The energy crisis, which threatened European countries due to the cessation of Russian gas flow, raised the need to increase energy output and cut off dependence on Russia. One of the fields of renewable energy, which has begun to gain momentum in recent years, is the production of wind energy in the sea (offshore wind).
The field of setting up offshore wind turbines has grown significantly, especially in Europe, and according to forecasts by research companies, it is expected to continue to grow at an even faster rate than other renewable energies, and the scope of projects operating in the field is expected to grow from about 27 gigawatts in 2021 to about 34 gigawatt today, to about 260 gigawatts by 2035.
In the USA, the market is in its infancy, but enjoys tremendous potential, in accordance with the government’s goals to establish offshore wind projects in the amount of 30 gigawatts by 2030.
Migdal, which has so far invested billions of shekels in the field of renewable energy, is now expected to invest about 100 million dollars in a global platform in the field. The investment is being made as part of a consortium, alongside the GIP infrastructure fund, one of the largest and oldest investors in the field.
The consortium acquires full ownership in Skyborn Renewables – an international platform for the initiation, construction, and operation of offshore wind farms. In addition, Migdal will join GIP’s holdings in the Bluepoint Wind project, an offshore wind farm under development, which is expected to generate 1.7 gigawatts of renewable energy for approximately 900,000 homes in the New York area.
“Wind energy is one of the fastest growing areas in our vision forward in the world of renewable energies,” explains Erez Magadli, Migdal’s Chief Investment Officer. “The reasons for this are that from a physical point of view the winds at sea are stronger than on land, and from a geographical point of view huge populations live near the big beaches.
“In the USA, for example, most of the population is in New York, California and Boston, where electricity consumption is high. Therefore, erecting turbines near the coasts saves the construction of energy transmission infrastructure, and lowers the overall cost to the electricity sector, which makes the investment very attractive, compared to the interior of the USA, for example, where wind farms have been built on land, and the cost of electricity transmission is very high. And finally, of course, there is the environmental aspect”.
What differentiates investment in offshore turbines from other renewable energies?
“The offshore wind market is attractive from an investment point of view, because it benefits from high barriers to entry, due to the complexity of the projects and the fact that they require huge investments. It is an arena for big players, because the capital required is high. Since, as mentioned, the barriers to entry are higher than in solar energy, the potential for returns Higher”.
Estimates are that the prevailing yield in renewable energy projects is between 8% and 12%, and for offshore wind energy the estimates are for a yield of 15%. “In infrastructure, as in other fields, it is not worthwhile to be only in one segment, where the returns are already lower, as for example in the solar field, but you have to constantly look for the next thing and the place where there are more barriers to entry.”