New investors will flock to offshore wind in 2013

E&Y finds growing enthusiasm backed by insurance products

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Investors unfamiliar with offshore wind are increasingly willing to enter the market, management consultancy Ernst & Young (E&Y) says in its latest quarterly renewable energy rankings. An "increasingly diverse investor base" is expected to help offshore wind become a "growth area" in 2013 for renewable energy investment and transactions.

New insurance products may offer greater confidence to inexperienced offshore wind investors, E&Y argues. It points to an innovative insurance deal signed last year between Munich RE and turbine manufacture REpower, protecting the latter from performance-related losses over five years at an unnamed German offshore wind.

"Insurance is likely to be just one source of guarantee amongst a range of options that offshore wind developers can use to enhance a project’s profile to third party capital," E&Y director, Arnaud Bouillé, told Windpower Offshore. "Currently, third-party capital is uncomfortable with some offshore wind construction and operational risks, but there are solutions."

As expected, the countries achieving the highest scores in E&Y’s latest offshore wind index rankings are Germany (80), the UK (78) and China (69). The German federal government’s adoption of new legislation designed to encourage more rapid offshore grid construction is a key factor in its top market position. It is not clear whether Germany would have retained the top spot if recent proposals that might undermine the financial viability of offshore wind had been fully incorporated in the rankings.

Next in the E&Y’s rankings, Belgium (58) and Denmark (57) have clear offshore wind construction pipelines, although E&Y makes much of what it describes as "persistent delays" in the construction timetable for Denmark’s 1.5GW in new capacity. These threaten Denmark’s ability to achieve its 2020 target of wind energy supplying at least 50% of national electricity consumption, says E&Y.

E&Y has awarded the same ranking to the USA and France (56), which may surprise some offshore wind insiders. The two countries have taken very different approaches to offshore wind development, with the French government awarding four concessions last year with a combined capacity of about 2GW, with plans for another 1GW to be tendered this year.

The US market is developing in a less ordered fashion, with three projects generally viewed as most likely to be built within the next few years: 468MW Cape Wind, 30MW Block Island and 25MWAtlantic City. Auctions for larger projects in federal waters are expected to begin this year.

The final three countries in E&Y’s top ten for offshore wind are South Korea and Sweden (both at 54) and Ireland (52). The Irish government has no offshore wind support mechanism, but is keen to allow offshore wind farms to be built in its Irish Sea territorial waters, with all power earmarked for its energy-hungry neighbour, the UK. Firm plans for such projects have yet to be announced.

Lower-ranking countries include the Netherlands (47) - where there are at least three offshore wind projects moving toward financial close – Japan, Canada, Italy, Norway (all 45) and Poland (44). Interestingly, Taiwan has been awarded just 38 points, despite plans for more than 200MW by 2018.

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