Green giants to profit as Europe guns for carbon neutrality

Wind is set to play a key role as Europe seeks to go carbon neutral by 2050 – and six utilities are better-placed than most to take advantage.

Topics
Richard Heap
January 13, 2020
Green giants to profit as Europe guns for carbon neutrality

Wind is set to play a key role as Europe seeks to go carbon neutral by 2050 – and six utilities are better-placed than most to take advantage.

That’s our reading of two stories we saw last week.

On Wednesday, Goldman Sachs published a research note that predicted the “rise of the renewable majors”. It said that the European Union would need to unlock investment of €7tn to hit its 2050 target, and added that utilities could get up to 45% of that (€3.15tn). Nice if you can get it.

Goldman added that six companies were better-placed to outgrow rivals – EDP, EDP Renewables, Enel, Iberdrola, Ørsted and RWE – because of their strong credentials in onshore wind, offshore wind or both.

And the second story we looked at was WindEurope’s analysis of auctions in three European countries where the results were announced in late 2019.

It’s fair to say that a great deal of our focus on competitive auctions so far has been where they’ve damaged uptake of wind and increased the pressure on the supply chain. But they’re a part of the market now, and are set to be a vital mechanism to unlock future growth opportunities for wind.

In Poland, the government has awarded support for 2.2GW of onshore wind at an average price of €45/MWh, and is looking offshore too. This could put it at the forefront of growth in European onshore wind after four hard years.

In addition, Greece has given support for 224MW projects at an average price of €57/MWh, and Denmark achieved record lows too.

WindEurope said the prices across all three auctions came in at just €2/MWh above the electricity market prices, which again underlines the attractiveness of onshore wind to governments. The three countries won’t drive the market on their own, but they are still interesting data points.

For us, the interesting element is how these two stories fit together.

These onshore auctions again highlight the role that onshore wind can play in helping to decarbonise Europe, as long as there is policy support as well. For example, Germany has auctions, but policy uncertainty over a proposed 1km distance rule is causing great consternation. But auctions can work.

If the EU is to meet a target of 40% European energy from wind and solar by 2030 then both will need major investment, including in offshore wind.

However, the lower prices on offer in these auctions only highlights how this capacity will need to be delivered at increasingly slim margins. This suggests that only a select group of cash-rich utilities, including the emerging ‘renewable majors’, may be able to find the economies of scale needed to help them thrive in the European onshore wind market, or unlock power purchase agreements with large corporates that enables them to avoid auctions in the first place.

Even if there is €7tn to unlock, the investors providing that will want the best returns possible. We therefore also expect to see a further wave of consolidation of developers by utilities as the major players seek greater scale.

Incidentally, these takeover targets include EDP, RWE and SSE, which the note said were attractive because they were underpriced compared to competitors.

Ultimately, the key challenge for anyone building in the early 2020s is going to be how to build wind farms at a low enough price to keep governments and private sector buyers happy, but high enough to enable companies through the value chain to be able to reinvest in further technological breakthroughs.

Competitive auctions are not without problems. We can rail against the ludicrous belief that governments seem to hold that transitioning to renewable energy can be done by pushing the costs onto private players such as utilities.

But that's the game we're paying, and emerging 'renewable majors' look to have stronger hands than most.

NEWS IN BRIEF

SIEMENS GAMESA CLOSES SENVION BUYOUT

Siemens Gamesa has completed the acquisition of Senvion's European service assets, which grows its serviced fleet by 9GW to 69GW. Read more

ARDIAN CONCLUDES €401M SPANISH REFINANCING

Ardian has concluded the €401m partial refinancing of the acquisition of a 419MW wind portfolio from Renovalia Reserve. Read more

EXCELSIOR CONCLUDES 109MW NEBRAKA DEAL

Excelsior Energy Capital has concluded its acquisition of Invenergy's 90.1% stakes in the 109MW Prairie Breeze II and III schemes in Nebraska. Excelsior has secured back-leverage finance for the projects with Nord LB. Read more

NEW YORK TO AWARD 1GW OFFSHORE IN 2020

New York State is set to hold its second solicitation for offshore wind in 2020, in which it is looking to give support to an extra 1GW. Read more

MEXICO STEPS UP ACTION AGAINST RENEWABLES

Mexican President Andres Manuel Lopez Obrador has said that authorities are set to review some government wind and solar contracts to see if companies are being improperly subsidised. Read more

NTR GROWS RENEWABLES PORTFOLIO TO 515MW

Top of Form

Irish investor NTR has bought the 19.2MW Ballycumber wind farm in County Wicklow to grow its wind and solar portfolio to 515MW. Read more

Bottom of Form

BRINTON TO SUCCEED GAINSBOROUGH AT SHELL

Elisabeth Brinton is set to succeed Mark Gainsborough as executive vice president of new energies at Shell on 1st April when Gainsborough retires.

