WindEurope’s Financing and Investment Trends 2016 show Europe raised a total of €43bn last year for the construction of new wind farms, refinancing operations, project acquisitions and public market fundraising.
This represents an increase of 22 percent from the 35 billion invested in 2015. New asset financing for wind power projects reached 27.6 billion euros in 2016 with a record breaking 18.2 billion euros in offshore wind. Onshore wind investments dropped by 5 percent to 9.4 billion euros, the first decrease in five years. The UK was the biggest market in 2016 with 12.7 billion euros raised for new onshore and offshore projects, Germany came second with 5.3 billion euros.
Investment levels are expected to fall in 2017 because they've been inflated in the last two years by projects squeezing through the gate before countries transition to auction-based remuneration mechanisms. There will be a lull this year before the auction results lead to new final investment decisions in projects, due to many key markets, including Germany and France switching to auctions.
“Wind was the largest recipient of power sector investments in 2016” said Giles Dickson, Chief Executive Officer of WindEurope. “The competitiveness of our industry and reduced risk perceptions have brought in major financial players who are looking to diversify their portfolios. Cost reductions across the industry’s value chain mean investors can finance more generation capacity for less money. What is worrying is the uneven growth geographically. 80 percent of new investments came from four countries alone, the UK, Germany, Belgium, and Norway. 14 EU Member States did not announce any new wind energy investments in 2016. Many countries struggle to manage the transition to auctions. Only 7 EU Member States have clear policies for renewables beyond 2020 - the unclear policy outlook in the rest makes investors and project developers go elsewhere. The National Energy & Climate Action Plans required under the Clean Energy Package (by 1 January 2019) will be crucial to sustain investments.”
Mr Dickson added that the growth of the secondary market is good news in that with more low risk profile finance coming in developers will be able to reduce costs even further. Finance houses view the wind sector as an opportunity for stable cash with three out of the top 10 onshore wind acquisitions by institutional investors. Sector maturity, adequate asset size and better risk profiles help to attract them.
The high level of total wind investments was driven by major initial public offerings, notably DONG Energy, Innogy and Senvion. It accounted for 5.2 billion euros, the highest level of issuance in the last seven years, suggesting there is a strong demand for regulated assets and stable returns in a low yield financial context.
The latest trend emerging is a dynamic secondary market. Refinancing transactions and the sale of minority stakes are now incorporated early in the financial arrangement of projects and mature onshore wind markets see more aggregation taking place. Finance houses are increasing their activity in both onshore and offshore wind. In 2016 they acquired 36 percent of the divested onshore wind capacity and 27 percent of the divested offshore wind capacity.