Offshore wind: Banks hesitant to support developments
Banks are proving hesitant to finance offshore wind projects due to concerns surrounding the use of Chinese equipment, according to a new report.
Security concerns, a lack of precedent and doubts that China-based equipment manufacturers can provide sufficient guarantees around performance have led would-be financiers to sit on their hands before plugging in cash, energy research firm BNEF found.
Beijing-headquartered Goldwind was the world’s top wind turbine supplier in 2024, ahead of three other Chinese manufacturers – Envision, Windey and Mingyang.
Banks are waiting for equity investors and private capital to move first to de-risk future investment ahead of any debt financing.
Broadly, executives are more confident in onshore Chinese turbines than offshore given China’s experience in those types of projects, BNEF said.
The findings are a fresh signal of private sector angst over investment into offshore wind, which is a key part of the UK government’s plans for clean power by 2030.
UK to miss 2030 offshore wind target
BNEF’s report found that the UK was likely to fall significantly fall short of its five-year target of 43GW of offshore wind, as developers delay or cancel projects amid rising costs.
It comes after the world’s largest offshore wind developer, Ørsted, paused work on one of the biggest projects in the North Sea, Hornsea 4, earlier this month.
Meredith Annex, one of the report’s authors, told CityAM hesitancy from banks would feed into wider concerns. “It’s not just banks, I would say across the board, developers are putting a lot more attention on the expected return that you’re going to see from projects,” she said.
The nature of debt financing means investors are often more concerned about the return of the asset, driving up competition for the most lucrative projects.
“There’s a lot less willingness to go on riskier projects at the moment,” Annex explained, although she said this would change when equity investors and private capital – which tend to be okay with greater risk – make the first move.
“Oftentimes you’re talking about having Chinese workers, Chinese parts being sent over. Can that be done in a timely manner? That’s the kind of question that people are looking at now.”
She added: “It does depend on a little bit on how the Chinese manufacturers decide to manage their operation and maintenance supply chains. I think a lot of them are thinking about this problem carefully.”
A DESNZ spokesperson said it “categorically” rejected claims the UK would miss its 2030 target.
“We have a strong pipeline of projects to deliver 43 to 50GW offshore wind by 2030 and our mission-led approach ensures we can steer our way through global pressures and individual commercial decisions to reach our targets.”
Frank Gordon, director of policy and head of power at the REA, said: “Offshore wind has become incredibly important for the UK’s transition to clean energy, but it is not the only technology.
“Backing a greater range of renewable energy options provides a number of very real benefits in terms of system resilience, as well as creating jobs and economic growth throughout the country.
“To manage the impacts of variable renewables, we need more than just wind and solar. Sectors like geothermal, biomass and hydro could all be further scaled up to help fill the gap.”