'Challenging' market conditions set back European wind investments in H1 2024

European wind investments in the first half of 2024 amounted to Eur15.4 billion ($17 billion), according to trade association WindEurope, less than 30% of the total from 2023, amid a difficult market environment to get new projects financed.

High interest rates and input costs, combined with lower power price forecasts, are "making it challenging to take [final investment decisions, or FIDs] for new wind farms, especially the big offshore ones," WindEurope said in a Sept. 12 report.

"The economic landscape and investment conditions remain challenging and variable having not fully recovered from the shock of the pandemic," the group said. "This is still impacting investments and complicating project prioritization."

The first half of the year saw just three FIDs in European offshore wind projects, all in Germany, with utility giants RWE and Iberdrola raising a combined Eur6.2 billion to finance 1.9 GW of new capacity.

Meanwhile, onshore wind investments in Europe totaled Eur9.2 billion during the period, financing about 7.2 GW.

WindEurope noted that offshore investment figures are "volatile" and highly dependent on the timing of what are typically multibillion-euro transactions. Last year saw some Eur35.6 billion of offshore wind FIDs, with the sector rebounding after recording just Eur400 million of investments a year earlier.

The trade association expects offshore wind investments across the whole of 2024 to total about Eur17 billion, financing about 5.2 GW.

RWE made a FID on its 795-MW OranjeWind project in July, and WindEurope sees two more investments to come this year.

Off track for 2030 goals

Investments in Europe's onshore wind fleet have been declining in recent years due to high inflation, WindEurope said.

While the investment figure for the first six months is about half of 2023's total, the group said there is a "risk that onshore wind volumes reaching FID are starting to diverge from the volumes required for the expansion of wind capacity in Europe."

European Union member states are targeting 425 GW of installed wind capacity by 2030, though WindEurope said the current trend points to the bloc reaching just 350 GW. Its installed base today stands at 225 GW.

WindEurope's projection equates to a buildout rate of 22 GW per year in the EU, with the targets requiring some 33 GW of annual additions.

"The main bottleneck now is in electricity grids," the trade association said. "New connections are not being built or permitted fast enough."

While project permitting also remains an issue, WindEurope highlighted "excellent progress" in Germany, which handed permits to 4.7 GW of onshore projects in the first half of the year to add to the 7.5 GW it distributed in 2023.

Germany also led Europe in installing new capacity during the period, adding 1.7 GW, of which more than three-quarters was onshore. Europe's largest economy is expected to add a total of 5.7 GW across the full year, WindEurope said.

Europe as a whole installed 6.4 GW in the first half of the year, 83% onshore, with France at 1.2 GW and Spain at 876 MW, behind Germany with the largest volume of additions.

S&P Global Commodity Insights reporter Alex Blackburne produces content for distribution on Capital IQ Pro.