Public policy aside, Leonora’s review was also timely because it coincided with news that the government was earmarking £557m in support of the offshore wind sector through a biannual auction process, whereby companies will be able to bid for contracts to operate wind farms in the waters surrounding the UK. It obviously represents a positive development for the renewables sub-sector, but doubly so for vehicles with established exposure to this area of the infrastructure market, such as International Public Partnerships (INPP), which has several existing government contracts to run the transmission links between offshore wind farms and the national grid.
The news was welcomed by the environmental lobby, especially as the government has recently come under criticism for policy changes that have resulted in an effective curtailment of onshore wind projects in the UK, although debate on the viability of renewable energy, at least through the mainstream media, isn’t usually notable for its objectivity – this area of energy infrastructure is politically charged. But even the most vociferous critic couldn’t ignore the scale of the commitment at a time when Whitehall budgets are under intensified scrutiny.
The reality is that 2017 represents a high-water mark for offshore generation. Last year saw the greatest increase in European waters on record, according to analysis by trade body WindEurope, with the UK accounting for over half of the 3.15 gigawatt (GW) installed capacity. Between now and 2020, it is envisaged that European offshore capacity will increase by 58 per cent to 25GW, much of that driven by delayed windfarms in UK waters. Indeed, separate analysis from Aurora Energy Research suggests that the continued rise of intermittent renewables could result in the UK attaining that level on its own by as early as 2030. To put this in perspective, between 2007 and 2015, the UK's peak electrical demand fell from 61.5GW to 52.7GW. (If you wanted further evidence of our transition towards flexible and distributed generation channels, just consider the recent share price performance of RedT Energy (RED).)
It behoves investors to have one eye on this corner of the energy market, but there are a lot of propagandists at work. Ever since we published a cover feature on the state of battery technology at the beginning of 2017, we’ve been inundated with press updates on the green energy market, the latest of which centres on an apparent resurgence of the global market in carbon credits. It seems a tenuous claim given the damage done through mis-selling scandals that hit the headlines through the intervention of the Insolvency Service through 2014-16. Of course, matters could have been much worse. At the time of the global financial crisis, some pundits were predicting that the market in carbon credits was the next likely speculative bubble (what price cryptocurrencies?).
