From student strikes to loud Government announcements, the deep shifts needed to decarbonise the national economy, improve waste management and increase forest cover have become more certain, and the colossal investments required less risky. 

As Ireland commits to catching up on its infamous “laggard” environmental status, the country turns into an increasingly attractive destination for international investors active in those sectors. In the past 10 days alone, Greencoat Renewables, which channels Irish and overseas investment into green energy here, acquired two wind farms and issued €100 million in new shares. 

For several weeks, The Currency has been talking to those involved in directing foreign capital to Irish shores in renewable energy and other green industries. These include:

  • The Chinese company coming to Ireland to recycle our plastic waste.
  • Wind and solar developers raising funds to build tens of billions of euros’ worth of assets.
  • American, British, French and German investors eyeing up Irish renewable energy opportunities.
  • Bioenergy and forestry professionals reporting growing overseas interest in their business.

From peat briquettes to plastic pellets

One of the vast halls of Bord na Móna’s disused peat briquette factory in Littleton, Co Tipperary came back to life in July with new machines capable of recycling 24,000t of plastic annually. The addition of waste processing technology to a Bord na Móna plant is nothing surprising – this is one of the businesses the State-owned company has chosen to transition away from peat.

What is more unusual is that the two production lines come from suppliers such as Suzhou Zhongsu Reprocessing Machinery while the Chinese and Irish flags fly side by side outside the factory, where a two-storey wall has been wrapped in a banner bearing the logo of Sabrina Integrated Services.

The Chinese company used to recycle plastic waste imported from Europe, but new environmental regulations imposed by Beijing closed down that trade two years ago, leading to rising plastic recycling costs at overflowing European plants.

“I’m just the investor with technical people on the production line.”

Sherman Ma, Sabrina Integrated Services

Sabrina saw the opportunity and moved here to open the first plant capable of treating soft plastics on an industrial scale in Ireland.

“We have a supply and management contract with Bord na Móna,” the company’s founder Sherman Ma told The Currency. “I’m just the investor with technical people on the production line.”

Bord na Móna’s waste subsidiary AES has the domestic footprint to collect material, starting with the black plastic used to store silage on Irish farms, which is enough to fill the plant’s initial capacity. There is space and appetite to expand, including for trickier materials such as food-contaminated plastic waste.

Chinese Ambassador He Xiangdong hinted at other direct investments from his country into fertilisers and cosmetics here.

Bord na Móna’s former peat briquette factory in Littleton, Co Tipperary, has re-opened as a plastic recycling plant. Photo: Thomas Hubert

The re-opening of Littleton is just one example among industries where growing environmental regulations and concerns are attracting foreign direct investment into Ireland.

Other international players have moved in to treat our waste, with one incinerator operated in Duleek, Co Meath by the Belgium-headquartered pan-European group Indaver since 2011 and Dublin’s more recent Poolbeg plant opened by US-based Covanta two years ago. Together, they produce over 90MW of electricity.

Ireland is finally catching up with environmental challenges in energy, waste and agriculture. And overseas capital is lining up to fund the billions of euros these investments will require.

€20bn investment pipeline

Capital-hungry renewable power generation is where the need for funding is highest. A tally of industry forecasts by The Currency points to around €20 billion in investments across wind and solar over the next decade if Ireland is to meet new Government targets, which have rekindled the appetite of foreign investors after years of frustration. 

“Over the last three or four years, we have seen a constant ramping up of international investment into Irish renewables,” according to KPMG’s global lead for renewable energy Michael Hayes. 

His analysis and that of the savviest investors with an eye on the energy sector has always been that Ireland would have to decarbonise electricity production – before the government put it on paper in June’s Climate Action Plan.

ESB and other utilities in Ireland such as SSE Airtricity and Energia (formerly Viridian) have developed increasing volumes of renewable assets and acquired existing projects at various stages of development, including with backing from overseas capital. In June, ESB raised €500 million through an 11-year green bond placed primarily with European institutional investors.

The issue was eight times oversubscribed and allowed the semi-state to obtain a 1.125 per cent fixed rate, which it said was its lowest ever coupon for a senior bond. The debt will fund renewable energy generation, grid connections for onshore wind farms and electric vehicle chargers.

Hayes sees different roles for overseas investors, between the high-risk development phase and the longer-term operation of renewable energy assets. “Planning and grid capacity are two of the really, really big challenges” in the first phase, he said, singling out the “archaic planning regime we have in this country”.

“There are countless cases of developers who spent €10 million, €20 million, €30 million developing projects, spending most of that money on planning and appeals.”

This means no bank, domestic or international, will fund this phase of a project, leaving the raising of equity finance as the most common option. 

