How will investors cope with the move away from subsidies?

Marc Groves-Raines has been with Allianz Capital Partners since 2005, and has been its head of renewables since January 2018. During this time, he has led on European transactions and been instrumental in growing an operating portfolio of over 2GW of renewable energy assets.

Marc was one of the guest speakers at Financing Wind Europe 2018. To find out more about upcoming conferences, visit the Financing Wind site.

Allianz is one of the biggest investors in renewables in Europe. How big is your wind portfolio now?

Since 2005, Allianz Capital Partners has been one of the world’s largest investors in renewables – we manage approximately €4bn of assets in renewable energies.

Our investment approach is long-term with a focus on Europe. However, we are also investing in tax equity in US renewables projects. So far we have invested in more than 80 wind parks and 7 solar farms, and our 1.8 GW renewable energy portfolio is predominantly made up of onshore wind assets.

What do you think the future looks like for renewable energy?

Today, one fifth of the world’s electricity is produced by renewable energy. In 2016, there were 160GW of renewable energy installations worldwide. New solar power was the main contributor to this with half of all new capacity, followed by wind power, which provided a third.

At the same time, costs of producing clean energy continue to fall and we see a growing role for renewables in the energy mix. Given its increasing affordability and technological development, the applications for renewable energy have broadened, providing new solutions for mobility and energy security worldwide.

How is the European market changing?

The market in Europe has changed as the competition for projects has increased significantly. As a consequence, one has to bid for projects carefully and think twice before committing to highly competitive auction processes. That's why markets like Germany or France, which have been core markets traditionally given the robust support frameworks, have become more challenging for investors. The industry is going through a period of change as more emphasis is placed on merchant revenue streams.

What role do corporate power purchase agreements play in this?

In the past, EU countries have heavily subsidised renewable energy. As a result, investors’ capital has enjoyed protection under the feed-in tariff model.

With the cost of technologies coming down, the trend towards a subsidy-free market with increasing reliance on wholesale electricity prices is continuing. That means investors need to cope with a less advantageous environment. PPAs can play an important role here to reduce revenue volatility and uncertainty. I'm sure that the PPA market, and in particular the appetite for longer-term contracts, will determine the success of the subsidy-free market in the future.

Can you share with us some details about your recent investments?

We have made several tax equity investments in wind parks in the US this year. With the increasingly high levels of competition amongst investors in the onshore wind sector, we are evaluating new business strategies and markets in Europe where we haven’t invested yet. I think that subsidy-free markets in connection with long-term PPAs could play an important role here and, with this in mind, we have recently focused on opportunities in Iberia.

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