Renewable retail finance doubtful for mass capacity extras

Renewable retail finance doubtful for mass capacity extras: Merchant finance for renewables projects is unlikely to lead to mass capacity additions to the generation fleet, according to the latest insight paper from Cornwall Insight – Merchant renewables still face challenges.

To gauge the market’s temperature, Cornwall Insight surveyed 258 individuals across the industry on what type of merchant onshore wind projects are most likely to succeed and what the implications might be for the developers who take them forward.

Survey findings

  • Fully merchant projects are rarely considered viable. For example, fully merchant onshore wind projects are generally not considered financially viable, with only 7% saying they would invest.
  • Investment premiums for the risk are prohibitive.
  • Hurdle rates are unlikely to be met.
  • Price volatility and cannibalisation cast long shadows. Price volatility (49% of respondents) and cannibalisation (35% of respondents) concern investors the most.

Daniel Atzori Research Partner at Cornwall Insight, said:

“Currently, it is hard to see investors taking the leap of faith on merchant renewables when debt leverage is low, and expectations of price volatility and capture price cannibalisation is high. On top of this, the sheer volume of decisions in policy and regulation, and the scale of technological development that could unfold over the medium to long term, makes it difficult 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 actually taken place in Great Britain and Ireland, and in reality, may struggle to ever really take off at all.

“Based on Cornwall Insight’s survey findings, the “merchant” financing route is anything but a slam dunk. In fact, merchant projects or even part merchant are unlikely at this stage to lead to mass capacity additions to the generation fleet.

Governments hoping to see lots of “merchant” projects be developed through private capital are likely to be disappointed.  If, as the consensus analysis shows in both GB and 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.”

Article kindly provided by Cornwal Insight

Renewable retail finance doubtful for mass capacity extras

, , , , , , , ,
Previous Post
How UK utility companies are addressing climate change
Next Post
REA-Extra government steps needed to reach net zero

Related Posts

2.3M EV charging points are needed for UK

2.3M EV charging points are needed for UK Approximately 2.3 million brand new electric vehicle (EV) charging points are needing to be manufactured and installed to help support the current UK automotive sector’s net-zero. This figure is what is believed to be needed, according to a recent report conducted by the Society of Motor Manufacturers…
Read More

Greece sent to EU Court again because of poor air quality

Greece sent to EU Court again because of poor air quality: The European Commission chose to send Greece to the Court of Justice due to poor air quality levels once more. It was referred to the Court last year because of the high levels of particulate matter (PM10) however this time for high nitrogen dioxide…
Read More

Subscribe to our newsletter!

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

British Utilities will use the information you provide on this form to be in touch with you and to provide updates and marketing.