Utilities are part of a widening pool of domestic and international investors in the sector. Hayes praised the role of the Ireland Strategic Investment Fund (ISIF) in facilitating this, with the launch of the €100 million to €150 million Aurora equity fund last November.

Aurora is managed by Temporis Capital, a London-based investment firm with an office in Cork. ISIF, AIB and the German independent power producer Encavis were first to chip in. The presence of such household names is expected to attract a wider array of investors – many of whom already have an eye on Ireland, either investment funds with a five to 10-year cycle or overseas utilities interested in getting their hands on assets for the long run.

“Whatever issues we have in Irish renewables, it is not shortage of investment.”

Michael Hayes, KPMG

Once a project has come out the other side of the development minefield, accessing credit to build it is no longer an issue – but “funding operational renewable assets is really a question of where you can get the cheapest form of finance,” Hayes said.

Irish banks, led by AIB, are very much present at this stage, as are other European lenders. 

Analysis by The Currency of 70 wind farms in the Republic with loan charges recorded by foreign lenders shows that 25 had borrowed from German bank Nord/LB, followed by nine with loans from HSH Nordbank, also in Germany. Next came Dutch-based Triodos Bank, which specialises in finance for green projects, with loans to six farms; France’s Crédit Agricole (5); Barclays (4); Norway’s DNB Bank and Mitsubishi’s MUFG Bank, with three each; and Rabobank (2). Hayes said Spanish banks were also active in this sector. 

He added that new types of investors were now showing interest in Irish renewables: “We’re seeing some family offices, some large independent power producers (IPPs) taking a look at our market. Because we’re going to be building a lot more renewables, because renewables is a highly investable asset that delivers good returns as long as you understand the risks, investors will flock, and we think the Climate Action Plan is going to generate a lot more interest.

“Whatever issues we have in Irish renewables, it is not shortage of investment. The issues are more around policy, around planning – it depends on which technology you’re looking at.”

Eoin Cassidy, the partner leading business in the energy sector for Dublin law firm Mason Hayes & Curran, shares this view. “What we have seen is a large number of investors looking at a small number of opportunities and that hasn’t changed over the last three or four years. Part of that is down to the wall of capital that is looking for safe investments and also looking for investments that satisfy ESG criteria,” he said.

While developing wind farms have been attractive to these investors, Cassidy added that the slow delivery of a pipeline of projects while uncertainty over Government support schemes continued over the same period had been a problem.

Black Banks Wind Farm
Black Banks wind farm in Co Leitrim. Different classes of investors are interested in existing or planned projects. Photo: Oliver Dixon/ (CC-BY-SA 2.0)

“It has been a very interesting twelve months,” Irish Wind Energy Association (IWEA) chief executive David Connolly told The Currency, “with a huge increase in interest because, in my opinion, of the certainty that has been provided by Government policy for the next 10 years.” He welcomed progress on the three key fronts of wind farm development – planning rules, connection to the grid and routes to market for the electricity – culminating in the Climate Action Plan. 

“It has been a very interesting twelve months,” Irish Wind Energy Association (IWEA) chief executive David Connolly told The Currency, “with a huge increase in interest because, in my opinion, of the certainty that has been provided by Government policy for the next 10 years.” He welcomed progress on the three key fronts of wind farm development – planning rules, connection to the grid and routes to market for the electricity – culminating in the Climate Action Plan. 

The plan targets 70 per cent of national electricity from renewables in 2030, up from around 30 per cent currently. This includes more than doubling onshore wind capacity from 4,000MW now to 8,400W. Meanwhile, off-shore wind farms, which don’t exist yet, are expected to generate another 3,500MW by 2030. 

Minister for Communications, Climate Action and Environment Richard Bruton has pledged to unveil a new Renewable Electricity Support Scheme (RESS) by the end of this year, re-opening access to Government support for new green power generation for the first time since 2015. The scheme will allocate contracts for difference by priority to those bidders capable of delivering the cheapest and fastest renewable electricity. Industry players widely expect the first auction to take place well into 2020 and to favour shovel-ready wind farms.

“That clarity that the industry has been asked to deliver yet again for the next ten years has resulted in a huge increase in investors looking to see how they can be part of this transition,” Conolly said.

With nearly all costs over the lifetime of a wind farm swallowed up by up-front capital expenditure, he added that banks, investment funds and utilities alike were now looking at funding the next decade’s wave of turbines: “It’s a wide mix across the various stages of the project.”

Most are European, but Connolly says he receives regular enquiries from further afield. “I’ve seen Asian as well as American investors getting in contact with IWEA in the last 12 months, asking could they get involved? They’re looking to touch base with the industry, get up to speed on what’s happening.”

