WindEurope: Europe wind farms investment reached €41B in 2021

Renewables

Belgium – In 2021, Europe invested €41 billion in new wind farms, according to WindEurope’s annual Finance and Investment Trends report.

This will fund a total of 25 GW of new capacity, which is a new high. However, the investments fall far short of the 35 GW per year of new wind energy that the EU needs to meet its 2030 climate and energy security goals.

In 2021, Europe invested €41.4 billion in new wind farms. This is an 11% decrease from 2020. However, the investments cover 24.6 GW of new capacity, a single-year record for new capacity financing. The majority of the new wind farms that were financed were onshore, totaling 19.8 GW. Which helps to explain why the investments were lower in 2019 than in 2020: onshore wind is slightly less expensive than offshore wind.

Geographically, the investments were fairly evenly distributed. Eleven countries put in more than €1 billion. The United Kingdom made the largest investment, followed by Germany, France, Spain, Sweden, and Finland. Spain has made the most investments in onshore wind. Sweden, Finland, Poland, and Lithuania all increased their investments in new farms over the previous year.

More wind in Europe

Strong onshore wind investments show that Europe is finally getting its permitting act together. However, the results are still far from where Europe needs to be in order to meet its new climate and energy security goals. According to the REPowerEU agenda, the EU’s wind capacity should increase from 190 GW today to 480 GW by 2030. This means that between now and 2030, 35 GW of new wind turbines will be built each year. In 2021, the EU’s new wind investments totaled only 19 GW of new capacity.

Much more could and should be built in Europe’s wind supply chain. The fact that it isn’t, and that the market is only half as big as it should be, undermines the supply chain’s competitiveness. Steel, other commodities, and component costs are rising, as are supply chain disruptions and higher shipping costs. All five of Europe’s wind turbine manufacturers are now losing money. The EU must continue to improve permitting, ensure a strong home market, and pursue trade and industrial policies that support the wind energy supply chain in order to restore the sector’s health.

Contracts for difference (CfDs), which governments are offering in their renewables auctions, are supporting an increasing number of new wind investments. CfDs provide project developers with predictable revenues at low cost to governments, as governments only pay out when the electricity price is below the auction price and are reimbursed when the price is higher. CfDs also lower financing costs because banks can finance projects at lower interest rates due to the clear revenue outlook.

New PPAs highs

Corporate renewable Power Purchase Agreements set a new high in 2021. (PPAs). 6.9 GW of new PPA agreements were announced, bringing the total amount of renewables under PPA to 18.8 GW in just one year. With 41 new PPAs for onshore wind farms and 11 for offshore wind farms, wind accounted for 60% of the new PPA capacity.

Europe will only be able to meet its climate goals and ensure energy security if it removes barriers to renewable energy expansion and ensures that wind remains a viable investment. Governments should refrain from holding auctions with zero or negative bidding.

The financial risk associated with wind farm development is increased by zero bidding. Worse, as seen in the Danish tender for the Thor offshore wind farm last year, negative bidding requires developers to pay for the right to build a wind farm. These additional costs must be passed on to electricity consumers, who are already facing higher bills, or the wind industry supply chain, which is already strained by rising material and component costs.

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