3 questions for European wind in H2

Europe’s summer holiday season is now in full swing – and those in its energy sector would be forgiven for craving a break more than usual this year.

Europe is in the grip of an energy supply crisis that is only going to worsen as the winter approaches. It is therefore natural that those in the wind industry may find their minds wandering as they relax on the beaches, mountains or city tourist trails. What are the biggest questions for the wind industry that are going to intrude on these holiday-makers’ attention?

The Financing Wind Europe conference that we held in May sheds some light. We gathered hundreds of the industry’s major players – including investors, developers, asset managers and suppliers – to discuss wind's prospects.

Our speakers were unanimously optimistic about European wind’s appeal to investors, and bullish on its ability to overcome looming challenges. But that doesn’t mean it will be easy as inflation, supply chain issues and emerging technology types continue to pose questions for investors.

Here are three of the biggest questions for the second half of 2022:

Will investors in Europe be tempted elsewhere?

The energy sector is facing challenges that will affect the value of wind projects and how much risk investors are prepared to take.

However, Caroline Lytton, Managing Director – Head of Power & Renewables at Sumitomo Mitsui Banking Corporation, said Asian investors would continue to be interested in Europe as it is regarded as a “very mature market” with experienced partners, stable laws, and lots of operational projects.

She added that this meant Europe would remain a testbed for technologies such as floating wind: “It’s quite natural to use Europe as a testing ground for the benefit of the world and, as the European market, we should treasure that,” she said.

Fabio Borba, Managing Director, EMEA Execution at GE Energy Financial Services said investors would need to adjust their risk-return profiles but added that “investors [are] not really exchanging Europe for other markets”. This interest will continue even as rising interest rates raise capital costs.

Can slow permitting processes spark innovation?

Permitting is a perennial bugbear for developers and investors in the European wind industry, and it remains so. Our speakers argued there is enough capital available in the market but that slow permitting is constraining the market.

Scott Mackenzie, Head of Asset Management at Susi Partners, said shortening permitting processes could lead to “a renaissance of onshore wind in Europe” – but added that there are “no guarantees” as it needs political progress.

Sam Goss, Head of Investments at Octopus Renewables, said fixing this is “absolutely fundamental”.

However, our speakers added that these permitting delays were pushing investors to be more creative about how they maximise the value of their projects, including how to extend their lifespan.

Mackenzie argued that investors had grown assumptions of project lifespans from 20 years to now up to 40 years in some cases, which is “really pushing the boundaries of the technology” and its robustness.

Is the success of wind entwined with hydrogen?

Despite criticisms of green hydrogen, attendees at Financing Wind Europe heard the success of wind is increasingly linked with this nascent technology.

Matthew Knight, Head of Market & Government Affairs at Siemens Energy, argued it would help wind farms to move beyond just producing green electrons and towards producing green fuels for use in the heating and transport sectors.

“The moment you can store that wind energy and release it whenever you like, you can now do not just 100% of electricity. You could do 100% of heat, or transport, and suddenly your market has gone up seven or eight times from what it would’ve been,” he argued.

Olivia Breese, Senior Vice President of P2X at Ørsted, said this required support from governments and regulators to create the market demand.

“We need massive demand, and we cannot rely on early adopters taking a bet, because a lot of them don’t have the capital to do that,” she said.

These are three of the questions that will continue to perplex the market in what is going to be a busy second half of the year. Enjoy the break if you’re taking one. You are going to need it!

To get similar insights on the state of wind in North America, join us at our Financing Wind North America conference in New York in November: Click here for details.