Foreign direct investment into Irish wind farms is nothing new, with a previous wave driven by Renewable Energy Feed-in Tariff (REFiT) support schemes between 2006 and 2019. Various types of finance streams made their way to Irish shores at the time, with Airtricity valued at £1.35 billion in its takeover by UK hydro utility SSE as early as 2008. 

Enter London, Toronto, New York investment firms

The sector also caught the eye of fund managers in global financial centres. In 2011, London’s Asper (formerly part of Hg Capital) teamed up with Macroom developer Michael Murnane’s Craydel Group to form Invis Energy, which now has 223MW of installed capacity and growing.  

Toronto-based asset manager Brookfield entered the Irish renewable market through the acquisition of Bord Gais’s wind portfolio in a 2014 fire sale of State assets under  Ireland’s international bailout programme. Its Cork office now manages 17 wind farms with over 360MW capacity, with another 400MW in its development pipeline, primarily onshore wind.

“Ireland is one of the strongest markets for wind resource in Europe, combined with high renewable energy targets and a supportive regime,” a Brookfield spokesperson told The Currency.

“We would like to see continued a continued supportive and stable framework for renewables including for planning and grid.”

Other funds include New York-headquartered BlackRock, which teamed up with National Toll Roads in 2011 when the company began to reinvent itself as an investment manager into renewables. London-based Impax and Cubico both started investing into turbines in Co Kerry.

“The big shift in the last year or two is that people who had built assets are putting them up for sale to prepare for the next round of development,” said Connolly. The early-phase, risk-hungry investors are getting out of existing projects, with funds returning capital to their shareholders after an investment cycle or freeing up cash for new wind or solar projects. They are selling to those who favour the long haul, for the final two decades of a proven wind farm’s life. 

In July 2017, Invis Energy sold a 60 per cent stake in five of its wind farms to a Japanese consortium comprising Sojitz Corporation, Kansai Electric Power Company (Kepco) and a financial subsidiary of the Mitsubishi group. Weeks later, Innogy, the renewables division of Germany’s second-largest electricity utility RWE, dipped its toe into Irish waters by purchasing the 10MW, three-turbine Dromadda Beg project under development in Co Kerry. Innogy has since built it out, staffed an Irish office in Kilkenny and taken a 50 per cent share in Co Kerry-based Saorgus Energy’s Dublin Array, a proposed 600MW wind farm stretching off the coast from Bray, Co Wicklow to Dalkey, Co Dublin.

Activity accelerated last year when Greencoat Renewables, the Irish-listed yieldco set up in 2017 by the £4bn UK-based asset manager Greencoat Capital to invest in renewables here, went on a shopping spree after a €270 million IPO in Dublin and London. Greencoat has now bought into 15 operating Irish wind farms – two of them this month alone in Co Mayo and Donegal – with a combined capacity of 461MW. Its single largest investment was the acquisition of Coillte’s stakes in its four wind farm JVs with ESB, SSE and Bord na Móna for €136.1 million last September, including a 50 per cent share in the 108MW Cloosh Valley wind farm developed with SSE – one of the largest in the country.

Greencoat bought another 25 per cent of Cloosh Valley from SSE for €34.5 million last March. Other Greencoat acquisitions illustrating the shift from one class of foreign investors to the next are two farms totalling 45MW in capacity from BlackRock last December, following the 36MW Dromadda More wind farm in Co Kerry from Impax in May 2018.

“Utilities and independent developers have the need for a partner to come in alongside them.”

Paul O’Donnell, Greencoat Renewables

“The rationale for setting up Greencoat Renewables was to have a locally-based institutional investor that was going to be able to provide liquidity and allow developers and utilities to recycle capital and to be able to continue to invest in the early stage needs for renewable assets,” Greencoat Capital partner and Greencoat Renewables investment manager Paul O’Donnell told The Currency.

“That sort of recycling effect is something we have seen across Europe now, across all streams of renewables be that onshore, offshore or solar. Utilities and independent developers have the need for a partner to come in alongside them, who can bring the right cost of capital and who wants to own the assets on a long-term basis.”

Coming from the UK, Greencoat Capital saw Ireland as a good base to start a euro-denominated renewables investment offshoot because of the country’s solid economy, regulatory framework and potential for development in the sector. Greencoat Renewables’ key shareholders are now a mix of institutions and wealth managers, some Irish (ISIF, Investec, Tilman Brewin Dolphin, Irish Life, AIB) and others international – mostly British (Fidelity, M&G Investment Managers, Aberdeen Standard Life, Bailie Gifford). According to  O’Donnell, they have been traditional investors looking for a stable income – though interest is now growing in the green credentials attached to the investment.

