The offshore wind sector in the Netherlands is at a critical crossroads. According to a recent study, led by Invest-NL, TKI Offshore Energy, and Financieringsloket van de Topsector Energie, and conducted by JBR Strategy, Corporate Finance, Restructuring, the country needs to scale up its installed capacity from 5.4 GW today to 21 GW by 2032 and 70 GW by 2050. However, the lack of access to financing threatens these objectives and the country’s competitive position in the renewable energy sector.
The report highlights that the European wind turbine industry has lost market share, dropping from 58% in 2017 to 30% in 2022. This decline reflects the growing pressure from global competitors, particularly China, which has gained ground in the manufacturing of wind energy equipment.
Companies in the supply chain are facing serious financial bottlenecks, making it difficult to invest in innovation and scale up, the report concludes.
The Three Levels of Financial Barriers
The study identifies financial challenges affecting the development of offshore wind energy in the Netherlands at three levels.
The business model of companies is under strain due to a deteriorating risk-reward balance. Many firms face high capital expenditure (CapEx) costs and tight profit margins due to tendering processes focused on low prices, making projects financially less viable.
The offshore wind ecosystem faces structural barriers that hinder expansion. Grid congestion restricts the connection of new wind farms, environmental regulations on nitrogen emissions limit the expansion of manufacturing facilities, and a shortage of skilled technical personnel delays the execution of key projects.
The financing landscape is misaligned with the sector’s needs. Private investment in innovation remains limited because investors view the sector as too risky. The lack of financial guarantees and the long capital recovery period make it difficult for emerging companies to secure the necessary backing for growth.
The current financing structure is not aligned with the sector’s needs. There is a lack of long-term investment funds and a shortage of mid-sized capital funding, making it difficult for innovative companies to expand, the study warns.
Lack of Financial Support Puts Expansion at Risk
One of the most critical issues facing the sector is the lack of financing for innovative projects. Emerging companies rely heavily on subsidies, but the removal of key programmes such as HER+ has left a significant gap in access to initial capital.
Without adequate incentives, start-ups and scale-ups cannot overcome the ‘valley of death’ financial gap and develop key technologies for the industry, the report emphasises.
Additionally, the current tendering structure does not sufficiently incentivise innovation. Wind farm developers tend to delay the implementation of new technologies due to insurance restrictions and risk aversion. This limits the sector’s ability to experiment and validate new technological solutions at scale, delaying the adoption of innovations that could improve efficiency and reduce costs.
Recommendations to Improve Access to Financing
To prevent these challenges from stalling the sector’s development, the study proposes several key measures.
The report recommends creating a more favourable financial environment by establishing joint investment programmes between public and private entities, which would reduce perceived risk and attract financing for large-scale and innovative projects.
It also proposes the creation of financial guarantee mechanisms to enhance the financial stability of offshore wind developers and facilitate the signing of long-term power purchase agreements (PPAs). These agreements provide income predictability and reduce investor uncertainty, making it easier to access capital.
Standardising the offshore wind industry would help reduce costs and risks in capacity expansion. The lack of unified standards makes it harder to scale up projects, as each wind farm requires custom solutions, increasing complexity and costs.
Another recommended strategy is to attract long-term investment from pension funds and institutional investors. To achieve this, there must be alignment between financial sector goals and the development of the offshore wind market, ensuring that these actors can participate in infrastructure projects with extended investment horizons.
The study also highlights the need to facilitate access to subsidies and green financing by leveraging instruments such as the European Commission’s AFIF. This type of financing can accelerate the transition to renewable energy sources by providing capital for strategic infrastructure.
The report concludes that a comprehensive financing strategy is crucial to prevent the Netherlands from losing its competitive edge in the offshore wind sector.
A Call to Action to Prevent a Financial Collapse
The report stresses the urgent need to take immediate action to ensure that the Netherlands can achieve its offshore wind energy ambitions. To do so, it is essential for policymakers, investors, and entrepreneurs to collaborate in closing financial gaps and strengthening the innovation ecosystem.
If the Netherlands wants to maintain its leadership in offshore wind energy, it must act now, the report’s authors warn.
With a clear roadmap and well-structured solutions, the sector can secure its growth and make a decisive contribution to the global energy transition.
Read the full report here:
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