International law firm publishes report on realising opportunity in European offshore wind industry

July 3rd, 2013 by Freshfields Bruckhaus Deringer

(click report cover to go to Freshfields Bruckhaus Deringer website to download report – use of report cover courtesy of Freshfields Bruckhaus Deringer)

International law firm Freshfields Bruckhaus Deringer has produced a report into the state of Europe’s offshore wind sector that reveals how uncertainty around subsidies and the need to unlock new capital are holding back investment in the development of European offshore wind farms.

The report ’European Offshore Wind 2013: Realising The Opportunity’ published on 26 June 2013, highlights a widespread concern in the market that a lack of equity and new subsidy mechanisms are a real risk to the future of offshore projects

The report surveyed 200 senior executives in the offshore wind industry over April and May 2013.

It examines the development of the offshore industry in the UK, France, Germany and the Netherlands, and gives a comprehensive analysis of the factors at play in one of Europe’s key clean-energy industries.

Key findings include:

• New subsidy mechanisms or cuts rank among key concerns for industry experts – 83% believe new subsidy mechanisms are a real risk to future offshore wind farm projects
• More than half the respondents believe Chinese investors will hold the funding key, with Japan (45%), the Middle East (41%), Korea (33%) and USA (33%) also cited as potential sources of funds
• Only 20% of respondents believe the UK will meet its 18GW wind capacity target by 2020, a figure that rises to 24% for France and 84% for the Netherlands

Paul Bowden, partner, Freshfields Bruckhaus Deringer, said “this report shows just how many challenges the offshore industry in Europe faces.”

“Few respondents believe that offshore capacity targets for 2020 will be met, with fears about the availability of capital and ongoing changes to subsidies spooking potential investors,” he said.

“But despite this, 80% of respondents still intend to invest in the UK off-shore wind power market in the next 18 months – on a par with Germany and 20% ahead of the next target market, France.”

“Underlying this enthusiasm to invest in the UK is a desire to accelerate projects ahead of the 2017 introduction of CfD FiTs (Contract for Difference Feed In Tariffs),” Mr Bowden said.

“With 63% of respondents believing that CfD FiTs will increase price uncertainty, and a concern about new levels of risk that the new regime will bring in.”

“This said, the interest is clearly there and the key for investors is balancing risk against missing out on a market that represents potential high returns” he said.

The report also highlights a belief that the pension markets offer a potential source of equity finance, with 80% of respondents believing bonds and securisations will become common as funding vehicles for the industry in the short term future.