Business Network for Offshore Wind Releases Paper at its Annual International Partnering Forum on Offshore Wind in NYC, April 8-10
For Release: April 8, 2019
New York City, NY – Decisions on how U.S. offshore wind parks will be financed are needed quickly to ensure smooth sailing for a growing number of renewable-energy offshore wind projects up and down the East and West Coasts, reports an offshore wind white report released by the Business Network for Offshore Wind at its annual International Partnership Forum in New York City April 8-10.
The New York State Energy Research and Development, NYSERDA, is the host of the Forum, which has attracted about 1,500 offshore wind experts, including the Governors and other elected officials from New York, New Jersey and Connecticut who are expected to speak about offshore wind in their states.
“We may hit some windy financing turbulence with the loss of tax equities and safe harbor provisions for US and foreign developers of offshore wind,” said Liz Burdock, President & CEO of the Network. “Short-term, financing using safe harbor provisions may have an advantage but, with longer-term financing, a clear and well-defined structure is needed to attract the $60-70 billion investments expected over the coming decade in the U.S.”
The paper,“How Will Offshore Wind Reshape US Project Finance?”, results from discussions with finance experts who propose in the medium term that the construction phase of an offshore wind park may need separate mini-financing tools, dividing up a project’s risks among suppliers, states and financial partners.
Ross Tyler, Executive Vice President of the Network said, “Developers are retaining maximum flexibility with last minute choice in turbine technology for competitive advantage and are looking beyond the OEMs to make up equity shortfalls. Banks must analyze risks and seek comfort with lending against risks through mini-financing for specific parts of multiple projects. This might be the new tool that will spread risk and ultimately ensure success.”
Multi-project developers most likely will influence the building of regional supply chains to benefit business clusters under mini-contracts, as well as the sponsoring States.
The paper argues:
“States will need to choose and then balance their priorities: price impact on ratepayers versus local job creation.” The State of New York, for example, plans to create 5,000 jobs with its investment of $6 billion for 9,000 megawatts of energy prior to 2035. At the same time, New York cautions against higher costs for ratepayers.
The white paper focuses on three additional areas:
1) Accuracy in wind resource measurement as this impacts a project’s financing because each percentage of wind power can decrease or increase millions of dollars in revenues.
2) Different financing mechanisms between U.S. and European lenders question the “appetite” for risks in this country. The paper stated: “Europe, which started with 10 banks supporting offshore wind investments, now has approximately 45 banks willing to lend to the offshore wind sector. Further, Europe is witnessing a growing appetite from institutional investors. This not only adds a source of liquidity to the market, but also helps keep the cost of capital competitive. Banks providing debt financing in the US have a preference for a single or very limited number of contractors. The US also has a strong institutional market, but it’s unclear if it has an appetite for offshore wind construction risk.”
3) The paper found: “Experience from Taiwan and Europe show it is difficult to have both a strong local supply chain participation and a low price for power. As scale in offshore wind is important for building the business case to support local job creation and investment in manufacturing, multi-project developers may be preferred borrowers as they provide ways for financiers to spread the risks. Developers and their financial partners are going to need a pipeline of multiple projects in order to satisfy the state supply chain needs through a regional approach.”
4) The industry and U.S. States view ports with high importance, needing them to attract offshore wind fabrication facilities to strengthen and increase the competitiveness of the US supply chain. Burdock wrote in a Crain’s New York op-ed about East Coast ports’ commitment to offshore wind: “If the ports upgrade their infrastructure and coordinate their efforts, offshore wind could create tens of thousands of jobs along the coast and help the states reach their carbon-emission goals.”
About the Business Network for Offshore Wind
The Business Network for Offshore Wind is a 501(c)(3) organization dedicated to establishing an offshore wind supply chain in the United States. The Network is focused on delivering education, creating partnerships and advancing the industry. All membership and event proceeds are invested back into supporting the industry by helping the Network continue programmatic education and develop the tools and networks necessary to create a U.S. offshore wind supply chain. The Network hosts the annual International Offshore Wind Partnering Forum (IPF), the leading technical conference for offshore wind in the United States dedicated to moving the industry forward.