O’Donnell said Greencoat Renewables announced from the start that it would target a 7-8 per cent net return for its shareholders. “That will be made up of two parts: a dividend that would be 6c to begin with and escalate over time, and the underlying vehicle would also grow in terms of net asset value growth. We saw that as being commensurate with the returns that are available in the market.” He acknowledged that this was lower than in the UK, reflecting a lower power price risk in Ireland.

Greencoat Renewables continues to fund acquisitions through a €380 million revolving credit facility with AIB, BNP Paribas, Commerzbank, Royal Bank of Canada and Santander, going back to the market to raise further equity and refinance at regular intervals. This has happened three times so far, with €111 million raised in July 2018 and €147 million in March this year. Last week, the company announced a fresh series of share issuances for the coming year, starting with an immediate €100 million tranche. It said that it was currently considering €500 million worth of assets for sale in Ireland and other targeted European markets.

Solar switch
Greencoat Capital already manages solar assets outside Ireland. Photo: Thomas Hubert

Greencoat Capital’s experience in managing offshore wind, solar and bioenergy assets overseas means Greencoat Renewables is ready to invest in these technologies as they emerge here. O’Donnell believes the company should also invest in smaller-scale projects, which will be essential to making renewables acceptable to local communities. After hearing about farmers’ frustration that they couldn’t get their own shovel-ready solar developments off the ground, he said: “How can we provide finance into something like that? It’s hard to figure out what is needed, because the government hasn’t given any guidance.”

In another transaction between overseas investors last October, Norwegian state-owned power utility Statkraft paid US investment fund Hudson Clean Energy Partners €39 million for Element Power’s portfolio of proposed wind farms, totalling 1,300MW in Ireland and 250MW in the UK. The Norwegian buyer also repaid €4.2 million in loans to Element’s previous shareholders and immediately launched the construction of the first project on the list, a 23MW wind farm in Kilathmoy, Co Kerry, describing Ireland as “one of the selected new growth markets for onshore wind in Statkraft”.

A further look at the Irish Wind Energy Association’s members directory throws up more global utility names. Although these don’t generate power in Ireland at present, their presence on this list is proof of keen interest.

There is Engie, the Paris-based multinational with roots in the Suez Canal and France’s former state-owned gas monopoly. Out of an office in Kilkenny, Engie has entered Ireland as a solar developer, recently taking its first projects through the planning process. 

Last autumn, it was joined on the IWEA members’ list by the other French giant, EDF. The state-owned utility registered a wholesale energy trading subsidiary in Dublin last November and its UK-based renewables arm appointed a business development manager for Ireland in January. Although has no presence here yet, EDF Renewables said it “is now looking to Ireland for new opportunities as part of [its] plans to grow the business further”.

Italy’s incumbent utility Enel joined the association last year through its US-based tech subsidiary Enel X, followed a few months later by the Swedish state-owned power generator Vattenfall. Eurus, a joint venture between Japan’s Toyota group and doomed Fukushima nuclear plant operator Tokyo Electric Power Company (Tepco), is also on the list, as is Belgian wind developer Storm.

Billions of watts and euros in offshore wind 

Some of those big international players may enter the market directly at a larger scale with billion-watt, billion-euro projects in the Irish sea. “The space that completely excites me is the offshore wind space,” said KPMG’s Hayes. “We’re going to see the advent of operating offshore wind farms in Ireland at scale for the first time other than the small farm currently in existence in Arklow, possibly from 2022 onwards, providing green power for Irish domestic consumption. But also, when you link it to some of the interconnection projects – in particular the Greenlink interconnection which I’m a big fan of, this project between Ireland and the UK – we will have the ability to export power to the UK market.”

Another proposed underwater interconnector could plug Ireland into the French grid, offering even more trading options. Yet major uncertainties remain on the conditions that will apply to offshore wind, ranging from the technology’s allocation under RESS future auctions to Eirgrid’s ability to connect projects to the grid and legislation being drafted for the licensing of those wind farms. “It’s still a gamble, but it’s less of a gamble. Nobody should be under the illusion that all the risks have gone away,” Hayes said. The main change has been the new, clear Government message that the industry will be supported, he added. 

A number of industry players expect the sale of the 1,100MW proposed Codling Bank offshore wind farm along the Co Wicklow coast to set the pace for investment in this new sector. The Codling project belongs to Norwegian group Fred. Olsen Renewables and Hazel Shore, a company owned by businessmen Johnny Ronan and his family and Richard Barrett.

