After receiving the necessary documents and project presentation, our team will try to review your request as soon as possible, and leading experts will offer the best options for project funding.
Large-scale wind farm funding in the UK in recent years has ensured that wind power can now supply nearly a quarter of the country's total electricity needs.
Since the commissioning of the first wind farm in 1990, the capacity of wind farms in the UK has been steadily increasing. Wind farm financing peaked ahead of a record 2017, when nearly 3.5 GW of additional capacity was installed. Since 2018, installed offshore wind capacity has exceeded onshore capacity every year.
UK companies and their foreign partners currently have 80 GW of offshore and about 22 GW of onshore wind projects in their portfolio.
Achieving the strategic offshore wind capacity target of 50 GW by 2030 requires an annual increase of 4.3 GW up to and including 2030.
The Committee on Climate Change (CCC) has recommended increasing onshore capacity from the current 14.2 GW to 23-29 GW by the end of the decade. This requires not only additional investments, but also regulatory changes. This should involve a review of the planning and permitting process, which the International Energy Agency has emphasized.
GCAM Investment Group, a Spanish company with international experience, offers financing for large wind projects in the UK, Europe, USA, the Middle East and other regions of the world.
We offer project finance services, long-term loans, loan guarantees, financial engineering and consulting services.
Contact us for details.
The development of the UK wind energy sector: past and future
The development of electricity generation from renewable sources in the UK was largely driven by the large-scale reforms and privatization of the energy sector in the late 1970s and 1980s.The Conservative government that came to power in 1979 was hostile to subsidies and research grants for renewable energy technologies. However, the Central Electricity Generating Board (CEGB) has been involved in research and demonstration projects on renewable energy technologies since the mid-1970s.
Since the early 1980s, CEGB has supported the development of several demonstration projects related to the commercial use of wind energy.
A turning point in the history of the wind energy sector in Great Britain was 1982, when the Oil and Gas (Enterprise) Act was passed. The act prepared the ground for national program of privatization of British Gas and British Petroleum (BP). Over the next decade, this process eventually led to a comprehensive reform of the energy sector, mainly in England and Wales.
Until 1990, one nationalized body, the CEGB, was responsible for the generation and transmission of electricity within the national grid in England and Wales.
After 1990, CEGB was divided into three generating companies: National Power (renamed International Power Plc in 2000), PowerGen and Nuclear Electric, and one high-voltage electricity transmission company, National Grid.
The next step was the privatization of 12 Regional Energy Companies (RECs), responsible for the distribution and retail sale of electricity in Great Britain. This was followed by the privatization of the UK's two dominant energy companies (National Power and PowerGen), which accounted for more than 70% of the electricity generation market in 1991.
The privatization process described above allowed for the gradual entry of independent power producers (IPPs) into the UK market.
Acceleration of wind energy sector since 2000s
Until the beginning of the 21st century, the policy of Great Britain mostly supported the privatization of the energy sector.In 2000, the government announced that by 2010, 10% of UK electricity would be produced from renewable energy sources, provided the costs were acceptable to the consumer. Legislative changes in 2000 led to further reforms of the energy markets in the UK.
In April 2001, the New Electricity Trading Arrangements (NETA) came into force.
Regional energy companies were divided into distribution network companies and suppliers. In February 2000, the Department of Trade and Industry published a call for public consultation on the RES Commitment. The main legislation was contained in the Law on State Services.
In 2002, the Renewable Energy Obligation (RO) came into force, replacing the previous NFFO framework.
The RO has required all registered electricity suppliers in England and Wales to provide a certain amount of electricity from renewable sources to their customers in the UK. No distinction was made between renewable energy technologies and they all received the same level of support per kWh. RO mechanism set a target for renewable energy and made it possible to trade Renewable Energy Certificates (ROCs), which would provide the cheapest renewable energy production.
By 2003, the British government had issued permits for offshore wind farms that exceeded the capacity of all wind farms built between 1990 and 2000.
The first large-scale offshore wind farm, North Hoyle, was commissioned in December 2003.
This was the start of significant progress and growth in wind farm financing in Great Britain, but there was much work to be done.
Thanks to huge investment in offshore sea farms, the UK currently has one of the largest installed offshore wind capacities in the world, representing more than 33% of the total European potential. For this reason, the history of the UK wind energy sector is inextricably linked to offshore wind farms, seaports and marine technology.
The 2006 Energy Review made it clear that UK renewable energy policy could be significantly improved. The report proposed a public consultation on RO adjustments to reflect the fact that some technologies will no longer require full support.
At the same time, financial support for the offshore wind energy sector was planned to be significantly increased.
Climate commitments as a driver of further investments
The Climate Change Act of 2008 committed the UK to cut CO2 emissions by 80% by 2050.This required a rapid acceleration of growth in the renewable energy sector.
In addition, the act called for reducing emissions by at least 34% by 2020 compared to the 1990 baseline. In 2008, the UK government reviewed electricity legislation. In practice, this further stimulated investment in the wind energy sector, especially financing the construction of offshore wind farms. In February 2012, less than ten years after commissioning the first offshore wind farm in the North Sea off Blyth, Northumberland, installed offshore capacity exceeded 1.7 GW.
The UK coast has very large wind resources and an area of sea the size of London can supply 10% of domestic electricity demand.
To make good use of this unique resource, the British Wind Energy Association began negotiations with the government in 1998 to draw up guidelines for negotiations with the Crown Estate (this body officially owns all the ocean floor within 12 nautical miles of the UK coast and therefore must agree to any offshore developments).
Over the past two decades, the UK wind industry has faced several obstacles, some of which have been extremely difficult to overcome. The UK Government has launched a number of initiatives to support the development of the wind energy sector by addressing critical issues such as grid access, national planning, local planning and electricity supply.
Despite these measures, investment in wind farms still faces serious challenges, especially for the onshore wind sector.
Grid capacity is limited in areas with high winds, so it can be difficult to get a siting permit. It can take up to 10 years to build a power grid in remote locations, creating uncertainty and risk for investors. Historically, grid operator National Grid has provided grid access on a non-discriminatory basis. Therefore, renewable energy sources were not prioritized compared to conventional generators.
In 2009 and 2010, the Department of Energy and Climate Change (DECC) held two public consultations on improving grid access for renewables.
This led to the introduction in August 2010 of the Connect and Manage social grid access system, which allowed new and existing renewable energy projects to be connected to the grid more quickly.
New way to achieve energy strategy
One way to achieve UK energy security is to increase investment in the construction of wind farms, including funding for the offshore wind energy sector.The new energy security strategy envisages increasing the construction of floating wind turbines in the next 10 years and tripling the installed capacity of nuclear power plants by 2050.
Like most Western countries, after Russia's attack on Ukraine, Great Britain wants to become independent of Russian energy sources. As London assures, additional investments in RES should lead to lower energy prices for households and industry. In 2022, Britons were hit hard by a spike in wholesale gas prices as a result of the geopolitical crisis, as their gas bills rose by 50%.
The goals of the British energy strategy, presented by the former British Prime Minister Boris Johnson, contained several goals for the development of the country's energy sector:
• By 2050, nuclear power plants should provide a capacity of 24 GW (in 2020 it was 8 GW).
• By 2030, 95% of the UK's electricity needs to come from low-emissions energy sources.
• By 2030, offshore wind capacity is set to reach 50 GW (it is currently about 14 GW).
• By 2035, the capacity of solar power plants will increase fivefold (now it is 14 GW).
In addition, it is planned to increase financing of hydrogen energy to 10 GW. At least half of this installed capacity will be green hydrogen produced using renewable electricity. Great Britain also has ambitious oil and gas projects in the North Sea. A new round of licensing for companies interested in oil and gas production off the coast of Great Britain has begun in autumn 2022.
The implementation of these investment plans should contribute to the recovery of the economy.
According to London estimates, the new energy projects will bring an additional 30,000 jobs in the offshore wind sector, 3,000 jobs in the hydrogen energy sector and about 5,000 in the solar sector.
Project finance and bank loans for wind farms in Great Britain
The UK wind sector is largely financed by long-term bank loans, with project finance schemes becoming increasingly important to the development of the sector.The main sources of capital for the construction of wind farms in Great Britain are debt capital and sponsor equity.
The equity capital provided by the project owners and investors faces the greatest risk, since the initiators and owners of the future wind farm are fully responsible for the successful development of the initial concept into a profitable business capable of generating adequate profits throughout the entire period of operation.
Debt capital, usually attracted through large UK and international banks (for example, HSBC, Barclays, Lloyds Banking Group), has a number of advantages.
In particular, the lenders do not have the right to manage the wind energy project, unlike the owners of the shares. On the other hand, large long-term wind farm construction loans require liquid collateral and sometimes loan guarantees.
Debt capital is considered less risky and therefore usually has a relatively lower value than equity capital. In wind energy projects, the so-called construction debt and capital involved to refinance the existing debt can be distinguished. In the first case, funds are raised to purchase and create new energy assets, while refinancing debt is used to finance construction debt on better terms.
Corporate finance vs project finance in wind energy sector
The final financial structure of the wind energy project is determined, in particular, by such factors as the optimal ratio of debt capital and equity capital.In this context, traditional corporate finance and project finance can be distinguished, with the latter playing an important role in financing long-term capital-intensive projects.
In corporate finance, investments are made on the balance sheet of owners and sponsors, so creditors turn to all the assets of these participants in the event of a failed project. Moreover, many contractual obligations are made with owners and sponsors. Although this method of financing is faster and cheaper than project finance, it carries much more risk for the initiators.
As the UK has highly developed financial legislation, a strong capital market and banking system, project finance has found wide application in the local wind energy sector.
Project finance refers to financing methods without recourse to the borrower, and project debts do not appear on the owners' balance sheets. An independent legal entity, special purpose vehicle (SPV) is created in accordance with British law, which attracts borrowed funds and is fully liable to lenders.
As a rule, banks, export-import agencies and other financial institutions provide 70-80% of the capital to finance a wind farm.
The remaining funds must be invested by the project owners.
The companies that own a wind energy project bear minimal risks if the project fails.
The negative aspects of project finance include the complexity of the contract structure, which is explained by the need for a rational distribution of risks between the participants in the investment project. For this reason, organizing project finance for the construction of wind farms in Great Britain is significantly longer and more expensive than traditional models.
In the structure of project finance, close partnerships play a key role from the earliest planning stage. Long-term debt capital is raised through both debt and equity instruments. Project owners must form consortiums to provide the necessary equity capital, while lenders (banks) may provide syndicated loans for particularly large projects.
Large wind power producers and utilities typically opt for corporate finance, raising funds at the corporate level through debt and equity instruments.
Small power producers and companies whose core business is not wind power generation benefit the most from project finance schemes.
It should be noted that the well-developed British financial markets have greatly supported the development of the wind energy sector, especially the construction of new offshore wind farms, which has taken place at a rapid pace in recent decades.
International banks have also strengthened their presence in the UK wind energy sector and increased competition.
The high availability of capital, lower interest rates, growing confidence in wind technologies and favorable financial legislation are helping to further develop the industry and overcome existing barriers.
In terms of equity capital, institutional investors are actively trading for wind assets. Interest in financing wind farms has exploded since the 2000s, both from institutional and strategic investors. Currently, large offshore wind projects in the UK are seen as a reliable source of predictable profits in the long term. The interest of investors in the technology extends to both new and existing assets.
Financing Dogger Bank Wind Farm
An excellent example of project finance in the UK wind energy sector is the Dogger Bank Wind Farm, an ambitious investment project in the North Sea, which could become the largest offshore wind farm in the world.When completed in 2026, Dogger Bank Wind Farm will supply 5% of the UK's electricity needs.
The development of the project is carried out by SSE Renewables and its partner Equinor, which owns 50% of the shares. According to preliminary information, the total investment should amount to £6 billion. National Westminster Bank, one of the largest banks in the United Kingdom, plays a leading role in financing the project.
NatWest will assist partners in project finance and risk management.
By the way, National Westminster Bank has a long-standing relationship with SSE Renewables, providing long-term loans for other energy projects in Scotland.
As part of project finance, around three dozen financial institutions provided £4.8 billion in loan funds, along with other assistance. Much attention was paid to currency risks and interest rate risks to ensure smooth financing of the project.
Financing offshore wind farms in Great Britain
Great Britain has been a world leader in offshore wind energy for many years.Just last year, China achieved more installed capacity than the United Kingdom. However, British companies in the near future plan to significantly increase financing of the offshore wind sector, primarily developing investment projects of wind farms in the Celtic Sea and off the coast of Scotland.
Legislation introduced in 1989 under the Electricity Act required UK energy companies to supply a certain amount of energy from renewable sources.
In 2000, the Blyth experimental power station (2 X 2 MW) was put into operation near the coast of Northumberland in North East England.
In 2021, the UK had a total of 12 GW of offshore wind capacity, far exceeding the potential of other European countries such as Germany. Offshore wind power is now one of the pillars of the UK's energy transformation. In 2021, the offshore wind sector produced 13% of electricity in Great Britain (another 11% was produced by onshore wind farms). However, gas still accounts for the largest share of the UK energy mix (over 40%).
The first large-scale offshore wind farm, called North Hoyle, was launched in December 2003.
Less than ten years later, the total installed offshore wind capacity in the UK has exceeded 1.7 GW.
This was achieved largely due to private investment, rapid development of project finance mechanisms and flexible long-term loans from British banks.
Planned offshore wind projects in the British Isles have already reached 86 GW in early 2022, a 10 GW increase compared to the plans of the current world leader in offshore wind sector, China.
The transformation of Britain's energy mix in recent years has also led to a marked reduction in emissions. In 2021, the UK has halved CO2 emissions compared to 1990. The further development of RES in Great Britain is primarily associated with the development of the offshore wind energy sector, which is confirmed by plans to expand the potential of RES to 100 GW by 2050.
For several years, the UK has pursued a strategy to move away from thermal coal, diversifying energy sources and keeping prices low for private consumers. Last year, Boris Johnson announced that by 2035, the country's electricity would be 100% renewable and nuclear.
Recently, many experts positively evaluate the role of offshore wind energy in the green transformation, paying attention to the low cost of electricity. Given the high tension in global energy markets, this looks even more important. The price of electricity for UK consumers in 2022 reached the highest level in more than 40 years, mainly due to the geopolitical situation in Europe.
A great advantage that allows the development of offshore wind energy near the coast of the British Isles is, first of all, the rich long-term experience of British engineering companies in the sector of oil and gas production, as well as well-established official procedures.
It should be remembered that when developing large OWFs, they are based on rules and practices developed for the oil industry that has developed in the North Sea for decades.
In this regard, Great Britain can be a model for the whole world.
The same applies to project finance, where British companies and banks have had practical experience since the 1970s.
On the other hand, the problem of British companies may be the low efficiency of seaports and port infrastructure, which must be adapted to new, larger projects and new technologies, in particular floating wind turbines. The hope for port development is increased funding provided by the British government last year, which will accelerate the offshore wind sector in Great Britain.
Largest UK offshore wind farm investments
In 2013, the 175-turbine London Array, located off the coast of Kent, became the largest offshore wind farm in the world.Then, for a time, the world's largest wind farm is Walney Wind Farm in the Irish Sea, which was increased to 1,026 MW in the latest expansion completed in 2017. In 2018, which turned out to be a surprisingly successful year for the local wind energy sector, the Galloper (277 MW), Beatrice 2 (273 MW), Rampion (221 MW) wind farms were also commissioned.
In recent years, Great Britain has implemented a number of very ambitious IMF projects. A special place among them is occupied by the construction of Hornsea One with a capacity of about 1.2 GW. The British government allocated £730 million for this project. The investor of this plant is the Danish company Oersted A/S.
The facility consists of 174 Siemens-Gamesa wind turbines, each with a capacity of 7 MW, installed approximately 120 km east of the Yorkshire coast.
At the end of 2021, the installation of the last wind turbine on the solid subsea foundations of the Hornsea 2 wind farm was completed, which increased installed capacity to 1.32 GW. Construction of Hornsea 3 is ongoing and investment plans are being developed for Hornsea 4.
Also, at the end of 2021, an offshore wind farm started operating near the coast of Scotland, where the wind turbines are not attached to the seabed.
This is the largest investment in a wind farm implemented on floating platforms.
The 50 MW Kincardine Floating Wind Farm was built in Aberdeenshire, approximately 15 km off the coast.
Great Britain plans to increase the potential of floating wind turbines in the Celtic Sea and off the coast of Scotland in the coming years. In March 2021, the British Crown Estate announced that it would begin preparing the contractual framework for new commercial floating wind projects in the Celtic Sea. The British government aims to install 1 GW of floating wind turbine capacity by 2030.
The United Kingdom has announced the implementation of very ambitious projects in the coming years, making a bet on floating wind turbines. The cost of installing such turbines is higher than that of traditional OWFs with a subsea foundation, and they are more prone to corrosion and damage.
On the other hand, the costs associated with the operation of floating wind turbines may be significantly reduced in the future.
Investments in seaports and infrastructure are on the rise
The offshore wind sector currently employs around 26,000 people across the UK.That number will increase to 70,000 by 2026, according to a report published last year by the Offshore Wind Industry Council.
In the middle of 2022, this figure has already reached 31,000 people.
The development of offshore wind energy, as well as the associated economic boost, has become one of the key elements of the policy of the ruling party. Politicians actively support increasing the participation of British companies in the implementation of offshore wind farm projects.
The contribution of local plants to the current projects implemented in the UK is estimated to be about 50%, which primarily includes the production of turbines and most blades, the installation and commissioning of the turbines, as well as their maintenance and service. However, government advisers hope to increase the share of British companies to 60% of the total costs associated with the entire cycle of offshore wind farms.
Given the ambitious investment plans for the next few years, the British government announced the allocation of £160 million for the expansion of seaports designed for the production, assembly and installation of floating wind turbines.
These facilities should serve not only as logistics facilities, but also as production facilities.
The British government hopes that local industry will produce as much of the floating components as possible.
In 2021, the Humber and Teesside ports have also been selected as next generation ports to support future OWF projects in the North Sea and off the coast of Scotland. It has been announced that £95 million will be invested in these projects, which will have a positive impact on the development of the region, creating around 6,000 new jobs.
It is also planned to invest tens of millions of pounds in the Irish ports of Galway and Shannon Foynes.
The seaports listed above act as assembly and service terminals not only for offshore wind farms, but also for the oil and gas sector.
In addition, many investments have been made in recent years in existing major ports, modernizing them specifically for the needs of the UK's rapidly developing offshore wind farm market.
With large investments in wind farms, Great Britain will undoubtedly become one of the world leaders in offshore wind in the future, developing its potential in production and logistics as well.
