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This time next month the UK election will be over and investors will be able to get back to planning their investments in the UK.

At least, that’s the theory. The problem is, this is one of the most difficult UK general elections to predict in the last 100 years, which is mainly due to the growing influence of small parties.

We are likely to see a coalition government again and so, even after the votes have been revealed, the talks between the parties will continue with compromises undoubtedly having to be made. These parties would all bring very different energy policy priorities into a coalition government. It is difficult to see how wind will fare.

But let’s try.

Neither of the two main parties — the Conservatives or Labour — is set to win an overall majority. This is good news.

The Conservative Party has committed to a ban on subsidies for all new onshore wind farms if it wins an outright majority; and pledged a referendum in 2017 on whether the UK stays in the European Union. Exiting the EU would weaken the UK’s international renewable energy targets and its business ties with Europe.

Meanwhile, the Labour Party is a bigger supporter of renewables, but is also regarded as being more anti-business. It has pledged to freeze the prices utilities can charge for energy until 2017, which would eat into these utilities’ profits and therefore reduce how much they could invest in onshore and offshore wind farms.

The party has also pledged tougher rules on financial institutions, which could have unforeseen impacts on energy investment.

In coalitions, both would see some of their extreme policies reined in. The problem is that none of the coalition options are good for wind investors. And any sort of tie-up involving the Green Party looks highly unlikely given their stuttering campaign thus far.

The two likeliest options are a Labour coalition with the Scottish National Party; or the Conservatives again entering a coalition with the Liberal Democrats.

This week Guy Hands, chairman of private equity group Terra Firma, came out in support of a Labour-SNP coalition because it would enable the UK to move away from the anti-wind rhetoric of the Conservatives. The SNP has an interest in backing Scotland’s wind industry, and that should lead to an investment climate friendlier for the wind sector. But Labour has not convinced people that it can run the economy or support businesses.

Meanwhile, a Conservative-Lib Dem coalition might mean the continuation of mechanisms like Contracts for Difference, although there have been some rumours that a second CfD round may not go ahead. Whether they could work together for another five years depends on the extent to which familiarity has bred contempt.

That said, the Conservatives may be anti-wind, but they are also generally more supportive of business and investors.

So it’s a neat problem. Both scenarios have significant downsides -- either a government that's anti-wind or anti-business -- and gaining clarity on the final policy intentions in the long term is tricky.

The most likely outcome of another coalition of some sort looks most promising for wind. The major parties will have to adapt or abandon their more ideological ideas, and compromise to meet somewhere in the middle.

At present, this looks like the best-case scenario for investors, utilities and developers alike.

Dong entry boosts US offshore

Dong Energy has entered the US offshore market by taking over development rights of a large area offshore from RES Americas.

The Danish utility, which is backed by Goldman Sachs, has agreed to take over the rights for an area of 187,523 acres, with potential for wind farms of over 1GW, off the coast of Massachusetts. RES Americas secured the right to develop the zone in an auction held by the US Bureau of Ocean Energy Management in January.

RES paid $281,285 for rights to develop the zone, and said it would continue to work with Dong to develop the zone. The site is around 55 miles south of Martha’s Vineyard.

Pattern pays $244m for NTR pair

Pattern Energy has agreed to pay $244m for two projects totalling 350MW from Irish investor NTR’s US subsidiary Wind Capital.

US developer Pattern has bought NTR's interests in the 134-turbine 200MW Post Rock project in Kansas; and the 100-turbine 150MW Lost Creek scheme in Missouri. NTR’s Wind Capital Group put the projects up for sale in November after a major restructuring at NTR.

Pattern Energy has also agreed to pay $128m for a one-third stake
in the 270MW K2 Wind in Canada from Pattern Development. It will hold a one-third stake alongside Samsung Renewable Energy and Capital Power, each of which owns one third.

Hands: Labour-SNP best for wind

Terra Firma chairman Guy Hands has backed a Labour-Scottish National Party coalition as the best UK election result for wind.

Hands founded private equity firm Terra Firma, which has invested in companies in the wind and solar sectors. He told the Financial Times he was concerned about hostility to the wind sector from the Conservatives, which he said were “ten years behind the times”.

He said a Labour-SNP coalition would be best for renewables, but added that it would also be bad for the financial community. People in the UK are set to vote in the general election on 7 May.

Japan wind could grow 13-fold by 2030

Japan could increase the amount of energy it gains from wind by 13 times by 2030, according to the Ministry of the Environment.

The report from the government department, which was compiled by Mitsubishi Research Institute, said wind farms currently generate 4.8 terawatt hours of energy a year, but this could grow to up to 64.6 terawatt hours by 2030. This represents an over 13-fold increase, and would include both onshore and offshore projects.

Overall, the report said Japan could triple the energy it gets from renewable sources by 2030, from 116 terawatt hours a year now to up to 357 terawatt hours by 2030.

GWEC: ‘Little chance of Paris boost’

There is little chance of help for wind at the United Nations climate conference this year, the Global Wind Energy Council has said.

GWEC said in the introduction to its annual ‘Global Wind Report’ there is “little evidence” that the deal set to emerge from the Paris talks will have much direct impact on the deployment of renewables such as wind, although added there is still time to change that.

However, the report also highlighted positives for wind, including growing competition on price against fossil fuels; and forecasts that over 50GW will be installed globally this year.

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This year the global green bonds market could top $100bn. That’s an awful lot of money, and an awful lot of potential investment in renewables projects including wind farms.

The prediction comes from ratings firm Standard & Poor’s, which forecast that companies could issue $30bn of green bonds this year of a total of $100bn. This is significant growth from the $19bn issued by companies in 2014 from a total market just shy of $37bn.

Now, there are a few main types of green bonds, as explained here by the Climate Bonds Initiative. But however they are structured, the idea is that all will lead to more investment going into green energy projects and companies. This includes those in the wind sector.

We can see a couple of main benefits of this increased appetite for green bonds.

