European wind investments hit €43bn in 2020

Europe invested €43bn in new wind farms in 2020, the second highest annual amount on record and equal to 20GW of capacity, according to WindEurope.

This is around 70% up on 2019, with €17bn for onshore wind, covering 13GW of new capacity and €26bn for offshore wind, covering 7GW 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 UK accounted for €13bn of the €43bn investments.

The Netherlands was next with €8bn, then France (€6.5bn) and Germany (€4.3bn).

Germany and France invested the most in onshore wind. France also financed its second and third offshore wind farm. Turkey was the fifth biggest investor with €1.6bn, Poland 6th with €1.6bn.

Wind farms continue to be financed with 70-90% debt and 10-30% 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, the association found.

WindEurope CEO Giles Dickson said: “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.”

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.

Another important trend is the growing role of corporate renewable power purchase agreements (PPA) in supporting the financing of wind farms.

Corporate and industrial energy consumers are increasingly keen to source power directly from wind farms. 2020 saw 24 new wind energy PPAs covering more than 2GW of capacity, signed across a range of sectors including chemicals, pharmaceuticals, telecoms and ICT.

PPAs provide stable long-term revenues for wind. They make it easier to raise debt at low interest.

The same applies to the Contracts for Difference (CfDs) which governments increasingly offer in their wind energy auctions: as revenue stabilisation mechanisms, CfDs reduce financing costs and therefore reduce the total costs of wind energy, said WindEurope.