Chinese firm to take over Gaafaru wind farm project following collapse of GE/Falcon Energy deal

Chinese electrical manufacturing firm XEMC will take over the development of the government’s flagship renewable energy project, the Gaafaru wind farm, following the behind-the-scenes collapse of the US$200 million dollar agreement between GE and Falcon Energy late last year.

Under the new agreement between XEMC and the State Electric Company (STELCO), XEMC will install turbines capable of generating 50 megawatts and submarine cables servicing the greater Male’ area, under a build, own and operate arrangement.

A backup liquefied natural gas (LNG) plant will also be built, capable of providing up to 30 megawatts on windless days, or when there is not enough wind to meet demand. The wind farm will provide up to 20 megawatts to STELCO’s grid, supplementing its current install capacity of 38.76 megawatts.

STELCO’s Managing Director Dr Mohamed Zaid told Minivan News that under the 25 year agreement the new facility will be owned by XEMC and the electricity bought by STELCO, with construction of the wind turbines starting within three months.

XEMC was selected through an open tender, Dr Zaid said, adding that STELCO had not signed a private partnership agreement with GE/Falcon.

“Initially we did not limit this project to a specific renewable energy source, but the XMEC group recommended using wind turbines given their experience with the technology,” Dr Zaid said, during the signing event held recently at the President’s Office.

He said was unable to provide reasons for the collapse of the GE/Falcon Energy deal “at this time”, and the circumstances around it remain unknown.

Minivan News was told that the reasons included a lack of consensus between the parties involved, and whether they had the requisite experience: “Falcon didn’t work out,” said one informed source, while “a lot of things were not carried out according to the memorandum of understanding,” said another. Local newspaper Haveeru meanwhile reported that there were concerns about pricing and profitability of the enterprise.

The original much-publicised project was to be central to the government’s ambition for the country to become carbon neutral by 2020, and promised a 75 megawatt wind farm in North Malé Atoll that was to produce enough clean energy to allow Malé, Hulhulé and a number of resorts to “switch off their existing diesel power generators”, according to the President’s Office at the time. Excess electricity on windy days was to be diverted to a desalination plant located on Hulhumale’.

The project was, according to President Mohamed Nasheed during its launch, intended to “reduce fuel imports into the country by 25 percent and cut carbon emissions by 40 percent.”

Minivan News raised concerns in an article published in April 2010 that according to figures published in a 2003 report by the US National Renewable Energy Laboratory (NREL), North Malé Atoll had an annual average wind speed of 4.9 m/s (17.7 km/h), while a 2005 report by the American Wind Energy Association (AWEA) described the minimum average wind speed needed to run a utility-scale wind power plants as 6 m/s (21.6 km/h).

That report stated that because “power available in the wind is proportional to the cube of its speed… doubling the wind speed increases the available power by a factor of eight.”

For example, a turbine operating at a site with an average of 20 km/h should produce 33 percent more electricity than a site operating at 19 km/h, because the cube of 20 is larger than the cube of 19.

This means that a difference of just 1 km/h in wind speed could significantly bring down productivity of the wind farm.

The Falcon/GE project’s local lead, Umar Manik, told Minivan News at the time that due to engineering advances the Gaafaru wind farm was expected to run on a minimum wind speed of 5.7 m/s.

However at time of signing the MoU, Falcon had still to raise the required investment with international banks, which by the time of Minivan News’ 2010 article had almost doubled to US$370 million from the original estimate of US$200 million.

“International banks are very keen to invest in the Maldives,” Manik told Minivan News at the time, “but they need eighteen months of wind surveys. They are becoming partners, they don’t want to lose their money.”

The turbines were to be planted once six months of data had been gathered, “to give us full confidence,” according to Manik.

While data was to be gathered by a 150-foot tall wind mast installed in the area, a LNG backup generator with a capacity of 50 megawatts was to be constructed with a supply contract reportedly signed with a Saudi Arabian firm. The deal was quietly terminated in late 2010.

Minivan News was unable to establish the credentials of Falcon Energy, which no longer appears to have a web presence. The Singapore-listed Falcon Energy Group, a major offshore oil and gas player that was widely presumed by the international energy media to be the party involved in the Gaafaru project, denied any knowledge of its existence when contacted by Minivan News last week. GE meanwhile failed to respond to enquiries.

Falcon Energy was introduced in the President Office’s original release as having commissioned “onshore and offshore wind farms totalling 1,500 MW over the past 10 years, in the UK, Spain, Portugal, Ireland and Canada.”

Interviewing Manik last April, Minivan was led to understand that Falcon Energy Group was based in the UK and represented a consortium of four companies – two from the UK, including Falcon Energy, one from Holland and another from Saudi Arabia.

The government’s Isles project website states that when the MoU signed with Falcon Energy was terminated a decision was made to proceed with a new group identified as ‘STAR Renewables Consortium’, a joint venture represented by the Saudi Trading and Resources Company. However an MoU was never signed as STELCO elected to proceed with an open tender – a process that led to the current deal with XEMC.

Minivan News understands that at least two years of wind data needs to be collected before the Gaafaru venture can proceed – data that should be available by the end of the year.

“The only wind speed data currently available is not good enough for a commercial venture,” an informed source told Minivan News. “That will determine what sort of turbines are needed – some are better at low wind speeds.”

LNG was selected as a backup option due to the ability to rapidly power it on and off as demand necessitated, however “at some point we will want to switch off the gas.”

Minivan News understands that the intention is to ultimately power Male’ and its surrounding islands with a mixture of wind, gas and marine current generation, with potential for the latter presently being determined by a £48,000 (US$76,000) study led by Scotland’s Robert Gordon University and due to report this year.

Foreign investment in such projects is subsequently to be coordinated by the government’s new office of Renewable Energy Investment, operating under the Ministry of Economic Development.