Last July, investment bank Rothschild was appointed to sell or find a new investor in this offshore wind project. The ESB and EDF are understood to be the leading bidders. Ronan told The Currency he can’t comment on this process: “Rothschild are working on it. That’s all I can say.”

Hayes said one transaction he was involved in was the entry of Belgium’s Parkwind into the proposed 330MW Oriel wind farm off the coast of Co Louth in September 2017. ESB agreed to acquire up to 35 per cent of the project earlier this year and work is now starting on seabed and wind condition surveys.

“I would have worked very closely with the founder of Oriel, Brian Britton, since deceased but whom I would regard as the father of Irish off-shore,” Hayes said. “Oriel was very similar to a lot of other Irish development companies: it had the development ethos, it had a small budget, Irish investors backed it, it was brilliant, there was an Irish off-shore tariff introduced or parts of it introduced in 2012 but it went away again and the problem that Oriel faced was the same problem that a lot of developers around Ireland face: development costs a lot of money, and at the same time they’re taking a huge risk.

“To be fair to banks, they don’t fund development. So what’d it takes to really move that project forward, a project with huge potential? They had to go out and find a big financial partner, and it wasn’t just money. The idea was to find somebody, clearly, with a big balance sheet to fund the development, but also a partner who understood the risks of what off-shore wind was all about and brought expertise.” Parkwind turned out to offer this fit.

“Investors from overseas are seeing issues occurring in other jurisdictions and they are looking to ensure that they don’t run into the same difficulties in Ireland. ”

Eoin Cassidy, Mason Hayes & Curran

This doesn’t mean it has been plain sailing all along between Irish renewable developers and foreign investors. A frenzy of interest ebbed during years of stagnation since the closure of REFiT schemes to new entrants in 2015. “We had renewable companies who could have done with foreign investment, Gaelectric being a case in point, but unfortunately what happened was that those international investors needed more certainty on Government policy,” said Hayes. China General Nuclear (CGN), which had partnered with Gaelectric, shelved plans for further investment when successors to REFiT failed to materialise.

Hayes found himself leading the team tasked by the Gaelectric board to sell all of its assets prior to liquidation. “That was a problem in the past, thankfully we’ve addressed that,” he said. “The policy environment at the time certainly wasn’t any help. If we had that situation today, there would be no shortage of investors.” 

Foreign capital also brings previous experience of what could go wrong. “Investors from overseas are seeing issues occurring in other jurisdictions and they are looking to ensure that they don’t run into the same difficulties in Ireland, so certainly matters relating to insolvency of key contractors on projects, they are very conscious of and wary of,” said Cassidy of Mason Hayes & Curran, who has acted for players including Neoen, Brookfield and Cubico. One example he gave was the recent insolvency of German wind turbine manufacturer Senvion.

Solar panels a blank slate for investors

Solar developers tell a similar story – with the difference that their industry, which has not yet been supported by any Government scheme, is now trying to attract investors to a completely blank slate.

“When foreign investors first got interested in Ireland, I think it was around 2015-2016, they came in in a big flurry, had a look around, got very excited as they thought the route to market was going to come a lot quicker than it actually did,” Peter Duff, director of Power Capital, told The Currency.

Since then, however, there has been “very slow progress” to report – until the Government’s promise to publish RESS rules this year and the recent reform of grid connection queues through the so-called enduring connection policy (ECP). New grid access rules prioritise those renewables projects more likely to see the light of day by requiring prior planning permission, and while ECP is not without critics in the industry, it is widely accepted that it will weed out the more speculative projects.

“Now suddenly the foreigners are back in looking,” said Duff, adding that he receives enquiries from investors as far away as Asia and America. Power Capital is the developer for another joint €140 million fund between ISIF and Encavis.

Solar farm
Solar farm in Skeoughvosteen, Co Kilkenny. Photo: Thomas Hubert

The German independent power producer “saw the phenomenon that was solar spreading across the globe, they saw quickly the German grid filled up, the solar experience in the UK where it was over after four years, and they see solar going westwards in Scotland, in parts of Northern Ireland,” said Duff.

“They looked at the Republic and they thought it was logical, given the way we had this massive growth in demand which was coming down the line and also the potential for massive fines coming down the line at the Government – the inevitability of some support mechanism coming in was palpable.” Duff said Encavis and ISIF backing is supporting around 250MW of solar development by Power Capital, with building on the first projects expected to start next year.

Encavis senior investment analyst Julius Weidemann told The Currency that the German company was attracted to Ireland by the new 70 per cent national renewable target, but remaining challenges include the wait for RESS auctions to start and the immaturity of the market for direct power purchase agreements (PPAs) with corporate customers. While Encavis’s focus is on investment plans already in place, “we are always looking for promising investments,” Weidemann said.

