The installation for the generation of the first 30MW is to be completed by July 2011, while the remaining is scheduled for completion by 2013, 36 months after the commencement of the installation, according to the agreement between the Ethiopian Electric Power Corporation (EEPCo) and Vergnet. Seen in the picture, the nacelle of the first wind turbine, weighing around 75tn, is transported to the wind farm on November 27, after being assembled in the workshop adjacent to the site.
In an exclusive interview, Marc Vergnet, CEO and founder of the company, explains the intricacies of generating wind power and the technology used by the company that allows the turbines to be lowered to the ground and tied down in case of storms or cyclones. “Wind barrel is cheaper than oil barrel,” he joked to emphasise his point about the viability of the energy.
Marc Vergnet, CEO and founder of the company, and Pierre Pesnel, director of Commercial Sales, sat down with HAILU TEKLEHAIMANOT, EDITOR-IN-CHIEF, two weeks after the company finished the construction of its first one megawatt turbine, and discussed why wind farms are viable for a country like Ethiopia, as well as the rationale behind the technology they are using.
Wind energy is one of the cheapest sources of electricity; yet, it constitutes a tiny portion, less than two per cent, of global power generation. Why is that?
VERGNET: There are many factors for this, at least for France and many European counties with which I am familiar. It took some time for us to venture into renewable energy. Now we are moving very quickly and growing very fast; 30pc of power generators installed is for wind energy.
While the global use of wind energy is growing very fast, by about 25pc to 30pc annually, it is used mainly in developed countries. Lately, China and India have started, but developing countries are only starting now.
What are "far wind countries," which your company claims to mainly cater to?
Far wind countries are those in which electricity is produced with oil. The grids are small or medium, 1,000MW and not 100,000MW. It is difficult to install and operate big conventional wind turbines in these countries.
The standard is a unit with 2.5MW, but it is difficult to transport and install in emerging economies which have narrow roads and harsh weather. Far wind countries are remote areas, and we need special technology adapted to these situations. In all the far wind countries, wind energy is cheaper than oil energy.
One of the criticisms raised against wind energy is that it costs more than other sources to produce the same amount of energy. Your agreement with Ethiopia is to use one megawatt turbines; to produce 120MW of energy would require many turbines. How do you validate those costs?
It depends what price you are considering. If you are considering the kilowatt hour (KWh) price, I can assure you that in a windy place like Ethiopia where you have one of the best wind resources the price is eight dollar cents. If you compare the kilowatt hour of electricity produced from oil, it amounts to 16 dollar cents. The price is cheaper with wind in Ethiopia.
The cheapest is hydro electricity, next is wind energy, and after that is nuclear energy. Yes, the price is higher at the beginning of a project when you first install the wind turbine. The setup cost for Ashegoda is about 2,359 dollars per KWh. The maintenance cost is one or two dollar cents per KWh. After the big investment, the operational costs are low.
If you compare this with oil, if you are using a good diesel generator with a low speed and 15-year lifespan, you will pay about 1,311 dollars per KWh. You might even find a high-speed generator which costs 393 dollars per KWh, but after that, you pay for about a quarter litre (220ml) of oil for each kilowatt hour.
In comparison with the initial investment, wind energy is more expensive, but over 20 years it is three times cheaper than oil. We used to joke that, "A wind barrel is cheaper than an oil barrel." For this reason, wind power will develop in emerging countries where there is wind potential.
Wind energy is highly dependent on the availability of wind, which is unreliable, and this varying output creates an uneven load on the grid.
In Ethiopia, there is regular wind unlike other countries. In this situation, you know how much you will be able to produce. Ethiopia is lucky that it has two renewable energy sources: water and wind, which are complementary. When you do not have wind you can increase the production using water and if that fails then you go to diesel.
Do you think that the investment in wind energy, especially for a country like Ethiopia with financial constraints, is justifiable?
Yes, completely, because every time you produce one kilowatt hour of energy using wind, you save the cost of 220ml of oil. It is really a good operation. Ethiopia has and will increase the production of power from wind. When you install the 120MW, you will have this for 20 years, so this is a guarantee of energy.
Do I think it is good to invest in wind energy? Yes, but I am partial to this as I have been working in renewable wind energy for the past 45 years. The economic reality is that wind power is the cheapest next, to hydropower.
You are using twin blade tiltable turbines for the Ashegoda project, while the industry has moved away from them over the past two decades. If three blade turbines are preferred, why return to twin blades? What has changed since the 1980s?
The industry prefers three blade turbines because they are easy to calculate and design. We decided to go with two blades because we wanted to have the turbines tilt to the ground and fasten them in protection against cyclones. That is not possible with three blades where you will have one of them stuck out in the air.
