Merchant onshore wind won’t result in mass capacity: Complete merchant onshore wind is not practical to most investors & will not result in mass capacity, as claimed by a report from Cornwall Insight.

Merchant wind power is the point where electricity is created from turbines that have been set up on brownfield sites. The wind operators provide the green electricity generated to the landowners at lowered rates & the land is leased in return.

The caution is that the set up & operation of the turbines is done only by that company & consequently they take the entire financial risk. Merchant power generation agreements are different from power purchase agreements (PPA) as there is no previous commitment of production & they are usually organised as short-term generation contracts.

The recent report polled the opinions of 258 industry leaders on which kind of merchant onshore wind projects are most probable to succeed, resulting in only 7% thinking a fully merchant onshore wind project financially practical.

The study showed this to be the general consent because of the fact debt leverage (borrowed funds to create returns from the investment), is expected to be very low for complete merchant projects, including some banks not lending as prices keep on fluctuating. The report says this signifies that rates of return are not likely to be carried out.

The surveyed respondents’ main concern was widespread price volatility, including 49% saying this would be a serious problem.

Daniel Atzori, Research Partner at Cornwall Insight, stated: “Currently, it is difficult to see investors taking the leap of faith on merchant renewables when debt leverage is low &  expectations of price volatility & capture price cannibalisation is high.

“On top of this, the sheer volume of decisions in policy & regulation & the scale of technological development that could unfold over the medium to long term, makes it hard for investors to be confident in these types of projects.

“These factors create more uncertainty today about long-term power prices than ever before. This may explain why so few fully merchant onshore wind financings have taken place in Great Britain and Ireland & in reality, may struggle to ever really take off at all.

“Governments hoping to see lots of ‘merchant’ projects be developed through private capital are inclined to be disappointed. If, as the consensus analysis shows in both Great Britain &  Ireland that technologies like onshore wind will be required at scale to meet decarbonisation targets, then it will be vital that auctions are calibrated to buy as much of the target capacity as possible.”

Merchant onshore wind won’t result in mass capacity

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