Europe invested €43 billion (~$51.47) in new wind farms in 2020, the second-highest annual amount on record. The investments cover 20 GW of new capacity that will be built in the coming years, 13 GW of it in the European Union (EU), according to WindEurope.
However, the intended capacity addition is much less than what Europe needs to build 27 GW of new wind energy a year to deliver its new 55% emission reduction target by 2030.
“The main problem is the slow rate of permitting of new wind farms. The money’s out there, but not enough new projects are coming through,” WindEurope said.
In November last year, the European Commission announced a strategy to help achieve the EU’s climate neutrality target by 2050. The plan suggested increasing Europe’s offshore wind capacity up to 60 GW by 2030 and 300 GW by 2050, from its existing capacity of 12 GW.
The investment in 2020 was a 70% increase over the investment in 2019. Onshore wind projects attracted €17 billion (~$20.35 billion), covering 13 GW of new capacity. Offshore wind projects drew €26 billion (~$26.31 billion), covering 7 GW of new capacity.
“Wind energy remained an attractive investment despite the pandemic. Given the right revenue stabilization mechanisms are in place, there is plenty of capital available to finance wind. This confirms wind energy is perfectly positioned to support Europe’s economic recovery from Covid. Each new turbine generates €10 million (~$11.97 million) of economic activity in Europe. And the expansion of wind energy envisaged in the National Energy and Climate Plans can create 150,000 new jobs by 2030,” Giles Dickson, CEO, WindEurope, said.
The U.K. accounted for €13 billion (~$15.56 billion) of the total for Europe. The Netherlands was next with €8 billion (~$ 9.57 billion). France and Germany followed with €6.5 billion (~$7.78 billion) and €4.3 billion (~$5.14 billion), respectively.
WindEurope considers complex permitting rules and procedures as the main bottleneck for more projects to be developed. Most EU states are not meeting the permitting deadlines set out in the EU Renewable Energy Directive.
Wind farms continue to be financed with 70-90% debt and 10-30% equity. Bank finance remains crucial, and more and more of it is project-specific rather than corporate debt, especially in offshore wind. The bigger wind farms are increasingly being turned into business entities with their management teams and financial reporting, capable of raising debt on their own. Banks lent a record €21 billion of non-recourse debt to new wind farms in 2020.
Another important trend is the growing role of corporate renewable Power Purchase Agreements (PPA) in supporting the financing of wind farms. Corporate and industrial energy consumers are increasingly keen to source power directly from wind farms. 2020 saw 24 new wind energy PPAs covering more than 2 GW of capacity.
PPAs provide stable long-term revenues for wind. They make it easier to raise debt at low interest, WindEurope said.
According to a report from Wood Mackenzie, a total of 114 GW of new wind capacity was added globally in 2020, representing an 82% increase year-over-year. This is the highest global annual installation total on record.