Europe’s wind energy sector is entering uncharted territory as inflation rears its head for the first time in two decades. The new environment is prompting companies to look more closely at portfolio management.
Rising wholesale electricity prices may offer opportunities to offset rising costs, but the risk for developers of new projects is to be caught in an environment where inflation does not apply to their revenues but will apply to their OPEX and CAPEX. If so, the inflation assumptions that underpinned their original route- to-market strategy may no longer be valid, resulting in a squeeze on developer premiums.
Meanwhile, a trend to lock in long-tenor original equipment manufacturer (OEM) operations and maintenance (O&M) service agreements, to mirror the project finance tenor, may be leaving value on the table for the sake of minimising the downside risk for banks.
This paper, which draws on comments made in a Wind Investment Boardroom debate, hosted by A Word About Wind in partnership with SkySpecs, looks at the drivers and issues with this trend and discusses how some far-sighted portfolio holders are adopting an alternative approach.
With thanks to the panellists for their contribution: