GCube, the specialist renewable energy underwriter, has said that whilst clear growth within offshore wind persists, the industry needs to take some extra steps to ensure that wind energy assets are ‘investment grade’ in the long term.
With limited opportunities for debt within the offshore wind capital structure, unknown risks from the power price, regulatory risks, technology risks, and the resource fluctuation of wind energy itself; offshore wind poses a number of investor challenges. These challenges are further compounded by Government pressure to lower the cost base of the industry, and continued policy uncertainty.
In order to overcome this future industry investment impasse, GCube believes that a step change needs to take place in the way that future offshore wind assets are built, managed and valued. This will entail seeking greater levels of collaboration between investors, developers and operators at an earlier stage; ensuring that projects are more effectively geared towards the needs of capital providers and that they can adapt to the regulatory and policy environment.
As part of the 5GW underwriting milestone, projects that GCube currently insure include Scroby Sands, Robin Rigg and Blyth, all of which were constructed under the UK’s Round 1 and 2 tender process. Further afield in Northern Europe, additional projects include the Danish initiative Rodsand II, located in the Baltic Sea.
“It seems obvious, but as new projects continue to come online and as existing technology improves, develops and matures, offshore wind energy still carries a large amount of risk,” said Jatin Sharma, Head of Offshore Wind, GCube .
“As such, it is the way in which we currently assess project construction and operating risk within the market that continues to require focus. Moreover, while a great deal of lessons have already been learned, it would be foolhardy to think that our understanding of risk ends here.
“At GCube, we underwrite a significant portfolio of offshore wind and work closely with developers and utilities to ensure that the initiatives they are currently constructing, appeal to the secondary investment market in future.”
“If we are to safeguard and secure the future of the offshore wind industry, we must ensure that the assets locked away within it are attractive to investors from the private equity and pension fund communities. Only then can we start to truly achieve the long-term ambitions in offshore wind that the policy makers are really aiming for.”
GCube has underwritten major offshore wind initiatives for almost ten years and has been involved with many of the large Round 1 and Round 2 projects currently in construction or operation.
This tenure and experience has enabled the business to develop a comprehensive understanding of the unique challenges within the market. And, in doing so, help develop a set of solutions that aid the industry in reducing its cost base through improving its risk management practices.
Press release, June 13, 2013