Tackling floating wind's funding challenges

There must be something in the water.

Over the last quarter, we’ve seen announcements of a host of gigawatt-scale floating offshore wind projects. These include:

• Erik Segersäll complex (6GW) by Deep Wind Offshore in Sweden.
• Gwynt Glas (up to 1GW) by DP Energy and EDF Renewables in the UK.
• Olympic (1.3GW) by Simply Blue Group in the UK.
• Southern Winds (1.2GW) by BlueFloat and Energy Estate in Australia.
• Tibula (975MW) by BlueFloat ] and Falck Renewables near Sardinia.
• Troll (1GW) by Equinor, Shell, TotalEnergies and others in Norway.
• Winds of September (1GW-plus) by BlueFloat Energy in Taiwan.

Separately, Copenhagen Infrastructure Partners has won permits for a 1.5GW complex in South Korea; and Corio Generation is set to develop floating and fixed projects in a 9GW tie-up with Ontario Teachers’ Pension Plan.

In summary, developer interest in floating wind is huge.

This is powering the growth of the market in the UK, Japan, France, South Korea, Taiwan, Norway and beyond. These were named as leading floating wind markets of 54 studied by ORE Catapult and Offshore Wind Consultants in the ‘Floating Offshore Wind International Market Opportunities’ report that came out last week. In total, the report said 250GW of floating wind could be installed globally by 2050.

However, getting there will require hundreds of billions of euros of investment, and the emergence of gigawatt-scale projects that are commercially mature.

How the industry could get there was the central question during the session on the funding of offshore wind farms at our Financing Wind Europe event in London on 26th May. The discussion was led by Clément Weber, managing director at Green Giraffe, and featured two speakers: Nathalie Lemarcis, London co-head of advisory and project finance at Societe Generale, and Adrian De Andres, director of market development at developer Simply Blue.

Construction and supply chain

Weber said there was no shortage of development finance in floating wind, but there are big questions around funding construction and growth in the supply chain. What are the risks in the market, how can they be mitigated, and on what terms?

Our speakers agreed that developers would need to start talking to banks now if they wanted to gain construction finance for projects of around 100MW in 2025, and that larger gigawatt-scale projects would happen after that.

Lemarcis said the fact that firms lacked a “significant track record” with funding and building large floating wind farms meant they would need to engage banks early, to explain what the risks are and how they are being mitigated.

She said key concerns surrounded how turbines would interface with floating foundations; use of dynamic offshore wind cables; the risks of scaling up the floating supply chain; and the uncertainty around operations and maintenance compared to fixed projects.

She explained that banks would need to carry out technical due diligence on projects too: “Given that we are very concerned about the interface between the turbine and the floating structure, they will need their technical advisor to give them comfort in terms of what has been done in terms of the design and the load analysis.”

De Andres said developers needed to be mindful of these concerns and start early on their ‘design loops’ – the process of gradually improving their tech – to give banks and investors confidence.

“You need to start these design loops very early in project development to make sure the risk is managed throughout all the engineering phases,” he said.

He also said investment was needed in ports to cater for the expansion of floating wind; and that operational expenditure on maintenance was largely unknown: “This is something that is going to require some learning by doing."

De Andres argued that contractual structures were important to de-risk floating wind projects.

Financing terms

Lemarcis did not go into the specifics of the terms that a well-structured floating wind project could achieve from financiers in the current market, which is understandable given the fact floating wind is still in its early days.

She said banks would be “more conservative in terms of pricing, reflecting a higher risk perception from the banks” compared to fixed-foundation projects, but added that terms and prices were “not miles away”.

This should give confidence to firms that talk to banks early and are willing to be open about how they are managing their risks.