The strong winds of recent days have largely contributed to the fall in wholesale electricity prices in Greece due to the overproduction of electricity from wind turbines.

However, the low price of electricity produced is not only a friend of wind energy, but also a serious problem for it, since it is currently not enough to finance its development internationally, according to an extensive Bloomberg report.

Mands Nieper, head of the Danish company Orsted, one of the world’s largest developers of renewable energy, told the international news agency that he is concerned that the transition to energy could slow down as growing competition and interest rates drive down yields and flip valuations. expanding the use of renewable sources and, in particular, expensive offshore wind farms.

Offshore projects can use much larger turbines – the size of skyscrapers. Europe, China and the US are planning to rapidly scale up their offshore wind farms to meet their climate goals.

However, as governments around the world ramp up their ambitions to replace fossil fuels with clean electricity, companies expected to make the transition are facing financial pressure.

The leaders of this market are starting to sound the alarm: growing the market enough to avoid catastrophic climate change will require trillions of dollars in additional investment and the ability of wind companies to generate healthy profits.

Lack of funds, rising costs

“Lack of funds for this transition is the biggest risk we face,” says Mr. Nipper, chief executive of the Danish company.

At the moment, this path to sustainability is hampered by the rising cost of borrowing money to build green power plants, as well as increased competition, and may be further complicated in the future by unexpected European taxes on renewable energy producers.

As turbines grew in size, the price of wind energy produced fell sharply. Governments expected this trajectory to continue forever—an impression reinforced by the wind energy market—and tenders for new projects began to favor bidders that could promise lower energy prices. In recent years, however, inflation and rising interest rates have put an end to the downward trend in costs and now threaten further growth.

The truth is that there are not many opportunities to cover higher costs. Huge turbines placed at sea have greater capacity due to their size, but also more reliable operation, since the winds at sea almost never stop. However, these wind turbines are also much more expensive.

The increase in the cost of their production due to more expensive raw materials, as well as their transportation and installation, while the manufactured product becomes cheaper and cheaper, make investments in new wind farms unprofitable.

According to Mr. Nipper, a classic offshore wind farm generates a return of about 1% above the cost of capital. A very good project can reach up to 3%. Higher interest rates are currently undermining those returns, and unless the price of electricity from wind farms rises, companies will not be able to invest at the pace needed to meet climate targets, warns Bloomberg.

Source: Bloomberg.