“We believe in the long term ownership of our assets”

Another Irish solar developer to strike a deal with an overseas independent power producer was BNRG. In January 2017, it secured backing from Neoen to invest €220 million in over 20 Irish solar farms. BNRG’s director David Maguire told The Currency that he first encountered his French-based partners when losing out to them in an auction scheme in Jamaica several years ago. 

While BNRG has experience building and running solar farms in southern Europe and is now expanding in the US, “Neoen brought an additional source of capital and knowledge in some areas in terms of bidding processes and financial models,” Maguire said. The 50-50 joint venture between the two companies is now developing farms totalling 300MW, which is twice as much as BNRG could have done on its own, he added. “I would rather have 50 per cent of a pie that was basically twice the size of my previous standalone portfolio, so it made a lot of sense.” 

Neoen is also in the process of opening its own Dublin office with two people by the end of this year, ramping up to five next year, its regional director of development Christophe Desplats-Redier told The Currency. Last month, the French company paid €25.8 million for eight wind farms totalling 53.4MW capacity. These formed the Republic’s section of an all-Ireland wind portfolio initiated by Energia, in which the Irish Infrastructure Fund co-managed by Irish Life and Australian-based AMP Capital had taken a majority stake in 2012 before offloading it in recent months.

Desplats-Redier said the acquisition was a way of boosting Neoen’s presence in Ireland while waiting for RESS auctions to open for new projects – though the company sees these wind farms as a development opportunity because some were built as early as 1998, snapping up good sites but using older technologies, and can be re-powered with more efficient turbines. Outside this case, “the overall strategy is to develop, maintain and hold” greenfield renewable projects, Desplats-Redier said. “We believe in the long term ownership of our assets, enhancing our production base reliability and efficiency, and strengthening the confidence of our partners.”

Aside from the solar pipeline shared with BNRG, Neoen will now initiate its own wind and storage developments through its Dublin office backed up by teams specialised in each step of the projects. Financing will be through a combination of equity from Neoen’s balance sheet and non-recourse project finance. “We are opportunistic: we have lenders we have worked with over the years, but we’re also open to talking to local lenders,” said Desplats-Redier.

The company is investing in Ireland now because the absence of solar development so far and the significant gap to national renewable targets leaves “an opportunity to become a significant player in solar, wind and storage,” Desplats-Redier said, adding that Neoen ambitions to become one of the major independent power producers in the country. This hinges on the opening of RESS auctions.

“We stay confident in the implementation of a support scheme despite the delay,” Desplats-Redier said. “The Republic of Ireland has published new targets for renewable energy for 2030 and that’s very encouraging,” he added, also calling for national grid upgrades to lift constraints on renewables development.

“The asset class has matured to a  degree that the expected IRR or hurdle rate is reasonably modest.”

David Maguire, BNRG

BNRG’s Maguire is upbeat about the wider investment climate into solar for three reasons: the rising cost of carbon, which he says is now in the “death and taxes” range of certainty; the falling technology cost, which has been divided by more than 10 over the past decade; and the fact that “the cost of capital for this type of project has never been cheaper”. Challenges remain in planning and grid connection, and for those reasons “development in Jamaica is less risky than in Ireland,” he said.

Yet he sees the virgin territory that is Ireland as benefiting from solar’s growing reputation as a safer investment internationally.

“Certainly within Europe, the US where we are also active and other jurisdictions such as Australia, we find that there are far many investors, far more capital seeking to deploy into this asset class of solar than there are projects to satisfy this deployment,” Maguire said.

“In Europe, it’s particularly interesting because the asset class has matured to a  degree that the expected IRR or hurdle rate is reasonably modest. So it’s very much viewed as long-term, 25-year, and you’ll certainly see models on solar running out to 35-40 years even, because that’s how long the asset lasts. That attracts a very low-cost capital, and that low-cost capital traditionally invests in very long-term infrastructure investments and government bonds, and they are quite frankly giving very low returns.”

Maguire’s view of the wider industry – he chairs the Irish Solar Energy Association – is that of the 6,500MW of capacity for which developers have applied for either planning permission or a grid connection, 2,200MW have passed these two hurdles, making them eligible to compete in the first RESS auction. In total, he reckons 3,000MW of solar capacity will be viable – twice as much as the 1,500MW envisaged by 2030 in the Climate Action Plan, which he found “very disappointing”.

