The last few months have seen an increase in announcements of private equity deals to invest in, or in some cases to start up, industrial-scale wind farms. Last month, Blackstone Group (US) revealed its plans to invest €2.5 billion in German wind construction, while just one week later, Bridgepoint, from the UK, agreed to buy nearly €600 million of existing installations.
This trend emerges as EU governments, in particular, revise their strategies for renewable subsidies in the wake of economic upheaval and the strong headwinds against public acceptance of new nuclear build. As feed-in tariffs and grants are set by administrations such as those in Germany and the UK, the European Wind Energy Association (EWEA) forecasts a tripling of wind energy installed base over the next decade*.
As private equity and banking make inroads into the sector, it should be expected that incumbent vertically-integrated utilities will start to see an increasing variety of competitors arrive in the market. This trend has advantages for many, such as enabling the 'recycle' of completed projects, as Dong Energy has recently done, to finance new construction projects. This enables vertically-integrated companies to continue to specialise in new build, while other companies can focus on operation of the completed installation.
With the ownership structure and investment model for wind energy starting to shift beneath a volatile regulatory environment, it remains to be seen whether the wind industry will continue to attract new investment, or whether another renewable technology might start to overtake it. Each new regulatory announcement has great impact on the landscape, and the next 12-24 months will be critical in determining the future of the wind market.
Posted by Ben Thacker on the 16th of September 2011
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This article is part of a series of Baringa view points on renewable energy. Read our thoughts on:
Wave and Tidal Energy: http://www.baringa.com/baringa_blog/item/the_tides_are_turning/
Green Gas: http://www.baringa.com/baringa_blog/item/green_gas_is_growing/
Solar Panels: http://www.baringa.com/baringa_blog/item/shifting_demand_patterns_shake_up_photovoltaic_suppliers/
