Onshore vs Offshore


October 29, 2012

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There’s a growing body of opinion that suggests that onshore wind energy has had its day and that the only genuine growth at any real scale sits offshore.

Those that table the argument, particularly when working within the European markets, suggest that the cost of construction and the operational economics are still simply too high. Often adding in the additional and increasingly complex planning, approval and permitting challenges – factors that have only served to increase the time during which a project sits within development.

This, when added to wider issues associated with the market move towards bigger turbines, offering the potential of bigger returns and a set of bigger logistical demands, inevitably tips the scales in offshore wind’s favour.

Or at least, so says the current thinking.

However, to dismiss the onshore wind energy market out of hand is perhaps to miss the point. A conclusion recently best identified by the team at PWC, who suggest that despite the summer deal-making lull, the coming months could see an unprecedented flow of deals for onshore European wind generation assets.

According to the report, there are 11 hope-for sales due to convert within the next six to eight weeks, with the firm estimating that there’s approximately $4 – $5bn having been left on the deal table in October alone.

That’s no small fry. The question however, is whether this onshore asset sale surge is something that’s about to become a permanent industry fixture, or whether it’s an attractive, if not entirely unforeseen market blip.

Naturally, understanding seller motivations plays an important role in getting to the bottom of this and provides an important insight into whether this is the start of a significant new trend.

For the most part, seller motivations are typically driven by the need to free up capital for future investment and more broadly, by a reappraisal of existing wind portfolios within established and proven market fields.

This then offers the added benefit of introducing (and educating) new industry investors and in widening the current spread of active industry participants.

All positive stuff then?

For the most part, yes. However, as the European onshore wind markets continue to evolve and as developers, manufacturers and early-stage investors look to new areas of the market to repeat the trick, the offshore opportunity looms large. And it’s these subsequent re-investment decisions that are perhaps just as important as the headline grabbing asset sales themselves.

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