Global renewables upswing, via wind

Bloomberg New Energy Finance

Clean energy investment continued to be on the upswing in the second quarter of the year, building on the momentum seen in the first quarter. Investment was up 9 per cent at $US63.6 billion during the April-June period, with China leading the list of countries pumping money into the sector, followed by the US, according to the latest quarterly update from Bloomberg New Energy Finance.

The numbers raised expectations that this year will see an increase in investment after two years of declines. “We are expecting the full-year figures for 2014 to show a clear rebound in global investment in clean energy," said Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance.

The stand-out deal of the quarter was the $US3.8 billion financing of the 600MW Gemini offshore wind farm in the North Sea, off the coast of the Netherlands, the largest investment decision ever in renewable energy (excluding large hydro-electric). The transaction involved the developer ‒ Canada’s Northland Power ‒ plus three other equity investor groups, 12 European, Canadian and Japanese commercial banks, the European Investment Bank, a Danish pension fund and three export-credit agencies.

Further details about investments during the quarter can be found in the fact pack available for download on our site, bnef.com.

Figure 1: Global clean energy investment by quarter

Into the third quarter of 2014, and Dong Energy, the biggest developer of offshore wind farms, sold a 50 per cent stake in a German project to four Danish pension funds led by PKA last week, making 840,000 savers co-owners of the farm. The 252MW Gode Wind 2 project is due to start construction next year and begin operating in 2016.

Offshore wind is also gaining traction in markets beyond its heartland of Europe. The US Department of the Interior announced an auction of about 344,000 acres off the coast of New Jersey for offshore wind energy development last week, an area that could host as much as 3.4GW of capacity. Companies can submit applications by 19 September.

China set out an ambitious plan in 2011 to build 5GW of offshore wind in four years, but less than 10 per cent of that capacity is in place currently. The target for offshore wind “definitely can’t be attained,” said Li Junfeng, director general of the National Center for Climate Change Strategy and International Cooperation. 

Coming back to Europe, German development bank KfW raised €1.5 billion through its first ever green bond last week, and is considering further sales. The bond was sold to 90 investors following strong demand that took orders to €2.65 billion, the state-owned lender said in a statement. It matures in five years and will pay an annual coupon of 0.375 per cent. The bank’s issue is the second-largest to date, only trailing GDF Suez’s €2.5 billion bond sale in May. 

On the buy side, Switzerland's largest insurer Zurich Insurance Group said it planned to allocate as much as $US2 billion for green bonds, doubling its planned investment announced earlier, citing their growing appeal in Europe. Other investors snapping them up include Nordea Bank and BlackRock. The securities offer returns and risk levels comparable to traditional debt of the same maturity and rating. 

Bloomberg New Energy Finance expects the total volume of green bonds issued to cross $US40 billion if the current pace is maintained, almost tripling the $US14 billion issued in 2013. Additional details can be found in our Green Bonds Market Outlook published last month. 

The week also saw another successful listing of a "yieldco" ‒ a company whose main purpose is to buy and hold operational assets and pass the majority of its cashflows to investors in the form of dividends. TerraForm Power ‒ which owns and operates solar farms built by SunEdison ‒ surged on its listing on Friday. It raised $US501.6 million in its initial public offering.

The headlines in the carbon market came from Australia. Prime Minister Tony Abbott’s government won final approval from Parliament to scrap a levy about 300 companies paid for their carbon dioxide emissions. The move leaves Australia, the largest polluter per capita among industrial nations, without a system for reducing greenhouse gas emissions. 

South Korea meanwhile plans to start carbon trading in January, but with some reduction in the penalty on companies that emit excessive greenhouse gases, news reports said, citing unnamed government officials.

The other important policy news came from India, which reinstated accelerated depreciation for wind farms. Bloomberg New Energy Finance estimates an additional 300-600MW of capacity could be installed this year as a result, and at least 800MW per year subsequently.

Originally published by Bloomberg New Energy Finance. Reproduced with permission.