Europe needs more wind energy to deliver its 2030 climate and energy goals, WindEurope said in a report on April 13.
Europe confirmed €43 billion of investments in new wind farms in 2020, the second highest amount on record and 70% up on 2019,Wind Europe said in its annual report “Wind Energy Financing and Investment Trends,” adding that €17 billion was for onshore wind, covering 13 GW of new capacity and €26 billion was for offshore wind, covering 7 GW of new capacity. Large projects boosted the offshore numbers, including Dogger Bank in the UK which will be Europe’s largest wind farm when completed and Hollandse Kust Zuid in the Netherlands.
The investments cover 20 GW of new capacity that will be built in the coming years, 13 GW of it in the European Union. “But this is much less than what Europe needs to deliver its 2030 climate and energy goals. The EU needs to build 27 GW of new wind energy a year to deliver its new 55% emission reduction target. The main problem is the slow rate of permitting of new wind farms. The money’s out there, but not enough new projects are coming through,” WindEurope said.
WindEurope CEO Giles Dickson reminded that wind energy remained an attractive investment despite the pandemic. “Given the right revenue stabilisation mechanisms are in place, there is plenty of capital available to finance wind. This confirms wind energy is perfectly positioned to support Europe’s economic recovery from COVID. Each new turbine generates €10 million of economic activity in Europe. And the expansion of wind energy envisaged in the National Energy and Climate Plans can create 150,000 new jobs by 2030,” Dickson said.
The UK accounted for €1 3billion of the €43 billion investments. The Netherlands were next with €8 billion. Then France (€6.5 billion) and Germany (€4.3 billion). Germany and France invested the most in onshore wind. France also financed its second and third offshore wind farm. Turkey was the 5th biggest investor with €1.6 billion, Poland 6th with €1.6 billion.
The EU’s new 55% emissions reduction target for 2030 requires 27 GW a year of new wind energy in the EU. But last year’s investments cover only 13 GW of new wind capacity in the EU, WindEurope said.
According to the trade body, permitting remains the main bottleneck. Permitting rules and procedures are too complex, which delays projects and adds costs – this results in fewer projects being developed. And there are not enough staff in the permitting authorities to process the applications, not even the existing volumes let alone the higher volumes needed for our climate and energy goals. Most Member States are not meeting the permitting deadlines set out in the EU Renewable Energy Directive.
Dickson stressed that Europe wants more wind energy to deliver its climate and energy goals. “The technology is available. So is the money. But the right policies are missing, notably on the permitting of new farms where rules and procedures are too complex. The revision of the EU Renewables Directive in the ‘Fit for 55’ package needs to tackle this. Governments need to simplify their permitting and ensure there are people to process the permit applications. Otherwise there’s no point having a higher renewables target,” he said.
According to WindEurope, wind farms continue to be financed with 60-80% debt and 20-40% equity. Bank finance remains crucial, and more and more of it is project-specific rather than corporate debt, especially in offshore wind. The bigger wind farms are increasingly being turned into business entities with their own management teams and financial reporting, capable of raising debt on their own. Banks lent a record €21bn of non-recourse debt to new wind farms in 2020.
Green Investment Group Europe head Edward Northam said wind projects present an extremely attractive opportunity for investors because they are one of the most mature, proven renewable technologies that can be delivered at scale. “The challenge currently facing the sector therefore lies not in access to capital, but in accessing a pipeline of investable projects. Investors are working hard to address this gap by delivering innovative capital structuring solutions that help make new projects happen,” Northam said.
Another important trend is the growing role of corporate renewable Power Purchase Agreements (PPA) in supporting the financing of wind farms, WindEurope said. Corporate and industrial energy consumers are increasingly keen to source power directly from wind farms, the trade body said, adding that 2020 saw 24 new wind energy PPAs covering more than 2 GW of capacity, signed across a range of sectors including chemicals, pharmaceuticals, telecoms and ICT.