The first is that it should enable companies in the wind sector to raise external investment to support their general corporate goals. Vestas is seeking to take advantage of this and it issued a seven-year €500m bond in March for just this purpose. This is the first corporate green bond issued by a company dedicated exclusively to wind energy.

The second potential benefit is more funding for the sector should enable developers to offload existing wind farms —or stakes in them —that they can reinvest in new projects.

The potential benefits of green bonds for the wind sector look clear. The only problem is that the Standard & Poor’s projection of threefold growth is not guaranteed to happen.

It relies on Chinese companies and public authorities piling into green bonds, which in turn depends on the Chinese government pushing laws to encourage them to cut pollution.

This growth also relies on how new standards for green bonds are introduced. It is widely accepted that those issuing green bonds need to comply with standards over how these funds are being used, and whether the projects they are investing in are truly ‘green’.

Clumsy application of new rules or lacklustre interest from China could both make big dents in that $100bn. For the sake of wind, we hope neither of these happens.

Today may be Good Friday but, for those in the Polish wind sector, even better days are in prospect. In the coming weeks, Poland’s new renewable energy sources act is due to come into force.

It has been four years in the making and, even three months ago, we couldn’t be certain whether it was going to happen. But it won support from the parliament in January, was adopted in February, and got the sign-off from president Bronislaw Komorowski on 11th March. It is due to come into force 30 days after it is published in Poland's Official Journal of Laws, which has not yet happened.

On the face of it Poland hasn’t been doing a bad job when it comes to wind. It has capacity of 3.8GW, which puts it in the ten largest markets in Europe, and 444MW of this was installed in 2014.

But these figures conceal the fact that around 90% of Poland’s electricity generation comes from coal; and that the eastern European nation is facing big fines for missing European Union targets on promoting renewable energy in Polish law.

Now the Polish government has acted and the country has an act designed to support the use of renewable energy, including wind. But wind investors would be wise to hold back from piling into this market. There is a long way to go before Poland looks a good bet.

As yet, we just don’t know how wind would benefit from the new renewable energy laws.

The main pillar of this act is an auction scheme for feed-in tariffs for renewables projects of over 1MW. All new renewable energy installations set to produce energy from January will have to bid in these auctions, including wind, solar, biomass, biogas and hydro.

These auctions should have a positive effect in that they will place tough demands on project backers to improve the efficiency and quality of their projects, and this should help to drive improvements. But winning projects will not simply be chosen on price, and so our concern is that any sector could lose out simply if it is out-of-favour with public decision-makers. Wind could easily be hit.

Poland’s adoption of feed-in tariffs certainly represents a U-turn in Polish energy policy, but it does not provide a stable basis on which investors can make their investment decisions.

In particular, wind could suffer if Poland’s main opposition party, the Law & Justice Party, wins power in the general election in October. The party generally opposes renewables including wind energy, and has previously proposed policies to specifically hit wind.

For example, it has proposed policies such as dismantling wind farms located within 3km of residential areas, and has also called for a moratorium on construction of wind farms.

In other words, it is not a party that wind investors would want to see running a renewables subsidy auction where the decision-making process leaves a lot to individual opinions. It doesn't like wind, and that opinion would surely filter into the auction process.

So the watchword is: caution. The renewable energy sources act may look like a good step, but investors should hold back on making major investment decisions until those October elections.

UK casts doubt on CfD round two

The UK government has said its second Contracts for Difference auction round is subject to change after this May's general election.

The government’s Low Carbon Contracts Company last week published a timetable for the second CfD auction round, which is due to start on 21 October. However, the document said this would run “at the discretion of the next Government” and was “subject to change to reflect [the Department of Energy & Climate Change’s] operational priorities post May 2015”.

The government has set a budget of £50m subsidies for onshore wind and solar in CfD round two, but has not committed funding to sectors such as offshore wind. In the first auction, CfDs were given to 27 projects including 15 onshore wind farms and two offshore.

France set to reveal Areva rescue plan

The French government is set to announce plans for the future of state-controlled nuclear firm Areva within the next fortnight.

Manufacturer Areva mainly operates in the nuclear sector, but also works in wind. Last month it reported losses of €4.8bn in 2014 due to writedowns on its nuclear projects, and the government has been looking at the potential for a tie-up with French utility EDF.

EDF operates all of France’s 58 nuclear reactors and is also active in wind. France owns over 80% of the shares in both Areva and EDF; and has said it is studying potential tie-ups between the two.

Global wind investment grows to $100bn

Global investment in the wind sector grew 11% year-on-year to just under $100bn in 2014, research has revealed.

The United Nations Environment Program, Frankfurt School and Bloomberg New Energy Finance have published the 2015 version of their ‘Global Trends in Renewable Energy Investment’ report. This said a record $99.5bn was invested in wind last year, which is 37% of the $270bn that was invested in all forms of renewables.

That figure was boosted by a series of large financing deals in European offshore wind, including the $3.8bn asset finance deal at the 600MW Gemini project. The only sector larger than wind was solar, with investment up 29% year-on-year to $149.6bn.

RES secures 200MW Nord/LB financing

Norddeutsche Landesbank has agreed to provide Renewable Energy Systems with financing for up to 200MW of UK wind farms.

The German bank is providing non-recourse debt to the developer for two wind farms totalling 25MW: the 15MW Jack’s Lane in Norfolk and 10MW Woolley Hill in Cambridgeshire. These are the first investments in a new portfolio facility agreed between the two firms to permit the financing of up to 200MW of UK wind projects.

Jack’s Lane and Woolley Hill are both set to complete this month.

E.On pulls out of 535MW Oregon scheme

E.On Climate & Renewables North America has withdrawn plans for the 535MW Brush Canyon wind farm in US state Oregon.

The German utility’s North American renewables arm withdrew its application for the 223-turbine project in February, which was planned near the cities of Antelope and Shaniko.

Local communities had raised concerns about the construction traffic that the 76,000-acre project would bring to the area. E.On has not said why it has withdrawn its application.

