Venture capital and pension funds to invest in Irish wind energy firms

irish news

Published in The Irish Times

April 16, 2012

INSTITUTIONAL INVESTORS are poised to target the Irish wind energy industry, which will need funding of €900 million a year between now and 2020 if it is to deliver on agreed targets.

According to a leading figure in the industry, institutional investors such as pension and venture capital funds, are preparing to invest in the sector both in Europe and Ireland.

Kenneth Matthews, chief executive of the Irish Wind Energy Association, said at the weekend that wind farms with the capacity to deliver 1,700 mega watts (MW) of electricity are now operating in the Republic. Capacity in Northern Ireland is about 400 MW.

Mr Matthews said that, in order to meet green energy targets agreed with the EU, the Republic will need a further 3,750-4,000 MW of capacity built between now and 2020, while Northern Ireland will need about 1,200 MW.

That means that the construction of 300 MW a year is needed in the Republic and a further 150 MW in the north. At current costs, – €2 million per megawatt – Mr Matthews said this would require investment of €600 million a year for the next eight years in the Republic.

Those figures point to necessary investment of €300 million a year over the same timeframe in Northern Ireland.

According to Mr Matthews, the current pipeline indicates that these targets could be met. The outstanding issue is funding.

The Irish Wind Energy Association chief said the current model, which involves utilities investing their own equity and borrowing from the banks, needs to be supplemented with something else.

He estimates that around 60 per cent of the funding – €360 million annually in the Republic – needed will have to come from new sources.

A report from global investment business Hg Capital, which has a dedicated renewable energy division, shows that Europe as a whole needs to invest €1 trillion in renewables over the next eight years.

Of this, utilities have the capacity to put up about €400 million. Mr Matthews says that this scenario applies to Ireland as well. He explained that institutional investors are likely to step in to provide the rest of this funding.

“There is a clear appetite to invest in wind infrastructure being seen from pension funds, insurance companies and sovereign wealth funds and 2011 marked the biggest investment year for the renewable energy sector,” he said.

The introduction of a new round of markets supports, known as Refit 2, will make the sector more attractive to institutional investors in the Republic. It is designed to support projects built and operational between the start of 2010 and the end of 2015.

The Minister for Communications, Energy and Natural Resources, Pat Rabbitte, announced the programme last month. It will guarantee prices of €66.35 per MW hour to large-scale wind farms and €68.68 for smaller operations.

Separately, the European Wind Energy Association will today publish a report showing that the industry has been growing twice as fast as the EU economy. According to its figures, the wind energy industry contributed €32 billion to the EU in 2010. The sector now employs more than 2,000 people in the Republic.

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