VALOREM BUYS 82MW GREEK ASSETS

Valorem has bought an 82MW portfolio of wind schemes in various stages of the development process. Read more

Wind is set to play a key role as Europe seeks to go carbon neutral by 2050 – and six utilities are better-placed than most to take advantage.

That’s our reading of two stories we saw last week.

On Wednesday, Goldman Sachs published a research note that predicted the “rise of the renewable majors”. It said that the European Union would need to unlock investment of €7tn to hit its 2050 target, and added that utilities could get up to 45% of that (€3.15tn). Nice if you can get it.

Goldman added that six companies were better-placed to outgrow rivals – EDP, EDP Renewables, Enel, Iberdrola, Ørsted and RWE – because of their strong credentials in onshore wind, offshore wind or both.

And the second story we looked at was WindEurope’s analysis of auctions in three European countries where the results were announced in late 2019.

It’s fair to say that a great deal of our focus on competitive auctions so far has been where they’ve damaged uptake of wind and increased the pressure on the supply chain. But they’re a part of the market now, and are set to be a vital mechanism to unlock future growth opportunities for wind.

In Poland, the government has awarded support for 2.2GW of onshore wind at an average price of €45/MWh, and is looking offshore too. This could put it at the forefront of growth in European onshore wind after four hard years.

In addition, Greece has given support for 224MW projects at an average price of €57/MWh, and Denmark achieved record lows too.

WindEurope said the prices across all three auctions came in at just €2/MWh above the electricity market prices, which again underlines the attractiveness of onshore wind to governments. The three countries won’t drive the market on their own, but they are still interesting data points.

For us, the interesting element is how these two stories fit together.

These onshore auctions again highlight the role that onshore wind can play in helping to decarbonise Europe, as long as there is policy support as well. For example, Germany has auctions, but policy uncertainty over a proposed 1km distance rule is causing great consternation. But auctions can work.

If the EU is to meet a target of 40% European energy from wind and solar by 2030 then both will need major investment, including in offshore wind.

However, the lower prices on offer in these auctions only highlights how this capacity will need to be delivered at increasingly slim margins. This suggests that only a select group of cash-rich utilities, including the emerging ‘renewable majors’, may be able to find the economies of scale needed to help them thrive in the European onshore wind market, or unlock power purchase agreements with large corporates that enables them to avoid auctions in the first place.

Even if there is €7tn to unlock, the investors providing that will want the best returns possible. We therefore also expect to see a further wave of consolidation of developers by utilities as the major players seek greater scale.

Incidentally, these takeover targets include EDP, RWE and SSE, which the note said were attractive because they were underpriced compared to competitors.

Ultimately, the key challenge for anyone building in the early 2020s is going to be how to build wind farms at a low enough price to keep governments and private sector buyers happy, but high enough to enable companies through the value chain to be able to reinvest in further technological breakthroughs.

Competitive auctions are not without problems. We can rail against the ludicrous belief that governments seem to hold that transitioning to renewable energy can be done by pushing the costs onto private players such as utilities.

But that's the game we're paying, and emerging 'renewable majors' look to have stronger hands than most.

NEWS IN BRIEF

SIEMENS GAMESA CLOSES SENVION BUYOUT

Siemens Gamesa has completed the acquisition of Senvion's European service assets, which grows its serviced fleet by 9GW to 69GW. Read more

ARDIAN CONCLUDES €401M SPANISH REFINANCING

Ardian has concluded the €401m partial refinancing of the acquisition of a 419MW wind portfolio from Renovalia Reserve. Read more

EXCELSIOR CONCLUDES 109MW NEBRAKA DEAL

Excelsior Energy Capital has concluded its acquisition of Invenergy's 90.1% stakes in the 109MW Prairie Breeze II and III schemes in Nebraska. Excelsior has secured back-leverage finance for the projects with Nord LB. Read more

NEW YORK TO AWARD 1GW OFFSHORE IN 2020

New York State is set to hold its second solicitation for offshore wind in 2020, in which it is looking to give support to an extra 1GW. Read more

MEXICO STEPS UP ACTION AGAINST RENEWABLES

Mexican President Andres Manuel Lopez Obrador has said that authorities are set to review some government wind and solar contracts to see if companies are being improperly subsidised. Read more

NTR GROWS RENEWABLES PORTFOLIO TO 515MW

Top of Form

Irish investor NTR has bought the 19.2MW Ballycumber wind farm in County Wicklow to grow its wind and solar portfolio to 515MW. Read more

Bottom of Form

BRINTON TO SUCCEED GAINSBOROUGH AT SHELL

Elisabeth Brinton is set to succeed Mark Gainsborough as executive vice president of new energies at Shell on 1st April when Gainsborough retires.

