Inflation, permitting delays and supply chain disruption have dominated wind industry discussion in 2023, but there are reasons for the industry to be positive as we head into 2024 too.
People in wind are an enterprising and enthusiastic bunch, but 2023 has tested even the biggest optimists.
You know why. Inflation, permitting delays, supply chain disruptions, failed tenders, and the impacts of the ‘race to the bottom’ on the supply chain. Positive headlines have been hard to find.
But we want to change that! We aren’t going to deny market reality. Times are tough and the challenges are real. Even so, we’d rather be sitting here now when the wind industry has over 1TW installed globally, then a decade ago with under 300GW.
There are reasons to be optimistic as we enter 2024. Here are five:
Wind companies in Europe have spent years telling the European Union about the impact of the ‘race to the bottom’ on the viability of the sector, and the risk of being undercut on price by rivals from China. Therefore, the announcement last week by the European Commission of a Wind Power Package is a reason to be cheerful.
The package includes 15 policies that the Commission says will help to strengthen the European wind industry. These include tougher rules on projects that can take part in auctions, so support is focused on those most likely to happen; indexing auction prices and tariffs to inflation; steps to support investments in new factories; and a beefed-up role for the European Investment Bank.
In addition, the EU has committed to expand wind power in its 27 member countries from 205GW today to 420GW by 2030. The EU needs to back its policies with laws that spur national governments to make the changes they need to realise these targets, but its commitments as we enter 2024 show policy is moving in the right direction. When that happens, investment in the wind industry often follows.
In ‘A Word About Wind’, we haven’t ignored the problems for companies in the US offshore wind sector. Indeed, we wrote last week about the 8GW of schemes where developers are seeking additional support to ensure they make financial sense, even before Ørsted and BP reported writedowns of $4bn and $540m respectively.
This will be a key talking point at Financing Wind Offshore in Boston this month.
Yet we see reasons to be optimistic as well. Copenhagen Infrastructure Partners and Avangrid last week signed a pioneering tax equity deal at the 800MW Vineyard Wind 1 development, which is due to be commissioned in 2024. The partners signed the package with Bank of America, JP Morgan Chase and Wells Fargo. This shows that big-hitting banks are still keen to back projects when the price is right.
In addition, the New York Research & Development Authority last week gave backing to three new offshore wind projects totalling 4GW in its waters. State support is going to be vital in helping US offshore wind developers through their current troubles, and NYSERDA’s announcement should give confidence that better times are coming.
Falling share prices have been a cause for concern since summer, but this is also likely to spur interest in mergers and acquisitions. Recent deals show that utilities and fund managers are still keen to expand their portfolios and service offers.
For example, Statkraft last week grew its development pipeline by 37GW by buying Nordic developers Svevind and Njordr Offshore Wind; and Total Energies agreed to buy German firm Quadra Energy to expand its energy trading operations. In addition, Brookfield last month continued its buyout spree by agreeing to buy UK firm Banks Renewables; and, in September, Octopus Energy bought into Deep Wind Offshore.
These deals show that large and experienced players remain keen to grow in wind, and ride out the current market challenges so they are well-placed for the upside.
You know Christmas is coming when tech giants like Amazon and Google highlight all the wind power purchase agreements (PPAs) they’ve signed that year. We expect to see similar in the run-up to Christmas 2023, as the pressure on these companies to embrace sustainability remains regardless of market cycles.
In addition, we think wind developers should take confidence from the new wave of PPAs we are seeing from green hydrogen producers. This week, the owners of the 288MW Butendiek offshore wind farm in German waters, including Wpd, Schroders Greencoat and EWZ, have announced a PPA to supply 62.5% of the project’s power for a green hydrogen production facility; and last week Kallista Energy signed a deal to supply Lhyfe with electricity from a wind project in France for hydrogen production.
New sources of demand for wind power should be celebrated, and it’s good to see wind developers starting to gain off-take deals in this emerging sector.
It’s easy to dismiss United Nations Climate Change Conferences as political talking shops, but they help to ensure sustainability remains high on the global agenda. It is with this in mind that we think the wind industry should be optimistic of progress for renewables at the COP28 conference in Dubai, which starts this month.
This week, the International Renewable Energy Agency and Global Renewables Alliance have called for support for global renewables capacity to triple to at least 11,000GW by 2030, and have claimed there is backing from the G20. This shows that the goal for decarbonisation is still live, and should give confidence that there will be political support for the energy transition in the medium- and long-term.
Naive? Perhaps. But we want to take the positives wherever we can find them.
What have we missed? What are your reasons we should be positive about wind? Let us know!
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