South African state utility Eskom appointed Tshediso Matona as chief executive last August. Now, seven months later, he has been suspended. That’s quite some going.

Now, to be fair to Matona, it isn’t really his fault. Eskom is suffering from a long-term lack of investment in South Africa’s energy infrastructure over the last 20 years, and the system’s over-exposure to coal. Matona is one of four senior executives that have been suspended as the utility conducts an ongoing investigation into the operations of the company, which has been presiding over rolling blackouts, as well as calling for people to use less power.

The situation is forcing companies and public authorities to look at other energy options, including whether they can buy energy from independent power producers.

This is a boost for those in the wind sector because renewables are among the options being considered. This vindicates the strategies of investors that are looking to build wind farms in the country.

However, Eskom is still a hurdle, as it does not have the sufficient spare capital to invest in building the grid links to these wind farms. It has made available the option that developers can build these links themselves, but that also means developers would need to fund the construction of these links. That is a significant extra cost on top of building the wind farm.

And yet, investors who know the market clearly don’t see these troubles as a disincentive.

For example, Mainstream Renewable Power and Actis last year opened the 138MW wind farm Jeffreys Bay on South Africa’s Eastern Cape, and are clearly aware of the issues with the South African market. But this has not put them off. Last month, Mainstream secured financing for three projects in South Africa totalling 360MW — 140MW Khobab, 140MW Loeriesfontain 2, and the 80MW Nouport — and all of which are in the Northern Cape.

And last month Mainstream and Actis formed Lekela Power, which is a $1.9bn pan-African renewable energy platform with plans to build up to 700MW-900MW of wind and solar across Africa by 2018. It isn’t focused on South Africa, but it also shows that the companies’ experiences in the country haven’t put them off Africa.

Meanwhile, this month China’s Longyuan secured financing from Nedbank and IDC to develop the first two phases of the 244MW De Aar wind farm in the Northern Cape. It is working with South Africa’s Mulilo Renewable Energy and a local community company; and construction work is scheduled to start on the project in the second half of the year.

Again, Eskom’s troubles are not putting them off. Far from it. It is the troubles with Eskom that are giving alternative energy sources like wind such a great growth opportunity. Let’s not forget South Africa went from no capacity to 570MW in the last 12 months.

Developers and investors are a canny bunch. Yes, problems with the grid mean it won’t always be easy, but the fact that existing investors have shown a willingness to persist with projects in South Africa shows that they clearly see a long-term opportunity.

There is no lack of financial institutions that want to be involved with Europe’s offshore wind sector. But what do developers need to get funding at the best price?

This was one of the main discussion points at our Quarterly Drinks networking evening in London last week, which featured a Q&A session with Carol Gould, head of power and renewables in the European investment banking division at Bank of Tokyo Mitsubishi.

The bank has been a keen backer of European offshore wind. Last April, it was part of the group involved in a £370m refinancing of the UK Green Investment Bank and Marubeni’s 50% stake in the 210MW Westermost Rough; and this month it was one of ten lenders in an €840m funding deal at the 332MW Nordsee One.

For Gould, the answer to that opening question is pretty simple: offshore wind developers need to offer long-term certainty over the cost of building and maintaining projects. If they offer large risks to financiers then they will have to pay more for their financial support.

Such deals are not unheard of. Law firm Freshfields Bruckhaus Deringer identified in its ‘European Offshore Wind 2014’ report last July that Dong Energy has used such a structure in most of its divestments of stakes in European offshore wind farms since 2010.

Dong has succeeded in attracting backers at pre-operating stages because, in most cases, it has offered investors an ‘EPC wrap’. This means it retains liability for construction risk and commits to completion at a fixed price by a fixed date. This protects investors.

There are a couple of reasons Dong can do this.

First, it is a leader in offshore wind so has a good knowledge of the risks; and second, it is backed by the Danish government, which is a nice backer to have if things do go wrong.

However, no other major developers have followed the ‘EPC wrap’model, and so they must look at other ways to remove risk.

This means having enough money set aside in case there are problems in the construction stage or, later on, with operations and maintenance. Some financiers are concerned about whether developers have set aside enough money in case things do go wrong. The risks of such projects are growing as projects get further offshore and become more complex.

And when it comes to operations and maintenance, the message to developers is they can avoid taking on some risks by getting long-term contracts with equipment manufacturers. This certainty can be passed directly on to their prospective financial backers.

Make no mistake, there is a lot of liquidity in the market. However, banks want to make sure they are working with people that have a good understanding of the market; and with enough capital in reserve to cope with problems if and when they arise.

So to get the most competitive finance, developers need knowledge and money. Sounds simple when you put it like that, doesn’t it?

We blame TV chefs. It seems like we can’t go anywhere without seeing someone talking about how their ingredients are ‘good, honest and locally-sourced’. It’s become a huge cliche.

But there’s a good reason we’re seeing it. Large numbers of people want to know where their food has come from, so they know it has been ethically-sourced and not come from the other side of the world. This helps people to make more informed choices.

But would it work with energy?

Renewables-only utility Good Energy and energy startup Open Utility think so.

They have announced plans to trial for six months a service that is set to enable businesses and renewable energy generators to trade electricity. The idea is that this online marketplace, Piclo, would become an ‘eBay for energy’and give people more transparency over which renewable energy projects they buy power from.

The aim is to enable renewable energy firms, including wind farm operators, to sell energy directly to their neighbours; and enables those neighbours, including local firms and public sector bodies, to get the best price for the energy they buy. Juliet Davenport, founder and chief executive at Good Energy, said the service could help to “unlock the potential of renewables in the UK”.

Effectively, it means customers can buy ‘good, honest and locally-sourced’energy.

It sounds an interesting idea, but we’ll have to see the detail before we know exactly what are the potential benefits for investors in wind farms. The main benefit appears to be getting support from local people for a potential wind project. If local people are in favour of a scheme, because of the promise of competitively-priced energy, then that should help some projects gain planning consent.