While he welcomed the overall 70 per cent renewable electricity target, Maguire dismissed the idea that offshore wind could be deployed as fast as envisaged under the plan, while building a solar farm takes only a couple of weeks, “like Meccano”. As emerging technologies vie for investor interest, you would expect him to say that.

Statkraft, for one, is willing to back solar power with some of the €1.5 billion it plans to invest in Ireland. In October, the Norwegian utility bought JBM Solar for €15.8 million, acquiring the Dublin-based developer’s pipeline of Irish projects totalling 326MW capacity. JBM was previously backed by PP Asset Management, a family office in London focused on property and solar energy.

Energia’s €3bn investment plan

One company illustrating the expanding role of overseas capital into Irish renewables is Energia, which announced in July that it would invest €3 billion over the next five years, including 1,500MW of additional renewable capacity. Its chief executive Ian Thom said this would involve doubling the group’s current 300MW onshore wind generation capacity at a cost of €600 million, entering the offshore wind rush in the Irish sea and ploughing €300 million to €400 million into 200MW of solar. 

Energia is also commissioning a €50 million bioenergy plant in Huntstown, Co Dublin that will take in 70,000t of organic waste from Beauparc’s Panda brown bin collections annually – charging a gate fee – and digesting it into biogas to fire a 4.8MW power plant. Thom added that the company would also start producing hydrogen as a motor fuel. 

His plan is to invest around €1 billion of the company’s own cash and borrow the other €2 billion. Energia is owned by US investment firm I Squared Capital, whose managing partner and co-founder Gautam Bhandari showed up at the launch of the plan in Dublin to express his support for the investment drive. Yet The Currency understands that I Squared is now lining up advisors to sell Energia.

Nord/LB and Rabobank are among the lenders who bankrolled the company’s investments into Irish renewable generation in the past and these links may prove useful again. After refinancing most of its debt through a split of euro and sterling senior notes in 2017, Energia has signalled that it would use non-recourse project finance to fund upcoming investments into renewables, as it already has for the Huntstown bioenergy plant.

Microsoft, Amazon and Ikea

Looking forward to the coming months and years, industry players expect that the opening of RESS auctions will weed out unviable projects, clarifying Ireland’s renewable energy landscape for outside investors – with some already choosing whom they will back in this process. “If you don’t have the balance sheet strength yourself, you’re going to be looking at an investment partner well in advance of the auction, and we’re seeing that now,” said  KPMG’s Mike Hayes.

Bidding for RESS support to supply the national grid is not the only way for a renewable project to become bankable, though. The latest Eirgrid forecast expects the ongoing data centres explosion to account for one third of national electricity demand by 2027, and some tech companies have begun to source direct supply through corporate power purchase agreements.

Microsoft came first two years ago, signing a 15-year PPA with GE to buy the entire supply from its 37MW Tullahennel wind farm in Co Kerry. ElectroRoute manages energy trading between the two companies through the national grid. 

Last April, Amazon committed to purchasing power from Invis Energy’s new 91MW wind farm in Co Donegal, prior to its construction. Amazon followed up in August with a PPA for another 23.2MW Invis wind farm in development in Co Cork. Crucially, these deals do not rely on any state subsidy.

“Others are sitting on their hands at the moment, to wait and see what the clearing price is” after the first RESS auctions, Greencoat Renewables’ Paul O’Donnell said. “I think there’s a bigger investment opportunity if we were to be a bit more joined up on that.” 

Hayes said end customers in such PPAs were now likely to invest directly in renewable generation:  “We’re going to see a whole bunch of new models around that, where some of the off-takers will make it more economically viable for them to actually become partial investors in some of those wind farms that are producing power for them. Any large carbon-emitting industrial players will start looking at these solutions.” 

Companies most concerned with their green image may go down the route of Ikea, which acquired its own 7.65MW wind farm in Carrickeeny, Co Leitrim in 2013 to power its Dublin and Belfast stores. The farm was built and remains operated by Mainstream, the company started by pioneer wind tycoon Eddie O’Connor after he sold Airtricity, and electricity is traded to Ikea through Naturgy.

Bioenergy and forestry the next frontier

The next frontier for developers and investors will be bioenergy – either in the form of biomass fuels for boilers or anaerobic digestion to produce gas. Irish Bioenergy Association Sean Finan told The Currency he had been contacted by investors interested in green gas production – mostly Irish, but also one American. “They already have farmers ready to work with them,” he added. While existing commercial biogas projects are centred on burning the fuel on site to produce electricity and heat, the prospect of a future Government scheme to support the injection of biomethane into the gas grid to replace fossil fuel would generate the scale attractive to overseas capital.

