Wind energy has hit the UK headlines again in September with the Prime Minister announcing that “every home in Britain” will be powered by wind farms” within the next 10 years. Clearly, the government sees great potential in the wind energy sector, and certainly there are strong reasons for investors to be interested in many of the companies driving innovation in this area. In this industry report, our team here at Bure Valley Group outlines the key developments and opportunities in this exciting and evolving part of the UK economy.
The development of wind energy
Wind energy technologies have come a long way even within the past 10 years. In 2010, the largest commercially available wind turbines had a circumference of 90m – producing around 3MW of power. This made wind energy less attractive to consumers and UK authorities, since on-shore turbines up to this size could get around £100 per megawatt-hour (£50 per megawatt hour was the market rate for electricity at the time).
However, over recent years the sizes of these turbines have grown – pushing capacity to 60%. In 2016, for instance, turbines could be as large as 164m producing 8MW, and by 2020 the figures were 250m and 20MW respectively. With a capacity factor now near 60%, wind energy is now higher than the average of the non-renewable, “non-green” energy sources of coal and gas. Over the next 10 years, turbine sizes and capacities are likely to grow even further.
At present, there are 7,054 onshore wind turbines in the UK. Offshore UK wind capacity stands at around 8,113MW with 10,579MW currently being constructed or set to be completed by the year 2025. Wind energy powered 15% of the UK’s electricity consumption in 2017 (i.e. 12.7m homes), and today in 2020 the figure stands closer to 20%. Investment in wind energy does not appear to be slowing down, with the world’s largest windfarm presently nearing completion 75m off the coast of Yorkshire (Hornsea Project One).
Wind energy outlook
So who is building all of these wind farms and turbines, and who is driving this innovation which is receiving so much investment? What is the size of the market and what kind of future does it have? According to one study, global demand for wind power stood at 58.9GW in 2019 and is expected to have a 5% compound annual growth rate (CAGR) between 2020-27. This is partly driven by social and political factors, as populations across the world demand more renewable sources of energy for their homes. Yet it is also partly to do with costs. 20 years ago, solar and wind energy was considered expensive, but today in 2020 they are often cheaper than new-built gas/coal plants. In the coming years, it is also widely predicted that it will be more financially viable to replace coal/gas plants with solar/wind plants than to simply keep running the former.
Although wind energy has not been immune to the adverse economic effects of COVID-19, the aforementioned certainly points to a promising global outlook in 2020 and beyond. Four years ago, the global wind turbine market was worth $81,147m and is expected to reach $134,600m by 2023. In the UK alone, the wind industry produced 8,750m Euros in turnover in 2018 – only beaten by Germany amongst EU member states with regards to profitability. Two huge factors driving this profitability are higher UK productivity and also increased employment in the sector – standing at 44,100 jobs in 2019. Jobs in wind energy are also likely to grow further over the next 10 years as the government keeps investing into the sector – comprising possibly “hundreds of thousands, if not millions, of jobs.”
There are some notable key players who dominated the global wind energy market in 2019: GE Renewable; Siemens Gamesa; and ENERCON GmbH. Yet the UK also boasts a thriving startup scene which is also devoted to driving innovation in renewables. Rovco is a great case in point; a company specialising in servicing offshore wind decommissioning using 3D vision and artificial intelligence via subsea robotics. Founded in 2015, the company has experienced strong growth – with £5m Series A Investment raised in January 2020. Another fascinating story is that of Ripple Energy (UK), a business aiming to be the world’s first consumer-owned wind farm. After a successful start raising crowdfunding from over 1000 individual investors, the company is now looking to raise £4.3m to build a turbine in Cardiff. If successful, customers will be able to own a share in their own local wind farm from investing as little as £250.
Conclusion
At this stage, we hope you are excited about the investment opportunities open to you in the UK’s dynamic wind energy sector. Encouragingly, the International Energy Agency (IEA) has stated that renewables is the only energy sector likely to keep growing through the COVID-19 pandemic. Moreover, according to Richard Harrington (former UK Minister for Energy and Industry), “The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created.” Whilst nothing can be guaranteed, the fact that a pandemic and recession in 2020 has not halted the global trend towards wind energy is a great reason for investors to consider its inclusion within their portfolio.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
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