However, it doesn’t address threats to the UK wind sector after the upcoming election in May, if the Conservatives retain power and carry out their plans to axe subsidies for new onshore wind farms. We don’t see how Piclo will help much in if such negative policies are implemented.

We also wonder if such a service would really be of much interest to businesses —or, eventually, to individuals. If people want to power their activities with renewable energy then that is good for the industry, but we’re not convinced they want to know exactly which project they are buying from. As long as it is at a competitive price and renewable then, for most, that would be enough.

It looks like an interesting idea and we’d like to see it in action. For now, ‘good, honest and locally sourced’energy looks fine —but only if the price is right.

UK GIB starts £200m new markets push

The UK Green Investment Bank plans to invest £200m in clean energy projects in Africa and India in an overseas pilot programme.

The bank has agreed with the UK Department for Energy & Climate Change to invest on commercial terms in renewable energy and energy efficiency projects in India, East Africa and South Africa. This is in addition to the £3.8bn it has available to invest in the UK.

UK GIB has so far invested more than £860m in the UK’s offshore wind sector by backing six projects with total capacity of 2.1GW. This overseas pilot programme opens the possibility for the bank to invest in onshore and offshore wind in emerging markets.

Havgul and Triventus in 1.6GW merger

Scandinavian firms Havgul and Triventus are set to merge to form Havgul Nordic to focus on projects in Finland, Norway and Sweden.

The deal enables Norway’s Havgul Clean Energy and Sweden’s Triventus Wind Power to pool development and expertise to attract investment for onshore and offshore wind. The pair hope to benefit from the Nordic nations’ ambitious renewable energy targets.

Havgul Nordic has a pipeline of 15 projects totalling 1.6GW, with permitted schemes including the 350MW Havsul 1 Offshore and 200MW Tonstad wind farm. The merger is due to complete in May.

Bain Capital leads $80m Japanese MBO

Bain Capital is set to lead an $80m management buyout of publicly-traded Japanese developer Japan Wind Development.

The US private equity firm is teaming up with JWD chief executive Masayuki Tsukawaki to take the developer private. Founded in 1999, JWD is one of the largest independent wind farm developers in Japan and operates one of the country’s largest wind farms.

The deal is scheduled to complete on 8 May. Upon completion, JWD and Tsukawaki would own the shares in the company; and Tsukawaki would continue as chief executive.

Dutch giant APG mulls backing Borssele

APG is looking to invest ‘several hundred million Euros’ in the planned 1.4GW Borssele wind farm in the Dutch North Sea.

The Dutch pension fund manager, which manages the Dutch civil service pension fund, is now looking at investing in offshore wind after ruling it out last year due to concerns about technology and subsidies. It has so far invested €1bn of the fund’s assets in renewable energy, mainly onshore wind.

Borssele is set to require investment of more than €2bn but will also qualify for subsidies for 15 years. The Borssele offshore wind area is set to be developed in two 700MW sections, and auctions for contractors for the the first section are due to start later this year.

Alpha Wind plans 816MW off Hawaii

Alpha Wind Energy is seeking to develop two floating offshore wind farms with combined capacity of 816MW off the coast of Hawaii.

The Danish developer has submitted a lease request to the US Department of the Interior to develop two 51-turbine projects, each using 8MW turbines and with capacity of 408MW.

Alpha plans to develop the projects in waters off Oahu’s northwest and southern coasts.

Four years ago this month the Tohoku earthquake hit Japan. This led to meltdown at the Fukushima Daiichi nuclear plant, the world’s biggest nuclear disaster since Chernobyl.

In the aftermath of this disaster the Japanese government started looking at the potential to use renewable energy instead of nuclear. This represented an opportunity for the wind sector to build more onshore and offshore; and there were high hopes that Japan would become a leader in the emerging offshore wind sector.

But, on the face of it, things have not changed much since 2011.

The country has only around 45MW of installed capacity, including a prototype 2MW floating turbine off the Fukushima coast that has been operational since October 2013. Developers and investors have been testing the waters, but none have yet taken the plunge on a large offshore project.

We should not, however, mistake this lack of activity for apathy.

Japanese investors have been highly active in Europe's offshore wind sector over the last couple of years, and with good reason. This gives them an ideal opportunity to get comfortable with the sector while not having to take the plunge by taking on development risk themselves.

For instance, last August the Marubeni Corporation and the UK’s Green Investment Bank refinanced part of their 50% stake in the 210MW Westermost Rough project, with a group of lenders including Japan Bank for International Cooperation, Bank of Tokyo Mitsubshi, and Mizuho Bank. The followed the deal in December 2013 where Marubeni divested half of its 49.9% stake in the 172MW Gunfleet Sands project to Development Bank of Japan.

And in October, Sumitomo Corporation bought a 39% stake in the 165MW Belwind and a 30% stake in 216MW Northwind in Belgium from developer Parkwind.

All of these deals show that major Japanese corporations have been gaining experience in the sector, and that can only translate into more informed investment decisions in their home market.

This confidence is now starting to translate into activity.

This month, the Japanese energy ministry launched a feasibility study to look at the potential environmental impacts of four offshore wind projects totalling 1.45GW.

These include the 500MW and 200MW schemes off Kitakyushu; a 522MW project off the Goto Islands in Nagasaki prefecture; and a 30MW development by SoftBank Corporation’s SB Energy in Tottori prefecture. Each of these studies is due to begin after April.

This followed the news in February that Japanese shipbuilder Hitachi Zosen and Sumitomo are leading a group that is looking to develop a 220MW wind farm off the coast of the city of Murakamii in Niigata prefecture. The pair are set to conduct a feasibility study on the project, where they plan to start work in 2020 and finish in 2024.

These projects are still in their early days and some may come to nothing, but the scale of the proposed development gives us confidence that one of them might happen. Japanese backers have shown they are happy to back well-thought-out schemes in Europe. An obvious next step would be rolling out that knowledge at home.

It's four years on from Fukushima. It's about time.

