Wind energy takes credit for first proving the concept of large-scale renewable energy developments. With the debate around energy security and climate change mounting in the early 2000s, wind power emerged as a viable, although perfectable, alternative for countries and power utilities to diversify and clean their generation matrix.

Global installed wind energy hit the 100GW mark already in 2008 – four years before solar did. It created hundreds of thousands of jobs along the way as the sheer scale of wind turbines, whose transport requires costly logistics solutions, has traditionally strengthened the argument for shorter, if not domestic, supply chains.

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FDI flows into wind energy lay bare the forces that emerged in those early days and would consolidate in the following years to take the whole industry to the next level. Namely: the leadership of European power utilities and wind turbine suppliers; the rise of China, the US and Europe as the biggest wind energy geographies, with emerging markets of the likes of India, Brazil and Mexico also achieving major progress; the role of the UK as the destination of choice of FDI into large-scale offshore wind projects.

European countries like Germany and Spain started experimenting with utility-scale wind energy development in the 1990s. Denmark did it even earlier, as the first policy input to develop wind energy traces back to the oil crisis of 1973 and the Danish government’s commitment to loosen the country’s dependence on fossil fuels. Those early developments gave local wind developers and power utilities a major competitive edge as soon as climate change entered the public debate in the early 2000s and demand for wind power went global as countries started committing to renewable energy targets. European power utilities thus became the dominant foreign investors in the market, accounting for 77% of global FDI into wind energy between 2005 and 2020.

The UK emerged as their destination of choice early on. European investors poured as much as $64.9bn of FDI into wind energy projects across the Channel between 2005 and 2020. No other country has received as much wind FDI in the period. In spite of its notoriously windy weather, back in the early 2000s the country appeared slower than other European peers in making the most of its wind resources because of a mixture of opposition to development at a local level and lack of clear government policy. Things changed in 2008 when the Crown Estate, the government’s agency in charge of managing the sea bed and the coastal waters, announced that land for 25GW of offshore development could be available in UK coastal areas while the government announced ambitious wind energy generation targets in its Renewable Energy Strategy published in the same year. A first wave of capital-intensive offshore projects of the likes of the 630MW London Array wind farm or the 576MW Gwynt y Môr wind farm mounted right away. Today, the UK is the world’s leader in offshore wind power with 10.2GW of installed capacity at the end of 2020, followed by China (10GW) and Germany (7.7GW), according to figures by the Global Wind Energy Council (GWEC).

European investors also started looking across the Atlantic seeking for opportunities outside the region. The largest consumer of electricity in the world, the US, has emerged as one of the biggest onshore wind markets since the mid-2000s, also thanks to a largely successful federal incentive – the production tax credit, a 10-year inflation adjusted federal income tax credit for each kilowatt hour of wind electricity generated – that has provided domestic and foreign investors with a the long-term stability to pull the trigger on their wind farms projects. Among others, Portuguese EDP announced in late 2009 it would invest $4bn in wind farms in the US. Fast forward to present time, the company operates 58 wind farms across the US, Canada and Mexico.

Major offshore and onshore projects in the UK and the US contributed to the first spike of FDI into wind energy in 2008 and 2009, when foreign investors committed $47.1bn and $46.1bn, respectively, to wind energy developments globally.

However, wind FDI scaled down in the wake of the global financial crisis, and took years to fully recover. The financial crisis forced investors to reset and look for returns beyond shrinking public budgets and incentives. As a result, the industry’s FDI horizon started expanding to embrace new geographies offering high, unexplored potential and improving regulatory frameworks.

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European investors announced wind projects worth $8.7bn and $7.5bn in Mexico and Chile, respectively, their biggest investment destinations outside Europe and the US in the decade of the 2010s. In the same period, they also committed another $7bn in Brazil, $5.6bn in Australia and $4.1bn in South Africa.

Wind energy FDI as a whole finally jumped back to pre-financial crisis levels when new wave of offshore wind projects, originating in regulatory changes, as well as the rise of ESG finance and deep-pocketed investors looking for the kind of scale and yields that offshore projects can guarantee, started mounting towards the end of the 2010s. Always driven by yield thirsty investors, developers also started flirting with floating offshore wind farms, which reduce costs and thus boost the overall profitability of wind projects – in 2017 Norwegian Equinor opened the first full-scale floating offshore wind farm in Hywind Scotland. Power-to-x projects, where wind and solar power is used to create green hydrogen through electrolysis, added to the mix too.

Eventually, in 2019, right before the pandemic, FDI into wind energy projects breached the threshold of $40bn for the first time since 2008.

Global FDI in the production of wind turbines is equally concentrated in the hands of a few producers whose origin once again traces back to the early progress of wind energy pioneers in Europe.

Only four European companies – Danish Vestas and LM Wind Power (acquired by GE in 2017), German Siemens and Spanish Gamesa (which merged with Siemens Wind in 2016) – made up about half the $17.4bn in FDI projects  in the production of wind turbines announced worldwide between 2005 and 2020.

They all chased booming demand for wind energy developments in a handful of geographies – first and foremost, the US and China, where they concentrated, respectively, 35.5% and 16.7% of their investment commitment between 2005 and 2020.

If the US has achieved tremendous progress in wind energy developments since the mid-2000s, China has experienced an even steeper development curve. Beijing’s commitment to diversify away from coal prompted wind power installed capacity to double every year between 2005 and 2010 and post double-digit growth in the following decade. The enormous Chinese market became a magnet for European suppliers, as well as local wind turbine producers like Goldwind or Envision, while power generation itself remains largely off-limits for foreign investors.  

Today, China is by far the largest single producer of wind energy in the world (278.3GW at the end of 2021), followed by the US (122.3GW). The EU plus the UK combine for 215.5GW.

Irena estimates that in order to under the 1.5°C scenario, installed capacity of onshore wind will have to reach 3,000GW, four times that of 2020, and offshore wind will have to scale up to 380GW, 11 times more than in 2020.

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