Renewable energy Wind power investments 2024: Mild breeze or rough wind?

Hardly any picture represents modern, sustainable energy and a greener future as much as the wind turbine. And for good reason. In 2023, wind power plants in Germany already accounted for around 31 percent of the total electricity generated. Wind turbines are therefore the most important and largest pillar of sustainable energy generation.¹

As a result, wind power is also becoming increasingly popular as an investment, and the market has grown considerably in recent years. But a larger, more competitive market can also overheat faster.

For investors in particular, this means: Stop your eyes, look closer. This article tells you what to look out for.

Renewable energies are now seen as a robust investment opportunity for many investors. In particular, the increasing demand for electricity from renewable energy sources and the fixed grid charges offer secure and predictable revenues for providers, which translate into stable return opportunities for investors.

Their material value plays an important role here: As tangible assets, wind turbines and other renewable energy plants generally have lower fluctuations in value. The statutory purchase obligations and remuneration for the electricity produced provide additional stability and planning security, which also pays off when it comes to investments.  

But wind power investments are often also traded on the stock exchange - and these wind power stocks have repeatedly lost money over the past year. For example, shares in Siemens Energy, one of the world’s leading manufacturers of wind turbines, fell by around 40 percent in 2023 October.² ³

According to Timo Werner, fund manager at the Commerz Real Group, this is mainly due to the current supply chain problems, which have led to larger and more complex offshore wind power projects in particular remaining on the line in recent times. Increased construction and financing costs also contributed to the fact that the implementation of several projects had to be postponed.

Offshore in particular is considered to be a challenge: The lead times are particularly long here, as several government authorities are involved in issuing permits due to seabed use. And installation and grid connection are also usually more complex than for onshore wind projects.

Of course, this does not mean that investments in wind power are no longer worthwhile at present. However, the steady growth of the market in recent years could no longer be sustained under the current economic and political conditions. In this context: the larger the planned wind power projects, the greater the risks for investors.

However, such risks can also be well offset - depending on which investment company is used. The more experience a company has gained in the field of wind power investment and the better it is connected to the market, the more targeted it can be in seizing opportunities and avoiding market risks.

A positive track record is a good indication for investors to be able to assess a company better. 

As the wind power market grows, so does its complexity. For many market participants, this represents a new challenge. Because as the market becomes more complex, the right management strategy is crucial to navigate successfully and in the long term.

Recently, however, some providers have missed the right moment to successfully adapt their strategy to increasingly complex market conditions. As a result, companies lost value, contracts had to be renegotiated and some projects even stopped.

One of the “best examples” was the US offshore project "Ocean Wind". The construction project was completed at the end of 20234, after the Danish construction company Ørsted had lost just under ⁴ billion euros in just nine months. The billions in impairments are primarily due to higher interest rates, high inflation and supply chain problems.

Under these complex conditions, it is currently difficult to make certain statements about the future. This means that long-term project developments in particular present a risk for those who want to invest successfully in wind power in the long term. Although early entry into project developments promises higher return opportunities, it also promises a higher risk that something will go wrong until completion.

But here too, market experience and expertise help to minimise the risks of long-term projects - as the Commerz Real Group has proven with its "King’s Roar" project in Sweden: The solar farm with a rated output of 22 megawatt peak was acquired in 2022 as a project development and successfully connected to the electricity grid at the beginning of 2024. There were challenging months in between. Even though wind is already an established technology in Sweden, solar energy in the far north is still in its infancy. With many years of experience from other markets, our technical and commercial asset managers were able to help the project developer on site with important decisions. This has contributed significantly to the successful implementation of the project in spite of difficult market conditions and in line with budget and deadlines.

If you are looking for a long-term investment in wind power, you should also consider various technologies. What is state-of-the-art today will not always be the ultimate in 10 years. So it’s worth keeping an eye out and also watching out for new impulses on the market - they could become the new standard.

This dynamic is repeated on the market: Where demand increases, supply is highly competitive. This now also applies to wind power investments. Wind turbines have had an immensely positive impact on our energy economy and have become increasingly popular - this has driven demand.

Since then, there have been more and more providerson the market who have recognised the economic potential of investments in wind power and other forms of renewable energy. Investments in wind power are almost part of the good tone. From closed-ended investment funds to crowdfunding platforms - the diversity is great.

Consequently, competition for individual, above all smaller wind power development projects is also increasing. These no longer have to be particularly high-quality projects in order to successfully attract investors even with high prices and rather low return opportunities.

For you as an investor, this means: A single investment in wind power promotes the expansion of renewable energy, but may also bring a cluster risk to your portfolio - especially if you are restricted to a smaller investment project.

A broader spread (over several individual investments or with the help of an investment fund) will therefore help you to protect yourself against larger losses.

1. Take a closer look at the provider

In most cases, you can already read a lot from the respective providers that will help you decide whether or not to invest in wind power.

• Take a look at the vendor’s track record: How many and which projects has he already completed? Were these projects also successful in the long term? How transparent is the leading company?
• And fund management should also be involved here: Who is behind it, where were the leading managers involved before? Are they recognised on the market?
• What investment strategy does the provider or fund management pursue? What values do you share with your strategy?

The more transparent a provider is with its past projects, governance and investment strategy, the more likely you are to consider investing in renewable energy. If you cannot find out much (positive) about the company, you should look elsewhere for suitable wind power investments

2. Keep an eye on current trends

As the market for wind power grows, it also becomes more dynamic. To be able to separate temporary trends from long-term opportunities, it is worth keeping an eye on the market.

Despite the current challenges, there is enormous potential in the offshore wind power sector in particular. For example, Commerzbank and the Commerz Real Group are planning a cooperation with RWE in order to produce large quantities of affordable green electricity using offshore wind farms, which is also to be made available to SMEs. A lot will happen here in the future - especially when the market has calmed down somewhat.

And the technological innovation power in the field of wind power and renewable energies is also far from exhausted. Hybrid models in particular, which combine technologies such as wind power and photovoltaics, but also power generation and storage, can specifically compensate for certain weaknesses and ensure more consistent power production.

Even though wind power is already the most popular form of renewable energy today, new impulses are constantly emerging here, which are pushing the market in a new direction. So it’s worth keeping an eye on the latest developments and including them in your next wind power investment decision. 

3. Diversify multiple times

As an investor, you will benefit from keeping your investment risks as low as possible in the long term. This is achieved primarily through diversification, i.e. by spreading the invested capital over various assets.

Diversification is particularly effective when this diversification is carried out strategically - this is the responsibility of the fund management. In the case of wind power investments, the first step is therefore to diversify across various assets, i.e. various wind turbines and turbines.

In the next step, however, a geographical spread can also be made, i.e. across different regions and countries. Then it can also be about different technologies, such as onshore and offshore wind power. And the respective construction companies, project developers and operators can also provide additional levels of diversification.

All of this can only be achieved using individual values with a great deal of research and resources. However, innovative investment funds such as the ELTIF klimaVest also offer you this level of diversification. The fund for renewable energies is currently spread over 43 assets⁶ throughout Europe. It currently manages around 1,3 Mrd. euros, making it one of the most successful ELTIFs at the moment.

In addition to onshore/offshore wind power, the portfolio also includes solar power plants and hybrid systems from various developers and operators. Thanks to the strong, strategic diversification in the klimaVest portfolio, individual investment risks and value fluctuations can be specifically absorbed and balanced out. This brings many benefits - both for investors and for the expansion of wind power in general.