The US wind market is at a crossroads.

Last week, the nation’s Department of Energy published its long-awaited 350-page ‘Wind Vision’ report, which sets a long-term strategy to support US clean energy policy. This shows that wind accounted for 4.5% of end-use energy in the US in the last year and this could go one of two ways in the next 20 years.

The first way is a high-growth scenario, and this is the one that has received most publicity thus far. This suggests that the proportion of wind in the energy mix could grow to 10% by 2020, 20% by 2030, and 35% by 2050. This would rely on aggressive reductions in wind farm costs, rising fossil fuel costs, federal or state policy support, and increased energy demand.

Those are all realistic, but we can't be certain that all will happen.

The second scenario in the ‘Wind Vision’ report is a more cautious one, in which wind’s net power contribution settles at 7% of total electricity demand in 2016 and then increases by just three percentage points over the next 15 years, to hit 10% by 2030. Sure, it’s progress, but not as impressive as the first scenario.

So will the US see fast growth or something more cautious? At present, we think the latter. The stars aren’t aligning for fast growth.

First, there is the Production Tax Credit, where tortuous battles continue in the US government between those trying to get it reinstated and those who insist that wind must be able to stand without subsidies — even when conventional fossil fuel operations don’t! If this isn’t renewed it removes a key plank from the strong federal support needed under the high-growth scenario.

Second, there is the point about aggressive competition. We have seen major competition between developers, which has driven down the levellised cost of energy on high performing wind farms to $45/MWh. Competition will of course continue, but US developers do not see the US as the only game in town.

The likes of Pattern Energy and NRG have been freeing up finance by selling stakes in operational projects, but they aren’t reinvesting all of this in the US. They are looking to emerging markets that offer better margins, including in South America, and that removes some of the competition that would lead to the aggressive reductions in wind farm costs that the DOE was talking about.

The other two points in the high-growth scenario are perfectly fine.

We would expect fossil fuel costs to rise in the medium-to-long term, and we would also expect demand for energy to rise in the US, but will these factors be enough to lead to the high-growth scenario? We’re just not convinced.

You see, the danger with reports like this one from the DOE is that the aspirations in the report look nice but they simply aren’t matched to what is happening in the market.

Things rarely work out exactly how we would like.

We are as interested as anyone in the move towards 10MW offshore turbines.

But sometimes we need a reminder of how that is still a relatively small part of the market. In the last month we have had one such reminder, from British renewables trade body RenewableUK in its ‘Small and Medium UK Wind Report’. This is its annual review of the UK’s sub-500kW sector.

The report starts by highlighting the sector’s successes. In 2014, 2,237 small (1.5kW-50kW) and medium (50kW-500kW) wind turbines were installed in the UK, and 2,614 were sold to markets overseas, mainly Europe and North America. This shows that manufacturers in the UK are using exports to bolster and promote the domestic market —although this masks problems at home.

RenewableUK says the government’s axing in 2012 of feed-in tariffs for 1.5kW-15kW projects has harmed the deployment of small and medium turbines in the UK, and held back the industry.

This change has forced small wind turbine companies in the UK to cut staff numbers, merge with rivals, or leave the sector at a time when the small and medium wind sector globally is growing fast.

The report says: “Every effort is being made by the industry to stay afloat, and after two years of decline, many companies are now heavily reliant on export markets.”

Now, it is great to hear that UK firms are making significant sales in the global market. Indeed, it is crucial for businesses in a global industry like wind to have thriving exports operations. But the UK government needs to realise how these firms are supporting UK Plc, and give them more support.

If the government doesn’t do this then more people who work in small and medium wind in the UK will decide to take their skills to a country that really appreciate them. UK industry will suffer —and according to RenewableUK it already is.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, we would love you to check out the new blog on the A Word About Wind website. Here is a taster of our most recent post and a link to the whole article…

EWEA Offshore: Report Calls For New Mindset

Do you know what you’re doing in ten years’time? No fixed plans? Well, the good news is you’re not alone. It’s challenging enough to plan for the next 30 days, when you take into account short-term deadlines and daily to-do lists.

For many, prioritising long-term actions doesn’t come naturally, and it certainly isn’t easy for those in a fast-growing and fast-changing market like offshore wind, where the immediate short-term pressures can be considerable

So it’s all the more interesting that, as the industry gathers together this week at the EWEA Offshore conference...

Wind Watch.

That argument was that setting up a joint venture like this allows Areva the chance to hand over some control of its offshore wind operations to Gamesa, and may point towards a plan to exit the offshore wind sector in the longer term.

Speculative? Yes, but we need only look at Areva’s dire set of annual results this month to give credence to this theory.

The French group reported losses of €4.8bn in 2014 after write downs on nuclear projects. In response to this, it said it would reduce the size of its commitments in renewable energy so it could focus on improving the health of its core nuclear business.

With that in mind it would not surprise us if one option for the firm was a complete exit from renewables — and registering Adwen in Spain would remove one logistical problem if it chose to do so.

Of course, it is impossible to predict at this stage that a total exit by Areva from renewables is definitely on the cards. Partly, we think Areva's long-term appetite for offshore will depend on what future France's leaders see for nuclear, and what successes Adwen enjoys in the face of stiff competition from other established rivals.

But one thing is for sure: it won't get an easy ride.

The pieces of the jigsaw are coming together for SunEdison.

The US solar giant and its subsidiary yieldco TerraForm completed their $2.4bn buyout of wind developer First Wind in January. This created the world’s largest renewable energy developer, and has given SunEdison a way into building wind in the US, Europe, Asia and South America. First Wind has 16 wind farms totalling 1GW.

And SunEdison last week announced a takeover of a four-year-old technology start-up in a deal that is in many ways as significant for wind as that First Wind buyout. SunEdison is set to buy Solar Grid Storage, which makes battery storage systems for solar schemes, for an undisclosed sum. SunEdison sees the potential to use this tech on solar and wind farms.

These acquisitions appear to fit together very neatly.