Two blade turbines are difficult to design. That is why we have patented a teetering hub where the rotor is not rigid on the shaft. The Danish and German schools of thought support three blades and the Americans two blades but they abandoned that and adopted three blades. But the first wind turbines had two blades and future wind turbines will have two blades.
Do twin blade turbines not capture five per cent less than three blades?
It is not five but only one per cent or two per cent less for the same diameter of rotor. We increase the diameter of the rotor slightly to have the same production.
They [industry] will come back to two blades for many reasons. It can work speedier than three blades by managing the teetering hub, making it cheaper and lighter. The weight of wind turbines can become huge. The weight of the nacelle alone can reach up to 600tn.
With two blades you can design a lighter wind turbine. Three blades are more stable but there is not that much difference between the two. With three blades you get all the stress created by different wind speeds on the surface of the rotor, but with two blades you can manage different wind speeds by adapting the position of the rotor.
You can decrease 35pc of the stress on the machine. That is why we designed and patented the teetering hub with rubber articulation as in a helicopter.
You erected your first turbine for Ethiopia two weeks ago, prior to which you conducted an environmental impact study (EIS). What was the outcome of that study?
The EIS was done by the Ethiopian Electric Power Corporation (EEPCo) with its consultant. The results of that study found the impact to be very light. The impact on the trees and wildlife and birds showed no problem. The only impact was aesthetics which was a very simple problem.
An EIS by GTZ indicated that the area was used by goat herders and farmers who would lose harvesting 100tn of grain from relocation.
Ethiopia has the need for energy development. Today it has 2,000MW installed and about 1,300MW working. It will need 8,000MW just to supply cities and big towns.
To produce energy using oil is more expensive and emits CO2. They decided to develop hydropower and wind energy. For the wind farm, we had to pay compensation to the farmers.
How much did you pay?
I don’t remember exactly, but it was really high. The EEPCo could give you the exact number. After the erection, when the turbines start working, the farmers can return. In the more than 40 working wind farms we have, people come back with cattle and continue agricultural activities.
The only place where you cannot grow things is the 2,000sqm area one wind turbine takes up. I am not sure about the 100tn grain, but you will see that people come back in five years and produce the same quantity as before.
There are many villages near the wind farm in Ashegoda, and, like you said, people are likely to return to the area with agricultural activities. However, wind farms cause noise pollution that affect people, research has shown. Would Ashegoda not have that effect?
It is true that wind turbines make noise, but the EIS showed that they are far from houses. This is really serious: When you install wind turbines, they must be more than 400 metres or 500 metres from the nearest house. The noise has to be less than 40 decibels (db), which is the ambience level.
The base ambience level at room temperature, inside the house, is 35db, is it not?
It can be 40db or 45db. It differs between environments. We do a lot of studies on the noise impact before installing wind turbines. Wind turbines are no longer as noisy as at the beginning. They were really noisy, but it is not a big problem anymore.
The problem now is aesthetics and sometimes birds or bats. This wind farm, even with the 120MW, will not have audible wind turbines.
The government of Ethiopia has, on various occasions, said that it wants up to 45pc of the parts used for its wind farms to be produced locally, an aspect included in all the contracts and memoranda of understanding (MoU) it signed subsequent to the one with Vergnet. Is that something you are planning to do?
If you take the global price with civil work and assembling the parts, we have about 30pc of local integration.
In what form?
Transportation, civil works – we have 300 people working in the workshop assembling the parts at Ashegoda. That is 30pc of the total investment.
PESNEL: Part of the assembling of the nacelle, which comes in two parts, is done in Ashegoda in a workshop we installed specifically for this. It is not only shipped and installed on top of the tower, but there is an industrial operation going on.
VERGNET: I have some dreams as well. I visited the facility of Mesfin Engineering in Mekelle a month ago and we are discussing the possibility of manufacturing small, five kilowatt wind turbines there for Ethiopia and maybe for regional countries. With this facility, we are trying to make some components of the wind turbine step-by-step. We are also training technicians from Mekelle University.
Once the installation of the turbines has been completed, they will require maintenance. Will that be done by Vergnet or local companies? What sort of technology and knowledge transfer is taking place?
In the 40 countries where we work, we work with one philosophy: to transfer the maximum we can and to help people maintain and operate the wind turbine or water pump we install. In Ashegoda, we will be here during the first five years to support and train the EEPCo’s technicians in the operation and maintenance of the turbines. After that, we will leave them and only return for training, and the wind farm will be operated and maintained by the EEPCo’s people.
