How attractive is wind investment in the G20?

This week, law firm Ashurst has published a report, ‘Powering Change’, which shares the views of 2,090 executives in the G20 about the energy transition.

The respondents are responsible for taking the energy investment decisions in their businesses, with average turnover of $15bn and total turnover of $30trn.

And among their views on the energy transition, there are interesting talking points for the wind sector in particular.

For example, the report highlights the growing attraction of offshore wind, including in regions that don’t currently have an active offshore wind industry, and how it could be more attractive than onshore wind in the coming years.

What does the research show?

There is broad agreement from respondents about the need to invest in the energy transition.

In total, 82% said they were under extreme or significant pressure to do so, with 87% citing extreme or significant government pressure.

This is forcing firms to act. Eighty-six percent of those from large businesses – with over $50m turnover and 250 employees – said the energy transition will be key to strategic growth. The figure for those at smaller companies was 71%.

But respondents also identified a series of barriers to investment, including technical risk, lack of government support and high transactional costs.

The second of those is the most intriguing.

How can governments be the greatest source of pressure for the companies polled and also the second-largest barrier to investment? Well, the report’s authors have a theory. The 87% doesn’t just show that businesses are under pressure from central governments, but rather from every level: from cities, states and opposition parties, reflecting public sentiment.

The respondents in Germany, Japan and the UK ranked the lack of commercial incentives as a key barrier for companies seeking to invest in energy transition technologies. This shows that political will is still important to spur investment in renewables and decarbonisation.

What does this mean for wind?

Wind ranked alongside solar and hydro as the most popular three technologies for companies that have already invested in renewables, or committed to. This is an indication of the relative maturity of these sectors, and steep price drops.

However, onshore wind may not stay in this elite trio in the next five years.

The research also polled respondents on the technologies in which they hadn’t invested yet. When considering technologies that businesses had invested in or would consider in the next five years, onshore wind slipped behind biomass, geothermal and offshore wind.

There are a few reasons we think this might be the case.

The first is that the industry is facing financial headwinds, as countries including China, Germany and India have moved to competitive auctions.

It may also reflect the fact that increasing amounts of onshore wind can spark greater local opposition, which businesses don’t want to be associated with.

And finally, the onshore wind sector is only an attractive investment for firms in regions with the right wind conditions. Compared to the other technologies in the study, interest in onshore wind in the G20 was low – which the authors said was lower than they had anticipated.

But there were strong pockets of interest. Latin American countries Argentina, Brazil and Mexico; Asian nations China, India and Japan; and European nations France and Germany all showed great interest in onshore wind.

The other big trend was the emergence of offshore wind.

Now, we would expect to see interest from respondents in Asia and western Europe, where projects are operational, and the research suggests that Asia in particular is poised for an offshore wind boom.

Yet the research also showed great interest in offshore wind from countries without a developed offshore wind sector. Forty-four percent of respondents polled in India are keen to invest in offshore wind, followed by Argentina (40%) and Brazil (34%). This should hearten offshore wind firms with global plans.

And one-third (33%) of those questioned in North America said they had invested in or committed to invest in offshore wind too. That is a strong level of industry support given that there is still only one US offshore wind project totalling 30MW operational.

The big caveat with all of this is that research was carried about before the Covid-19 crisis. But if the energy transition pressures on business translate into investment in wind, we can see reasons for wind to remain positive.

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