Let’s look at Solar Grid Storage. The company was formed in 2011 and partly funded with $250,000 of venture capital from the Ben Franklin Technology Partnership. It currently has four energy storage projects, but SunEdison is not buying this start-up for those projects. No, it mainly wants access to Solar Grid Storage’s intellectual property and technology.

If battery storage is done properly then it can offer clear benefits to wind investors. It enables them to store excess energy at windy times and sell it to the grid when the conditions are less windy.

This helps wind farm owners to store and sell energy that would otherwise be lost; and also enables them to sell energy to the grid when it is most needed — which means that they can command higher prices for the energy they are selling. This is a smart move for investors that want to maximise the returns from their projects.

The problem is that so far battery storage has been much better in theory than practice, and First Wind is among those who have literally been burned.

In 2012, it had to shut its 30MW Kahuku wind farm in Hawaii due to a large fire at a battery storage facility by Xtreme Power. First Wind opted not to use battery storage when it reopened Kahuku.

The cost of this fire was an estimated $30m and clearly it is hugely expensive for investors to have a project offline. It is natural that most investors would be unhappy for the financial performance of their project to rest on somebody else’s energy storage technology.

This is what makes this Solar Grid Storage deal so interesting. It shows that SunEdison wants to bring that knowledge in-house and take control over this aspect of the scheme. We expect to see more deals like this as other renewables investors seek that certainty.

Of course, Solar Grid Storage is still a small business. We haven’t seen evidence that it can provide a battery storage scheme capable of coping with a utility-scale wind farm. It may take years for it to get to that stage but, with the right support, it should do so. That would be a great boost for investors in wind farms.

For wind’s long-term future this is a vital piece of the jigsaw.

Do you know what you’re doing in ten years’time? No fixed plans? Well, the good news is you’re not alone. It’s challenging enough to plan for the next 30 days, when you take into account short-term deadlines and daily to-do lists.

For many, prioritising long-term actions doesn’t come naturally, and it certainly isn’t easy for those in a fast-growing and fast-changing market like offshore wind, where the immediate short-term pressures can be considerable.

So it’s all the more interesting that, as the industry gathers together this week at the EWEA Offshore conference in Copenhagen, the collective cry is to look a decade into the future at the long-term competitiveness of offshore wind.

Earlier this week, Ernst & Young published a study stating that the offshore wind industry in Europe must reduce costs by 26% over the next five years if it is to reach cost-competitiveness with conventional energy sources by 2023.

Key recommendations in this report include deploying larger turbines to boost energy capture (and cut project costs by 9%); fostering competition between industrial players (7%), commissioning new projects (7%); and tackling supply chain challenges like the need for more efficient installation equipment (3%). Dong Energy, MHI Vestas and Siemens are among those to back this call.

If these recommendations are implemented then the report says offshore wind should be competitive with gas, coal and nuclear in the first half of the next decade. It’s a compelling prospect and, as the global energy market evolves, this is something that the European market much keep in the front of its mind. This will provide focus in a period when growth in offshore wind has slowed.

The challenge of course is in integrating these priorities into the mindset of those individuals working day in day out, on the front line. And it’s precisely why industry trade body the European Wind Energy Association —which commissioned the report — keeps pushing the market to look ahead.

The EY report goes a considerable way to resetting that mindset and giving a collective goal that the industry can back. However, the ability of offshore wind to meet these ambitions will be wholly dependent on the willingness of those working within the market to change the way they think.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you checked out our special reports? So far this year we have published Finance 2015 and Middle East. But we are not resting on our laurels and have already started work on our next special report, Funding Offshore, which is due out this June.

This report is set to look at the state of financing in offshore wind around the world, from established markets such as the UK and Germany to new markets including the US and Asia. It will look at some of the themes that Green Giraffe's Jérôme Guillet covered in his guest Wind Watch on Monday. If you didn't read that, do it now!

If you would like to discuss editorial in this report then please get in touch with editor Richard Heap; or, for commercial queries, please get in touch with sales and membership manager Joe Gulliver.

We are still in the early stages of research but, as always, we will look to bring some of the freshest insights for investors looking at the hugely exciting offshore wind market.

And as always, if you have any feedback, please let us know!

The Eiffel Tower has been a Parisian icon for 126 years, but it was always missing something: wind turbines.

Thankfully, US onsite renewables specialist Urban Green Energy fixed that last month by fitting two vertical axis turbines inside the structure of the tower, 400 feet above the ground. We’d like to see UGE now turn its attention to using turbines to improve other world icons. For example, we’d like to see the Statue of Liberty’s torch replaced with a more renewable alternative, but we digress…

The two UGE VisionAIR5 turbines have been painted the same colour as the tower but, of course, this installation isn’t mainly about aesthetics. It’s about economics. The fact is that the organisation that manages the Eiffel Tower, the Sociétéd'Exploitation de la Tour Eiffel, believes that wind works.

These turbines are set to produce more than 10,000KWh of electricity a year. This offsets annual energy consumption of commercial activities on the tower’s first floor, which include a restaurant, cafe, cultural display, and a gift shop selling highly fashionable items including Eiffel Tower-branded travel cushions. And this gives the tower’s owners more certainty over their future energy costs.

Of course, this monument benefits from conditions that many other tall urban buildings don’t enjoy. The tower has a structure where wind can pass through it, and it is not bounded by buildings that would block off wind. It shows that with a little creativity there are ways to incorporate wind into even the world’s best-loved monuments.

Nick Blitterswyk, chief executive at UGE, said he was proud that its technology could help to make “arguably the most renowned architectural icon in the world”that little bit greener.

So next time you see the Eiffel Tower in a romantic film you’ve got a great excuse to start talking about the merits of wind power. Your friends and family will love you.

This Wind Watch has been written by Jérôme Guillet, managing director of renewable energy financial advisor Green Giraffe.

There is much to be positive about as we head to Copenhagen this week for EWEA Offshore.

