Joost Bergsma, global head of clean energy at Nuveen Infrastructure, shared his insights into offshore wind, solar and the latest trends in renewable energy financing in the latest edition of Tamarindo’s digital magazine Finance Quarterly.
“I would say that the overall fundraising market, so capital available from institutions, over the last 18 months has been a little tight.”
Joost Bergsma, global head of clean energy at Nuveen Infrastructure, shared his views on the changing dynamics of renewable energy financing in the latest edition of digital magazine Finance Quarterly, published by Tamarindo last week. He also discussed the difficulties for investors of offshore wind and the growing attraction of solar.
Bergsma started his career in banking and investment in 1990. In 2007, he moved to French bank BNP Paribas to lead Clean Energy Partners, an independent manager of clean energy infrastructure that was spun out in 2013 to become Glennmont Partners. Asset management giant Nuveen bought Glennmont in 2021 and has since rebranded it as Nuveen Infrastructure, but Bergsma remains very much at the helm.
He said there are still “very deep” pools of investment available for renewables projects in the credit and debt market, despite a tightening of capital in the last 18 months.
“Banks are very comfortable lending money to solar, onshore wind and offshore wind,” he explained. “Those are really proven technologies so they’re quite comfortable as a lot of money has been raised in the private credit markets.”
Bergsma said interest in renewables will stay strong: “For investors, it’s perceived as an electricity stock. Particularly in today’s volatile market, it has a pretty robust resilient profile. You’re producing long-term contracted cashflows so investors like that in today’s market,” he said.
However, he added that a weaker focus by some investors on the ESG credentials of projects would have some effect on the industry.
“It’s not as hot as it was two to three years ago, but that’s never been the key driver for our investors. The key drive was always returns. But it’s fair to say that, yes, there is a little bit more mixed appetite for ESG strategies than there was,” he said.
Offshore wind and solar
Bergsma also reflected on recent changes in the economics of offshore wind projects. Nuveen Infrastructure got into offshore wind in 2019 when, as Glennmont, it bought 25% of the operational 330MW Gode Wind 1 project in the German North Sea.
This year, on 28th February, Nuveen Infrastructure and Ørsted commissioned the 253MW Gode Wind 3, which is made up of 23 of Siemens Gamesa’s 11MW turbines; and the pair are also working on the 913MW Borkum Riffgrund 3, which is due to be commissioned this year.
He acknowledged that the economics of offshore wind have shifted dramatically in the last 18 months, with the reversal of a trend of continuous falls in the levelised cost of energy. He said rising geopolitical tension’s since Russia’s invasion of Ukraine meant “commodity prices started to rise quite quickly” and well as “labour costs increasing, energy cost increasing but also, very importantly, you saw interest rates increasing”.
“All these projects, because of their size are debt financed, so if you have to pay 5% on your debt versus the 2% before then it really eats into the economics,” he said.
The result is that offshore wind farms are currently less attractive to investors that other technologies, such as solar: “Developing an offshore wind farm maybe takes five years and it’s quite expensive, and how the economics of the build cost change in five years will have a big impact on whether or not you build it. Whereas with solar, let’s say it’s just a 12-month lead time and the build costs haven’t increased that much.”
Bergsma said the company’s recent deal highlights include investing in a 400MW solar farm in Texas in late 2024, which will benefit from increasing demand for electricity in the US and also has potential for Nuveen to add a battery. He said solar and storage would particularly benefit from the growth of the data centre industry.
“If you want to build your data centres at scale in the next two to three years and you need electricity then solar and storage are really the most feasible solution,” he said.
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