The state of German offshore wind


March 21, 2013

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The future financing of German offshore wind appears to be at a tipping point.

On the one hand, there are a number of institutions that are happy to lend to the market – including this week the European Investment Bank, which has pledged to increase its lending to the wider market by 30%.

In February, developer WPD Offshore announced that it had secured debt and equity finance for the 288MW Butendiek offshore wind farm in the German North Sea. The deal saw an impressive list of institutions, which included KfW IPEX-Bank, UniCredit and Bremer Landesbank, line up to lend to the project.

It can be argued that we are of course seeing many of the same institutions on each occasion, and overall, the market would be significantly stronger with some new entrants who would be willing to lend.

But this will take time. And if recent reports as to the intentions of the German Government to reduce support for renewable energy projects are to be believed, then investor interest will be greatly diminished.

Add this to continued concerns regarding the pace of connectivity from German offshore wind to the national grid, and the future prognosis doesn’t look quite so good.

Yet, despite this backdrop, there is still a Government ambition in Germany to install 25GW of offshore wind by 2030. Which, given the current pace of development, political and investor uncertainty seems hugely ambitious.

Could the appearance of some new investors in the market solve the problem? Perhaps so, but it’s highly unlikely in the short term. The finance panels of countless wind energy conferences have told us as much.

What should be the biggest motivator of course are Germany’s plans to entirely abandon nuclear energy, one of its current energy mainstays. But it’s rare for ultra long-term goals such as these to provide the 25 – 50 year fillip that investors really need.

It’s controversial then but perhaps German offshore wind shares many similarities with the carbon market? Sound principles, sure, but without the correct framework, ultimately a just fraction of what it really should be.

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