Europe Financed 4.2GW of New Offshore Wind in 2018

Europe invested EUR 10.3 billion in new offshore wind farms with a combined capacity of 4.2GW in 2018, according to WindEurope’s annual Financing and Investment Trends report.

Investments in new offshore wind projects increased by 37% from 2017 but were still some way off
the record EUR 18.2 billion seen in 2016, according to the report. The capacity financed in 2018 is also the second highest after 2016.

In total, Europe invested EUR 27 billion in new wind farms in 2018, 38.5% of which went towards new offshore wind projects.

The amount invested is similar to previous years, but thanks to cost reduction, especially in offshore wind, it will finance a record 16.7GW of new wind capacity, the report stated.

1MW of new offshore wind capacity now requires EUR 2.5 million capital expenditure, down from EUR 4.5 million in 2015. This represents a reduction of 45% in capital expenditure per MW over just four years.

In total, 190 wind farms across 22 different countries in Europe reached Final Investment Decision (FID) last year. Northern and Western Europe still account for most new investments. The UK was the biggest investor, mostly in offshore wind. Sweden was second. Investments in Southern and Central and Eastern Europe were only 4% of the total, though Spain and Poland will pick up this year, according to the report.

A further EUR 23.8 billion was invested in the acquisition of wind farms including projects under development and of companies involved in wind energy. This is much more than in previous years, WindEurope said. The maturity of wind energy and the competitiveness of the sector have brought in more investors as equity partners in projects, particularly from financial services. As investors become more confident about wind energy, they can price risk more accurately and invest earlier in projects.

Developers are also increasingly financing wind farms through debt. New business and ownership models have diversified the pool of investors, with banks, institutional lenders and Export Credit Agencies (ECAs) looking to provide long-term finance. This has meant a significant increase in ‘affordable debt’, particularly via non-recourse financing (ie. not on a company’s balance sheet). Lower interest rates and falling risk premiums – as lenders become more comfortable with risk – means wind farms are getting competitive funding and lower financing costs.

“Wind energy got 60% of all the new investments in power generation capacity in Europe last year. And it was a record year for the amount of new wind energy capacity financed. Cost reduction means investors now get more MW per euro they invest. And lenders are more comfortable with the risks so the costs of finance are falling too,” WindEurope CEO Giles Dickson said.

“But Europe needs to keep investing significant amounts in wind if it’s going to meet its 32% renewables target for 2030. The money is out there. But there aren’t enough bankable projects. One problem is permitting: the processes are slower and more complex than they were. Another problem is the lack of visibility today on governments’ plans for renewables. The National Energy Plans they have to write this year are key to resolving this. If they’re clear and ambitious this’ll provide investment signals which will make projects happen.”