In the recent auctions for long-term purchase contracts for offshore wind, winning bidders came out with prices far lower than many

expected: £114-£119/MWh for the UK's Contracts for Difference(CfDs) and the equivalent of £75/MWh for Denmark's Horns Rev 3.

This is good news, but there is even better: the current combination of technical progress, stable regulatory frameworks and favourable funding conditions should ensure continued downward pressure on costs – and increasingly low bids under competitive auctions.

On the technical side, the two drivers are the size of the turbines now on the market (in the 6MW-8MW range), allowing for economies on the foundations and installation; and the increased competition one can see following the return of Vestas with a credible offer – and balance sheet – as well as the continued competitive presence of Senvion and Alstom. This has certainly concentrated minds at Siemens. Project developers have never had so many compelling offers to choose from, which ensures downward pressure on prices.

On the regulatory side, one can argue that things have never been so simple and transparent as today. Several markets (the UK, Germany, the Netherlands, Denmark and Belgium) have converged on CfDs or similar mechanisms that ensure long-term price stability for projects and allow them to be financed on attractive terms.

But more importantly, there is now good visibility on the pipeline across most North European countries, with de facto rationing explicitly imposed for the next several years, be it through the grid connection as in Germany, the CfD ‘pot’ in the UK, or a pre-announced volume of auctions like in the Netherlands or France.

While this rationing may be frustrating to a few developers who were hoping to go faster, this actually guarantees that there will be 3GW, or a little more, built in Europe each year for a number of years. This allows the supply chain to invest with confidence in ad hoc industrial facilities – as shown by Siemens in the UK – and will similarly help lower prices as manufacturers can better match their plans to the needs of the industry and achieve economies of scale.

Finally, the financing markets are also fully able to support the requisite level of investment, and their increasing depth is offering attractive perspectives to lower the overall cost of capital and thus the long term cost per MWh.

With 8GW now operational, the secondary market for assets is increasingly liquid and competitive, with many long-term investors (pension funds and the like) now comfortable with the relatively low operating risk and happy with the long-term revenue stream offered by offshore wind farms.

This allows for capital to be recycled on attractive terms by the investors willing to fund the construction phase, and this ‘exit’ can increasingly be taken into account at the point of investment prior to construction. This means that IRR requirements for equity can now be a blend of a few years of more expensive construction equity and many years of cheaper long-term equity.

In parallel, the project finance market is able to finance construction risk cheaply: with current low long-term interest rates, 15+ year debt is available at 4% or even less, and volumes are definitely available for the expected pipeline of projects, with 30 or more banks now comfortable with the risk and many increasingly willing to offer large (€100m or more) tickets or even underwritings. With typical debt:equity ratios at 70:30, the overall cost of capital can be quite low, and it would be natural for such leverage to grow as the industry shows it can build more projects on time and on budget.

With all these factors put together, the goal of £100/MWh, or even €100/MWh, is a realistic medium-term target.

Were you busy on Valentine’s Day?

Our readers are a romantic bunch so we imagine you started with flowers, moved to dinner, and then… well, that’s your business…

Or maybe you were raising hell about fossil fuel investments at one of 450 events in 60 countries on six continents to mark Global Divestment Day. Confusingly, this took place on two days: 13-14 February. These days are part of a movement to tackle climate change by forcing major investors to divest from fossil fuels and move the funds towards renewables.

It may sound like a hippy movement, and in some ways it is. But it is also achieving some major successes, and that is likely to result in more funding coming into wind, particularly operational schemes. If new investors want to get into wind then they are likely to start by investing in working wind farms that offer stable returns.

This would be good news for the utilities and developers that are looking to sell out of operational projects so they can raise capital to support expansion in emerging markets. Only last week we wroteabout large numbers of projects up for sale, and investors who are divesting from fossil fuels could be among potential buyers.

We are, after all, talking about some significant numbers

Go Fossil Free, the group behind Global Divestment Day, says so far it has persuaded 180 institutions including local authorities and universities to sell investments in coal, oil and gas worth a total of £33bn. It is now gaining traction among institutional investors.

First, hundreds of thousands of investors in six Danish pension funds, worth a combined €32bn, announced this week that they are to vote on whether to divest investments in 100 of the largest coal companies by the end of 2018. They are due to vote in April.

Second, the Bank of England warned the insurance sector on Tuesday that insurers would suffer a “huge hit” if their investments in fossil fuel firms are rendered worthless due to action on climate change. This is an argument for those firms to consider divestment.

And third, the Norway’s €850bn oil fund, the world’s largest sovereign wealth fund, said in February that it was set to dump investments in 32 coal companies on environmental grounds, and was looking at making further fossil fuel divestments in future.

The divestment movement is an exciting one, and we are starting to see the fossil fuel and renewable energy industries starting to compete for the same capital. We are still in the early stages, of course, and it would be naive to think renewables has significant investment muscle yet. Even so, we do expect to see more large institutions showing more interest in wind.

We don’t agree with everything this movement stands for, though.

It may be attractive for activists to argue that fossil fuels are bad and renewables are good, but we shouldn’t lose sight of the fact that both can be part of a healthy energy mix.

Also, we must accept that there will be fossil fuel investors who keep doing what they do regardless of the activists.

But this movement will encourage some major institutions with significant financial clout to put some of their capital into wind. For that, it is a movement with a lot about it to love.

Wind Watch

Wind Watch is published every Monday and Friday.

In the meantime, have you read our new report on investing in wind energy in the Middle East? If you haven’t then you’re missing out!

The region is best known for its plentiful fossil fuel resources and its hotspots of instability. But change is afoot. Middle Eastern investors are increasingly active in wind overseas, in both established and emerging markets; and turbines are starting to go up in the region.

In this report, we talk to leading experts to get their views on what the emergence of companies from the region means for the wind market. We will also look at what opportunities there are for companies from established markets to take advantage.

To download the report, log in to your account on our website and select 'download'. If you don't have an account yet, contact joe@awordaboutwind.com for a direct download link.

The Middle East is home to some of the hottest countries on Earth.

