Offshore wind power heads for record year

Those 118 wind turbines have a wind energy capacity of 333 MW – well over half the 577 MW installed offshore last year – showing continuing strong growth in offshore wind power despite the financial crisis. In addition, 151 wind turbines (440 MW) were installed but not yet connected to the grid, EWEA revealed today.

Overall 16 offshore wind farms totalling 3,972 MW were under construction. Of these, four became fully operational: wind farm Poseidon in Denmark, wind farm Alpha Ventus in Germany, Gunfleet Sands and Robin Rigg in the UK.

To date in Europe there are 948 offshore wind turbines in 43 fully operational offshore wind farms, with a total capacity of 2,396 MW.

Among the developers, E.ON Climate and Renewables developed 64% of the offshore wind power capacity grid connected during the first half of 2010, followed by DONG (21%) and Vattenfall (11%). Among the manufacturers, Siemens accounted for 55% of the offshore capacity grid connected during the first half of 2010, Vestas 36% and REpower 30.9%.

"Despite the financial crisis, offshore wind energy continues to be a major growth industry”, said Justin Wilkes, Director of Policy at EWEA. “The number of offshore wind turbines connected to the grid in the first half of this year is well over half the total amount installed all last year and I am confident we are heading for a record year.

“There is no doubt this burgeoning industry is being held back by a lack of finance. Projects led by utilities are less affected thanks to their ability to fund investments from their balance sheets, but independent developers are severely constrained. Loans from public institutions such as the European Investment Bank are crucial and have already helped a number of projects, and this support must be extended further.”

"Europe is a world leader in offshore wind energy, and continuing growth – and the availability of finance – is essential for European jobs and competitiveness as well as for reducing CO2 emissions.”

Financing offshore wind farms on a non recourse basis has proved challenging in the first half of 2010 due to the financial crisis. This has had a very different impact on the two sectors active in developing offshore wind farms – utilities and independent project developers.

The wind farm projects developed by the utilities have been less affected by the financial crisis thanks to their continued ability to fund investments from their balance sheets, and recent announcements of investment decisions for projects such as Gwynt y Môr (576 MW in the UK), Baltic 2 (288 MW in Germany) and Anholt (400 MW in Denmark) confirm this continuing trend.

Conversely, independent developers have been, and continue to be, severely affected by the financial crisis and the consequent lack of availability of project finance. This is because:
• retrenching banks have taken a more conservative approach to lending. The lack of precedent for the offshore wind industry is curtailing the banks’ appetite for the sector; and
• the reluctance of banks to commit to any significant underwriting of loans leads to difficulty in financing the deals necessary for large offshore wind farms.

The result is that market capacity remains severely constrained by a lack of committed banks and lack of existing deals, even when taking into account development banks.

Positive financial trends, which started in the second half of 2009 with the Belwind and Boreas financing agreements, have continued in early 2010, with a number of transactions progressing in various markets, although none have closed so far this year.

Projects expected to raise non-recourse debt in the coming months include the second phase of C-Power (300 MW in Belgium), the Masdar portion of London Array (20% of 630 MW in the UK), Lincs (270 MW in the UK), Borkum West (200 MW in Germany), Meerwind (288 MW in Germany) and Gode Wind 2 (240 MW in Germany).

The European Investment Bank is playing a crucial role through its involvement in several of the above transactions, and through separate funding facilities on a corporate basis to utility-led projects. It recently provided a €300 million loan to DONG for the London Array wind farm.

It was joined in that last transaction by EKF, the Danish export credit agency, which is also providing critical support to projects whose financing is currently under negotiation. Continued support from such public institutions is deemed crucial for the non recourse market to take off given the volumes of funding required in aggregate and on each individual transaction.