VALOREM BUYS 82MW GREEK ASSETS

Valorem has bought an 82MW portfolio of wind schemes in various stages of the development process. Read more

Wind is set to play a key role as Europe seeks to go carbon neutral by 2050 – and six utilities are better-placed than most to take advantage.

That’s our reading of two stories we saw last week.

On Wednesday, Goldman Sachs published a research note that predicted the “rise of the renewable majors”. It said that the European Union would need to unlock investment of €7tn to hit its 2050 target, and added that utilities could get up to 45% of that (€3.15tn). Nice if you can get it.

Goldman added that six companies were better-placed to outgrow rivals – EDP, EDP Renewables, Enel, Iberdrola, Ørsted and RWE – because of their strong credentials in onshore wind, offshore wind or both.

And the second story we looked at was WindEurope’s analysis of auctions in three European countries where the results were announced in late 2019.

It’s fair to say that a great deal of our focus on competitive auctions so far has been where they’ve damaged uptake of wind and increased the pressure on the supply chain. But they’re a part of the market now, and are set to be a vital mechanism to unlock future growth opportunities for wind.

In Poland, the government has awarded support for 2.2GW of onshore wind at an average price of €45/MWh, and is looking offshore too. This could put it at the forefront of growth in European onshore wind after four hard years.

In addition, Greece has given support for 224MW projects at an average price of €57/MWh, and Denmark achieved record lows too.

WindEurope said the prices across all three auctions came in at just €2/MWh above the electricity market prices, which again underlines the attractiveness of onshore wind to governments. The three countries won’t drive the market on their own, but they are still interesting data points.

For us, the interesting element is how these two stories fit together.

These onshore auctions again highlight the role that onshore wind can play in helping to decarbonise Europe, as long as there is policy support as well. For example, Germany has auctions, but policy uncertainty over a proposed 1km distance rule is causing great consternation. But auctions can work.

If the EU is to meet a target of 40% European energy from wind and solar by 2030 then both will need major investment, including in offshore wind.

However, the lower prices on offer in these auctions only highlights how this capacity will need to be delivered at increasingly slim margins. This suggests that only a select group of cash-rich utilities, including the emerging ‘renewable majors’, may be able to find the economies of scale needed to help them thrive in the European onshore wind market, or unlock power purchase agreements with large corporates that enables them to avoid auctions in the first place.

Even if there is €7tn to unlock, the investors providing that will want the best returns possible. We therefore also expect to see a further wave of consolidation of developers by utilities as the major players seek greater scale.

Incidentally, these takeover targets include EDP, RWE and SSE, which the note said were attractive because they were underpriced compared to competitors.

Ultimately, the key challenge for anyone building in the early 2020s is going to be how to build wind farms at a low enough price to keep governments and private sector buyers happy, but high enough to enable companies through the value chain to be able to reinvest in further technological breakthroughs.

Competitive auctions are not without problems. We can rail against the ludicrous belief that governments seem to hold that transitioning to renewable energy can be done by pushing the costs onto private players such as utilities.

But that's the game we're paying, and emerging 'renewable majors' look to have stronger hands than most.

NEWS IN BRIEF

SIEMENS GAMESA CLOSES SENVION BUYOUT

Siemens Gamesa has completed the acquisition of Senvion's European service assets, which grows its serviced fleet by 9GW to 69GW. Read more

ARDIAN CONCLUDES €401M SPANISH REFINANCING

Ardian has concluded the €401m partial refinancing of the acquisition of a 419MW wind portfolio from Renovalia Reserve. Read more

EXCELSIOR CONCLUDES 109MW NEBRAKA DEAL

Excelsior Energy Capital has concluded its acquisition of Invenergy's 90.1% stakes in the 109MW Prairie Breeze II and III schemes in Nebraska. Excelsior has secured back-leverage finance for the projects with Nord LB. Read more

NEW YORK TO AWARD 1GW OFFSHORE IN 2020

New York State is set to hold its second solicitation for offshore wind in 2020, in which it is looking to give support to an extra 1GW. Read more

MEXICO STEPS UP ACTION AGAINST RENEWABLES

Mexican President Andres Manuel Lopez Obrador has said that authorities are set to review some government wind and solar contracts to see if companies are being improperly subsidised. Read more

NTR GROWS RENEWABLES PORTFOLIO TO 515MW

Top of Form

Irish investor NTR has bought the 19.2MW Ballycumber wind farm in County Wicklow to grow its wind and solar portfolio to 515MW. Read more

Bottom of Form

BRINTON TO SUCCEED GAINSBOROUGH AT SHELL

Elisabeth Brinton is set to succeed Mark Gainsborough as executive vice president of new energies at Shell on 1st April when Gainsborough retires.

VALOREM BUYS 82MW GREEK ASSETS

Valorem has bought an 82MW portfolio of wind schemes in various stages of the development process. Read more

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