Offshore wind has been in the spotlight over the past week. Dong Energy announced plans to build the world’s largest offshore wind farm, with a capacity of 660MW; and RWE at last found fellow partners, in the UK Green Investment Bank, Siemens Financial Services and Macquarie Capital, with which to build a 336MW wind farm off the shores of the UK.
Dong Energy’s Walney Extension project will break new records in the offshore wind financing space – at an estimated cost of around $3.1bn – large enough to power almost half a million homes. The project will be made up of 40 MHI Vestas 8MW turbines and 47 Siemens 7MW machines, the Denmark-based energy producer announced. Dong said the project brought the industry one step closer to a point where offshore wind can compete economically with other forms of energy.
Improvement in the capacity factor of offshore wind, together with a reduction in the cost of equity, are two of the most important factors in reaching the industry’s cost reduction targets of as low as $110/MWh by 2020, according to the Research Note: Route to offshore wind 2020 LCOE target, published by Bloomberg New Energy Finance. The current benchmark levelised cost of offshore wind is estimated at $176/MWh, says the note.
RWE’s GBP 1.5bn ($2.3bn) Galloper project is back up running after SSE backed out of the 50:50 joint venture in March 2014. Situated about 27km (17 miles) off the coast of Suffolk, the project will be financed by a GBP 1.37bn debt facility from a group of 12 commercial banks and the European Investment Bank. Siemens has been contracted to provide 56 of its 6MW wind turbines to the project, which is itself an extension of the operational 504MW Greater Gabbard farm.
Many miles away, the tables seemed to have turned in Australia for offshore wind, as the country’s environment minister, Greg Hunt, said he would try to facilitate proposals for the technology, speaking at the Bloomberg New Energy Finance APAC Summit in Shanghai. “There are likely to be some major international financing and investment opportunities on a grand scale,” Hunt said when talking about offshore wind.
There was a flurry of movement in clean energy funds last week as the Hamburg-based asset manager, Luxcara, announced its intention to raise EUR 1.3bn ($1.4bn) for a new renewable energy fund, to invest in European solar and onshore wind energy. Luxcara has already secured initial investment from German pension funds and insurance companies, and will structure its third fund with subordinated partial bonds, while offering investors securitisation options as well as direct investments.
Quercus Assets Selection, a private-equity fund incorporated in Luxembourg, also intends to play its cards right in clean energy, by creating two funds that focus separately on wind and solar plants in Italy. These will complement its existing European Renewables Fund. Quercus plans to raise EUR 100m ($165.5m) in each of the new funds, hoping to capitalise on Italy’s highly fragmented renewables market, in the anticipation of consolidation.
The sustained development of small-scale PV projects in Italy contributed largely to the $392m invested in clean energy in the country in Q3 2015, according to the Insight Note: Q4 2015 European Policy Outlook, published by BNEF. Some 18GW of solar energy is currently installed in Italy, according to BNEF data.
Likewise, a fund jointly financed by the Australian Renewable Energy Agency and Shanghai-based Softbank China Venture Capital, to invest in clean energy in both China and Australia, also made the news. The fund, amounting to AUD $120m ($86m), has so far made six investments totaling AUD $31m, Australia’s Hunt said at the BNEF Summit in Shanghai.
Indeed, China’s exponential growth in wind and solar power over the past few years has placed strain on the country’s grid network and led to delayed subsidy payments, as the system struggles to meet investment demand. The Asian nation is considering cutting the preferential tariff rate it currently offers wind and solar developers through 2020, to make clean energy more competitive with coal power.
Germany too announced that it would cut subsidies for onshore wind and biomass from January 2016, largely due to onshore wind installations that exceeded the target range by over 1 gigawatt. Onshore wind installations will receive a subsidy cut of 1.2%, while lower-than-expected additions of biomass translate to a smaller cut, of 0.5%.
Last but not least, Goldman Sachs brought a new clean energy target to the table last week, almost tripling the goal set in 2012. The New York-based investment bank is aiming for $150bn worth of clean-energy finance and investment arrangements by 2025. “Environmental issues have become increasingly relevant to our clients and our investors, and have become core to our business,” Kyung-Ah Park, head of Goldman Sachs Environmental Markets, said in a statement.