Onshore wind markets: Hotspots and bottlenecks

Wind industry participants see “good opportunities“ for onshore wind in the Asia Pacific. For example, wind development is taking off in Japan, South Korea and Taiwan thanks to offtake arrangements. Further growth markets include Vietnam and Indonesia, while Australia is seen as “very big and growing very fast.” 

In the West, some European onshore wind investors are interested in Spain and Portugal, while others are intrigued by Poland. The US and Brazil are also promising.

But some lenders question the ability of sponsors to continue to indefinitely push their onshore wind assets to be more profitable over longer lifetimes. In line with this, they caution against the assumption there will be inexpensive long-term debt that will be available over long offtake tenors. They are wary of continued sponsor bets on a move to merchant while assuming zero-equity IRRs over 20-year CfD agreements. 

Network constraints remain a bottleneck to onshore wind farm development internationally. Developers have seen network-and-permitting-related delays to projects they were expecting to sell as ready-to-build not just in the very constrained US, but also in Brazil and Australia. 

In Europe and the US, developers see state backlogs delaying both permitting and local consultation timelines, in addition to delays related to networks. In these markets, seven or eight years is the standard time for an onshore wind project development to go from proposal stage to being shovel-ready. Developers say they will invest in wind where legislators create policies dealing these issues: EU, Germany and Californian regulators have proposed fast-tracked wind permitting.

The US market offers wind backers an interesting mix of risk and reward. On the one hand, the Inflation Reduction Act is becoming a major driver for wind development discussions. On the other hand, sophisticated community opposition to wind farm development is increasingly frustrating. 

Several observers warned of possible debt default by the US government, which raised the debt ceiling on 1 June to avert an economic tumble. A potential Trump re-election is another risk for the markets activated by the Inflation Reduction Act. One observer commented that a conservative victory could imperil the IRA, despite a conservative politician having been behind the production tax credit that is its primary instrument.