Winners and losers in green energy’s ‘Age of Inflation’

worker with clipboard

European renewable energy asset holders and investors must rapidly re-evaluate their strategies and business models, faced with inflationary and supply chain pressures, alongside ongoing regulatory uncertainty driven by the energy crisis.

This is according to digital investment platform, RealPort, whose special report Winning in Green Energy’s Age of Inflation, launched on 15 September, outlines the attributes that will define the ‘winners’ and ‘losers’ in today’s unprecedented market environment.

The next few years for the renewable energy sector will look very different from the decade just passed. While some projects are insulated by inflation-linked returns, and there’s short-term reprieve for projects with high exposure to merchant risk and spiralling European power prices, many other companies in the renewable energy sector will be compelled to change tack.

The report finds that many investors will have no choice but to rethink the debt financing terms and off-take structures currently in place. This is especially true of projects financed in the early 2020s, a period of high asset prices and unsustainable yield compression.

For companies that leveraged aggressively in this period, refinancing and follow-on financing strategies in the coming years must pivot toward the equity markets. Those failing to do so will find the risk of stranded assets to be high and rising.

Ekow Yankah, Founder, RealPort AG, said: “Our report lays out why renewables investors can no longer rely on the traditional rules of engagement that have served them so well until now.

“Faced with a highly complex inflationary environment, renewables firms are grappling with considerable uncertainty and must be alive to a re-evaluation of approach to continue delivering the energy transition we need.

“Of course, there will be winners: projects with inflation-linked returns, balance sheet or all-equity financing, or high percentage exposure to merchant risk are among those most likely feeling confident about the economic environment the sector finds itself in today.

“But for many others, particularly those who brought projects to market since the turn of the decade, the market changes outlined in our report demand a radical rethink.”