It’s a breeze

Background: The global economy may have been blown off course over the last couple of years, but wind energy has impressively weathered the turbulence. As can be seen from the statistics produced by data provider New Energy Finance, wind has continued to attract an increase in financial third-party investor dollars every year for the last six years. The rate of increase has slowed markedly since 2007, but the resilience implied by the figures is notable given the drop in solar investment and steeper decline in backing for biofuels during the same period.   

Key attractions: “Simple economics” is the most compelling aspect of wind investment according to Simon Page, an investment manager in the renewable energy team at Platina Partners, a London- and Paris-based investor in European renewable energy projects. “It’s scalable to the extent that it can deliver a large volume of renewables capacity and can help meet Europe’s 2020 targets,” he says. “It’s also the most cost-effective form of renewable energy – not yet as cost-effective as conventional power, but the closest any renewable energy gets – and wind is the most widely available [renewable energy] resource.”             

“There is a huge amount of deal flow. It’s a young area and it’s growing,” says Peter Rossbach, managing director of infrastructure funds at London-based Impax Asset Management, an investment manager dedicated to the environmental and cleantech sectors. The firm has a portfolio of six north German wind firms acquired in 2006, which became operational the following year. Adds Rossbach: “We want to build a lot of assets and sell them to utilities which are obliged to have these assets to meet their green targets. This is one area where they can still put money to work.”             

Key drawbacks: All other things being equal, returns from wind and solar projects are normally expected to be very similar. However, there is an argument that wind projects are subject to more volatility. For one thing, should a turbine break, the entire windmill will be out of operation for a period of time. By contrast, a damaged panel will have only a tiny effect on the output of a solar plant. Furthermore, research suggests solar production has something like a four times lower standard deviation than wind production. In layman’s terms, the sun shines a lot more consistently than the wind blows, making output from wind farms more difficult to predict.          

Regulatory environment: Wind energy is a vital component of Europe’s push to produce 20 percent of its energy from renewable sources by 2020. The good news is that incentives for wind energy production appear to be working well, if the level of confidence to be found at the European Wind Energy Association is anything to go by. In March last year, it increased its 2020 target for installed wind energy capacity in the EU from 180GW to 230GW. 

Typically, the incentive scheme for European wind energy projects is based around a process whereby electricity suppliers are obliged to provide a certain share of their electricity supply through renewable energy. This obligation is complied with through tradable ‘green certificates’, certifying the generation of a certain amount of electricity. These certificates have economic value, generating extra income to renewable energy-based electricity producers.           

Recent deals: 

Jan 2010: Canadian renewable firm Boralex and Paris-based Cube Infrastructure fund acquires three wind farms in France from local renewable energy firm Theolia for €73 million. 

Oct 2009: Centrica, the owner of British Gas, sells a 50 percent interest in three of its wind farms to US investment manager TCW, a subsidiary of Société Générale Asset Management. TCW pays Centrica £84 million (€94 million; $138 million) for stakes in the Lynn and Inner Dowsing wind farms off the Lincolnshire coast, and the Glens of Foudland onshore wind farm in Aberdeenshire. 

Jul 2009: Platina Partners completes financing for a project to develop the first wind farm in Cyprus. The €170 million financing package will back the development of the 82-megawatt Orites wind farm project.