You are scheduled to finish the erection of turbines for 30MW by the end of 2011. Will this power be supplied to the grid immediately?
We are installing the substation with which we will supply the 30MW to the 220KW line.
The whole project is scheduled to take 36 months. Why so long?
It is a huge project. It is the biggest wind farm in Africa. It takes three years to build the road and the concrete, to install 120MW, and to commission a starting date.
Yet, one of the selling points for using the twin blade is its ease of assembly and installation. If that is true, why would it take 36 months to complete this project?
It is easy to install because we do not need cranes. It is normal for 120MW to take 36 months. It is not easy – it comprises a 75tn nacelle and 70-metre tower. I doubt if anyone can go faster than we are.
PESNEL: Almost half of the 36 months is for supply time – time for manufacturing, having the components assembled in France, shipping, and to line up all the subcontractors. Installation time is one year or less.
The contract with the EEPCo was signed in October 2008. Why did it take such a long time to start work?
The contract was signed at that time, but it took from October 2008 to October 2009 to put the money together from the lenders. The wind farm was financed through an export credit from France and a soft loan from Agence Française de Développement (AFD), the French development agency.
It took one year for the EEPCo, the Ministry of Finance and Economic Development (MoFED), National Bank of Ethiopia (NBE), AFD, and BNP Paribas to discuss the loan agreement. The loan between the lenders and EEPCo took a longer time than discussing the contract between the corporation and Vergnet.
The tender was floated in January 2008, and we started the shortlist discussion in March that year and finalised the commercial contract in six months, by October 2008. It took one year to finalise the loan agreement because it is much more complicated and it needed security from the Ethiopian government and an audit of the public account. The effective starting date of the contract was October 2009.
Is that the time you received the first instalment of the payment?
Yes, that was when the first down payment was received. From October 2009, the first phase of the project was supposed to be done in 16 months. The compensation plan from the EEPCo took some time and delayed our access to the site for four months. We were delayed another month from onsite fieldwork. With that five-month delay, we will finish the first phase in June 2011, in line with the original schedule.
Did you play a role in securing the loan?
Not exactly securing, but, since it is a French loan and we are a French company, when we answered the bid, we brought the finance. We approached the French government first and said, "We have a tender in Ethiopia and we need finance, can you provide it?" They supported Vergnet in this and it has been dealing through us.
Are there other wind farm sites that you are looking at?
Aysha seems to be a very nice place. It is close to the Djibouit port for shipment. The potential is for 300MW in 100MW phases.
VERGNET: We know all the sites, but our target is to finish this site first.
Vergnet’s finances have been in the negatives the past couple of years. Your projection had it that the Ethiopian project and the contract you recently signed for a project in Nigeria will pull the company into the positives. How is that looking now?
PESNEL: Vergnet is a fast growing company. When I joined five years ago, there were 60 people, while we are 300 now. At the time, we had a turnover of around 13 million dollars. Last year it was 52.4 million dollars and this year, it is projected to be almost double, at 177.8 million dollars.
Since it is industry and not software, but hardware, you need cash for all this fast growth. To obtain cash, you borrow money from a bank and then have debt, or you have contracts. We have a mix of the two.
Ashegoda is only one project. We have another big project in Nigeria and we just signed a contract in Mauritania. It is a normal business model. We were in the red last year and this year we will reach equilibrium.
Over the coming years, when Ashegoda, Nigeria, and the French West Indies come online, we will grow. We are also seeing strong growth in the US market. We opened a subsidiary there and are planning to manufacture to supply the local market.
But you have tough competition in the US, Nordic Windpower [which is a competitor in twin blade turbines] is already established there.
Not in the range of products that we are developing. We will not be developing turbines like we have here in Ethiopia; we have other models that are smaller and are dedicated to distributed generation. It is not big wind farms supplying to the grid, but small sources of generation closer to the load. In this range of power, 275KW per unit turbine, we do not have competition.
The evolution of wind energy is pretty interesting. Over the past 10 years, the big race was to go bigger in size of turbines for onshore, wind. German companies went from 500KW, one, two, and up to six megawatt turbines.
Now the problem of land, transportation, installation, and maintenance forces the move in two different directions: The very big turbines are going offshore and onshore it is moving towards distributed generation and mid size power close to industries, communities, and farms in order to avoid building big transmission lines because they cost a lot.
This is the tendency in Europe and the US, which is the leading market. The race for big turbines onshore will switch to offshore. Vergnet is in the midsize market, where we have been for a long time. While our competitors moved to big size, we kept investing in research and development into mid size, giving us a technological advantage with these products.
