Governments around the world are doubling down on their ambitions to scale-up wind power in the face of two overlapping global crises that urgently call for cheap, green, homegrown energy. Renewable energy targets first put in place to decrease carbon emissions and mitigate the climate crisis are now being ramped up in the face of an energy crisis tragically brought on by Russia’s invasion of Ukraine.

In the 2015 Paris Agreement countries committed to lowering their carbon emissions to limit global temperature rise to below 1.5 C and prevent climate disaster. Around the same time new onshore and offshore wind projects began consistently coming in at lower cost than fossil-fuel power plants, demonstrating the commercial viability of wind power, which has the potential to supply three-fifths of global electricity by 2050. Electricity from wind power has thus been a cornerstone of many countries’ roadmaps to achieving net zero emissions.

Now, the recent energy crisis has seen electricity prices surge to record levels due to the high cost of gas (in the UK gas is currently nine times the cost of wind) and energy security has been pushed to the top of the agenda as Russia threatens to cut off gas supplies to key markets. As a plentiful resource in many countries, wind offers a cheap domestic alternative to foreign gas.

These economic and political pressures, compounding the existing environmental imperative have thus increased the appetite for wind power globally. However, while wind markets in some parts of the world are thriving, countries with more nascent wind sectors still struggle to find the investment for new projects. In our study we investigate how the financing ecosystems behind the fastest-growing wind markets operate to uncover a ‘recipe for fast-growth’ that can be applied to new and emerging markets to boost wind deployment.

We find that lending activity in the fastest-growing markets is underpinned by small groups of commercial banks who rise to increasingly dominant positions in these markets as they mature over time. In the UK for example, which had a total installed capacity of 24 GW in 2019, the largest debt-led investor group has made ten times more co-investments than the average investor. Behind their rise to prominence is a process of ‘financial learning’ through which these lenders lower the risks associated with new projects as their experience in the sector increases and they accumulate data and gather legal and technical expertise. Lower investment risk means better financing conditions and easy access to credit for new projects, which attracts new investment in a virtuous cycle.

A recipe for fast growth in wind markets thus includes encouraging private banks to step into these dominant positions. This can be done through e.g., co-lending and loan syndication, where public banks take the lead role in a deal while allowing private lenders to build to experience and confidence. This has been the case of the Polish wind market which grew an average annual pace of 21.9% – this strong expansion was led by a handful of large banks acting in syndicates under a public lead book runner, the European Bank of Reconstruction and Development. In addition, these critical lenders often invest in multiple international markets, highlighting the globalised nature of the wind finance ecosystem. Such international links are thus critical to propagate the beneficial effects of financial learning from mature to less mature markets.

A strong banking system underpinned by a few systemically important banks seems to be at the heart of the wind revolution. The speed and timing of the revolution in different countries may be determined by whether these critical lenders are supported and incentivized to seek sustainable growth in wind finance markets.


Read the full paper in the Journal of Cleaner Production