Quick Assessment of Wind Power Investment Opportunities 1/3

Quick assessment of wind power investment opportunities

Over the past years, investors around the globe have been paying an increasing amount of attention towards the renewable energy industry, which has translated into a considerable industry expansion and commercialisation.

New investments in wind in 2016 totalled 112.5 billion USD (Frankfurt School-UNEP Centre/BNEF. 2017.) down 9% compared to the previous year depite the boom of offshore projects. With a total of 54GW installed wind energy capacity in 2016, annual installations were down from the previous year’s high of 63GW.

Especially Europe showed a strong commitment to offshore wind, totalling 25.9 billion USD. This increase of 53% is strongly based on final investment decisions on mega-affays such as the 1.2GW Hornsea offshore wind project in the UK Northsea. But China also invested heavily, putting 4.1 billion USD into offshore wind technology.

This series of blogs addresses the main elements and considerations regarding wind investments and how they can be built into a quick investment case analysis. The aim of these posts is to support investors in assessing project viability and project uncertainty supporting decision makers with a better understanding of wind farm economics.

 

Through our online platform portal.e-nable.eu we facilitate energy project development on a global scale by connecting project owners and interested investors. Our information structure is based on our industry experience, expertise and user feedback. All (currently 300+ ) projects showcased through our platform are framed through the same set of comprehensive information described below, with the aim of enabling an easy and quick assessment of wind power investment opportunities available through our portal.

When analysing a wind investment case we turn to 7 key information chapters that need to be evaluated in order to understand the investment base case and conduct further analyses, these include:

  • General Information
  • Project Owner Information
  • Energy Production
  • Economics
  • Technical Information
  • and Legal Information

General- and Project Owner Information

This Includes a wide set of information including the project type, a description, location as well as personal information on the project owner such as contact information.

Energy Production

Including the topics: Installed Capacity, Status, Commercial Operation Date, Ready to Build Date

Project costs vary with project complexity. Hence, an increased installed capacity will lead to increased project cost.

On a more general side note; offshore projects are generally more complex than onshore projects, resulting in them being typically 2-3 times more expensive per installed MW, as well as having a different cost structure. (Turbines in offshore wind projects tend to make out a smaller proportion of total project costs due to other components (i.e. foundation, grid connection and construction) becoming somewhat more expensive.)

In both on- and offshore wind projects, costs during a project’s development phase are rather insignificant when compared to the construction phase of a wind project, which accounts for the largest cost accumulation. This is due to the large costs of turbine, foundation, and transmission assets compared to the relatively small costs of environmental impact assessment, wind studies, financial analyses and consenting costs.

There can be significant variations in project costs when comparing onshore wind projects. These can be due to several factors, such as soil conditions, applied technology, cost of transmission assets, infrastructure and local costs. Furthermore, project costs can be affected by project profitability as turbine suppliers often increase prices on projects where they anticipate that returns are high and competition is low.

 

Continue reading about the chapters Economics, Technical Information and Legal Information in our next blog: Quick Assessment of Wind Power Investment Opportunities 2/3!