The EU will need to significantly ramp up its investment into wind energy in order to meet its 2030 climate goals, according to the latest report from WindEurope.
€43 billion was invested into new wind farms in 2020 alone, representing roughly 20GW in extra capacity the report states and a 70% increase on 2019 numbers. However, as much as 27GW per year of new wind energy will be required in order to meet the drastic requirements of the 2030 climate ambitions, the report claims.
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WindEurope states €17 billion of this investment was in onshore wind, covering 13 GW of new capacity.
The report suggests the largest problem facing the EU's renewables sector is the slow adoption rate of new wind farms with the authors stating that "the money is out there" but projects are trickling through.
€26 billion of the investment represents offshore wind, covering 7 GW of new wind energy. Large projects, such as the Dogger Bank project in the UK - set to be the largest wind farm in Europe once running, or the Hollandse Kust Zuid in the Netherlands - boosted these numbers
WindEurope's CEO Giles Dickson states that wind energy has remained attractive throughout the pandemic, likely due to it relying on a natural resource that is never in short supply, particularly at sea.
He added: "Given the right revenue stabilisation mechanisms are in place, there is plenty of capital available to finance wind. This confirms wind energy is perfectly positioned to support Europe’s economic recovery from COVID.
"Each new turbine generates €10m of economic activity in Europe. And the expansion of wind energy envisaged in the National Energy and Climate Plans can create 150,000 new jobs by 2030.”
The three largest markets for investment were the UK, the Netherlands and France, with €13 billion, €8 billion and €6.5 billion in wind investment, respectively. Germany clocked in fourth with €4.3 billion.
The report indicates that while the €43 billion in investments shows strong growth year-on-year, it will still not be enough to meet the bloc's climate targets and last year's investments represent less than half the annual requirements to meet the Paris Climate Agreement's goals.
Permitting remains the main bottleneck. Permitting rules and procedures are too complex, which delays projects and adds costs – this results in fewer projects being developed, the report says. These agencies also suffer from severe understaffing which further complicates things.
Most EU member states are also not meeting the permitting criteria set out in the EU's Renewable Energy Directive.
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“Europe wants more wind energy to deliver its climate and energy goals. The technology is available. So is the money. But the right policies are missing, notably on the permitting of new farms where rules and procedures are too complex," Dickson said.
He added: "The revision of the EU Renewables Directive in the ‘Fit for 55’ package needs to tackle this. Governments need to simplify their permitting and ensure there are people to process the permit applications. Otherwise, there’s no point having a higher renewables target.”
Bank financing is reportedly also crucial to the development of new wind projects. Dickson says Wind farms continue to be financed with 70-90% debt and 10-30% equity.
The bigger wind farms are increasingly being turned into business entities with their own management teams and financial reporting, capable of raising debt on their own. Banks lent a record €21bn of non-recourse debt to new wind farms in 2020.
Edward Northam, Head of Green Investment Group (GIG) Europe, said: “As one of the most mature, proven renewable technologies that can be delivered at scale, wind projects present an extremely attractive opportunity for investors. The challenge currently facing the sector, therefore, lies not in access to capital, but in accessing a pipeline of investable projects.
"Investors are working hard to address this gap by delivering innovative capital structuring solutions that help make new projects happen.”
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Another important trend is the growing role of corporate renewable Power Purchase Agreements (PPA) in supporting the financing of wind farms.
The report claims corporate and industrial energy consumers are increasingly keen to source power directly from wind farms with 2020 seeing 24 new wind energy PPAs representing a capacity of 2 GW signed across a range of sectors including chemicals, pharmaceuticals, telecoms and IT.
PPAs supposedly make wind energy economically viable for the long term and make it easier to raise debt at low interest.
This, and other measures such as Contract for Difference (CfD) which governments offer at wind auctions continue to drive the operating costs of wind farms down, which WindEurope claims will make projects far more economically feasible in the future.
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