when it pops, it will pop big,” he said. “I’m optimistic about our species’ ingenuity in the face of adversity. But I think our political systems are enormously challenging.”