For companies in the wind sector, however, the reception they have received in the oil-rich region has been decidedly cooler. Governments in the region have been slow to recognise how wind and other renewables can fit with their traditional oil and gas operations; and most of the nations that have committed to ‘green’targets have not brought in laws to give investors uncertainty.

And yet, in our report about wind in the Middle East published this week, we can see that there is hope for investors and manufacturers that want to expand in one of the wind industry’s final frontiers.

The first myth about the region is that every country is like Qatar, Saudi Arabia or the United Arab Emirates, with huge fossil fuel reserves. They aren’t, and some countries in the region are looking to use wind to reduce their reliance on fossil fuel imports. One of the most interesting is Jordan.

The second myth is assuming that countries in the region have all the energy they need. Many of the countries in the Middle East are growing fast and so their energy demand is growing too. We expect more to look to wind as they seek to diversify their energy supply, and the likes of Egypt and Turkey are both a case in point. Lessons learnt there will spread to the Arabian Peninsula.

And the third myth is assuming that these countries won’t change. Government-backed sovereign wealth investors such as ACWA Power, Masdar and Nebras are looking to invest in wind projects across the region, while Masdar has also been active overseas. We expect more Middle Eastern investors to gain experience in wind overseas and then take that back to their home market

The wind sector is starting to gain a foothold in the Middle East, and investors would be wise to look at what opportunities it presents —although it isn’t a market for those who want a quick win.

Why not read the full report here?

With some stories you just light the touch paper and stand back.

The UK government’s announcement last Thursday of the projects that have won subsidy support in the first auction in its Contracts for Difference regime is one such story. Twenty-seven projects were awarded CfDs, including 15 onshore wind farms and two offshore.

This has brought out the predictable criticisms of the government for paying out generous subsidies to the wind industry.

These criticisms are bolstered by the National Audit Office, which last June slammed the government's decision to award early CfDs to eight projects last April, at levels higher than those announced in the auction round last week. It may have a point.

But let’s take a step back. This first auction shows the government is making good on its commitments to support the growth of UK renewables, including onshore and offshore wind. It is supporting investment in the sector and the supply chain; and must continue to do so regardless of the result of the election in two months’ time.

This is the message that wind must ram home to the UK's leaders. If it doesn't happen then the UK's standing among wind investors will be further damaged. See today's lead story for more details.

It is absolutely right that the government supports the wind sector in the UK because the country is under pressure to integrate more low-carbon sources into the grid. Wind is a cost-effective alternative to fossil fuels, and it enjoys widespread support in the UK despite what prime minister David Cameron and others would tell you.

It also makes sense for the UK to invest in offshore wind because it helps the country to take a global lead in a fledgling industry.

New factories for MHI Vestas and Siemens in the Isle of Wight and Hull respectively show that major manufacturers are keen to set up offshore wind facilities in the UK. By backing the 714MW East Anglia 1 and 448MW Neart na Gaoithe in the CfD auction, the government is helping to support jobs created in those factories.

Critics will portray subsidies as unfair support for an inefficient industry, but we prefer to see them as an investment by the government in developing British industry and skills.

And, according to the government’s Offshore Renewable Energy Catapult, the investment strategy is working. The Catapult reported last week that the cost of energy from offshore wind farms has dropped 11% over the last five years, and that its aim of getting the cost of energy from offshore wind farms to under £100/MWh is achievable. This is underpinned by evidence from independent consultancies Deloitte and DNV GL.

The focus now is the May election. CfDs are helping to support wind, but we have major doubts whether this support will survive the election. The Conservatives have pledged to end onshore wind subsidies if they win the general election, and they are likely to have a major role in a coalition government.

The next CfD auction is due in the autumn, and we want the government to commit to the process into 2016 and beyond. Wind has dominated this CfD auction round, and we don’t want to see it marginalised after May. Future investment in the UK is at threat.

You'll have seen in today's news that EDF's renewable energy arm is making its first foray into South American wind. It is buying a majority stake in an 800MW portfolio from Latin American wind specialist Sowitec.

It is always interesting to see a high-profile utility make a big splash in a new market, but this time we are more interested on the effect this has on countries with more established wind markets — and, in particular, on the secondary markets in these countries.

If utilities and developers want to expand in new markets they need working capital, and one way to quickly raise it is to sell operational projects in established countries. This is driving the growth of secondary wind markets in Europe and North America. On paper, the thinking is good — and it sounds relatively straightforward too.

But, as the number of projects being offered to investors on the secondary market increases, utilities and developers will need to become more savvy about how they sell these projects.

In short, the secondary sell isn’t as simple as it sounds as there is no shortage of projects or investors.

Indeed, in the last week, two funds have told us there is a large number of projects to invest in. First, Greencoat Capital in the annual results for its UK wind fund said that it expected to see a “significant number of further investment opportunities” over the next year and that it would have to “invest selectively”.

And second, The Renewables Infrastructure Group said in its annual results that it has a “healthy pipeline of projects available across its target markets”. That “healthy pipeline” is competition for all those utilities and developers who want to offload assets; and they can be sure that potential buyers will carry about tough due diligence before completing a deal.

The message for would-be sellers is clear: potential buyers have no shortage of options. If sellers want to sell their assets for the best prices then they need to be aware of this. Pitch an asset right and a good asset will move fast at a good price.

But pitch it wrong and the project — or, worse still, a portfolio of projects — will struggle to sell and get stuck in a vicious circle as potential buyers question why it hasn’t sold already.

For companies that want to free up working capital to invest in emerging markets it is not good enough to enter the project sale process without a clear, compelling proposition. If you want to see how investors are becoming more savvy then look at Greencoat and TRIG. They are being very selective, not splashing the cash.

Utilities and developers must take time to really understand what they're selling, recognise key investment drivers, and be selective about who they target. It isn’t simply a matter of putting a project up for sale and watching it go.

This targeted approach is more effort, but it’s also vital for those who want to make sales in a crowded marketplace.