The use of gas to replace oil in off-grid, rural locations is attracting foreign players, too. Liquefied petroleum gas (LPG) is used for small and medium heating or industrial processing, while liquefied natural gas (LNG) suits larger users. Both are transported by tanker and can also be used as motor fuels in lorries. 

Food processor Aurivo will soon start using LNG from Dutch-owned Calor Gas to dry milk in Ballaghadereen, Co Roscommon. Spanish-based Molgas, one of the largest suppliers of LNG in Europe, is also entering the Irish market. High supply in Europe means LNG is currently at its “lowest cost in years” at €10/MWh Molgas’s commercial director in Ireland, Kenneth Treacy, told The Currency

While LPG and LNG are traditionally made from fossil fuels, their emissions of greenhouse gases and other pollutants are much lower than those from oil. Suppliers are also developing renewable forms of tankered gases, with Calor now selling bio LPG, a liquefied gas derived from biodiesel production and imported from the Netherlands. Meanwhile, Molgas has run tests with an Irish customer to import bio LNG, which is made from biomethane in Sweden – a process Treacy admitted was “very expensive” for the time being.

One barrier to foreign investment in bioenergy is that projects here are finding it more difficult to identify stable feedstock sources. The privatisation of waste collection has left the sector very fragmented and plans to turn Bord na Móna into a national biomass trading company under former Environment Minister Denis Naughten have gone very quiet.

“When you’re looking at the circular economy in relation to waste, or generally into biomass combined heat and power (CHP)-type projects, the key issue that we have seen develop time and time again is certainty around your supply of fuel,” said lawyer Eoin Cassidy. “In both cases, I think Ireland suffers a little bit when compared to other jurisdictions in that you don’t have those single-point large-scale suppliers for either biomass or waste.” 

Wood energy.
Wood for chipping and fuel use at Gurteen College, Co Tipperary. Overseas investors are now entering Ireland’s forestry sector. Photo: Thomas Hubert

On the biomass side, international investors are now moving into Ireland through the forestry door. The surge in private plantations observed at the turn of the century is now translating into fragmented standing forests hitting the end of the 15- to 20-year Government afforestation premium, when they need active management to start making money from production. 

These constitute a prime target for investors looking to build forestry portfolios in Ireland – where tree growth is among the fastest in the world – and benefit from expected continuing growth in wood energy and construction timber demand, all tax-free. Government policy is to double current afforestation rates in an effort to store more carbon dioxide.

The €112 million Foraois investment fund led by Finnish-based specialist forestry asset manager Dasos Capital was established in late 2016, with a €55 million contribution from ISIF and €28.5 million from the European Investment Bank. It has been taking over plantations and new land for planting, targeting an 18,000ha portfolio by 2021. All parties have declined to share details of progress so far. “We would have acquired a limited amount,” Dasos senior partner and Foraois director Olli Haltia simply told The Currency.

In May, Veon sold a 4,074ha portfolio to Paris-based AXA IM in what it described “the largest private sale of forestry in Irish history”. The Irish forestry investment company had developed the properties over the years across 185 estates, with funding from thousands of small shareholders through successive Irish Forestry Funds.

“The wood market in Ireland [is] forecast to double by net realizable volume over the next five years.”

Christophe Lebrun, AXA IM – Real Assets

Some shareholders have since expressed discontent at the sale, saying returns were lower than initially promised and arguing they should have held onto the assets for longer to realise more value.

“With the wood market in Ireland forecast to double by net realizable volume over the next five years, this acquisition provides us with a significant footprint at the early stage in this growth phase,” said Christophe Lebrun, head of forestry at AXA IM – Real Assets. The UK-based forest management firm Gresham House has taken over the operation of the portfolio and Veon has stayed on as local forestry services contractor. 

As they compete with farmers for access to land, forestry investors have discovered a new stumbling block: opposition from local communities accusing faceless capitalists of pricing them out. Lobby group Save Leitrim has been opposing planting in Ireland’s most afforested county through systematic objections to applications received by the Department of Agriculture. A number of wind farms have experienced strong opposition in the planning process and land-hungry solar developers can expect similar difficulties if they don’t bring local communities with them – reaching wider than the individual landowners they sign leases with. 

Farmers trying to develop wind and solar farms on their own land have also complained that rising grid connection fees and new bond payments required to take part in upcoming RESS auctions will restrict access to foreign investors and bidders with greater financial strength, excluding them and other local players.

Those who live next to these new green industries will either see them as a hostile competitor or an attractive, complementary alternative to the rural enterprises they have always lived off which are now coming under huge economic and environmental pressure, such as beef farming and peat harvesting. Achieving the latter will be key in attracting continuing foreign investment into Ireland’s growing renewables and bioeconomy sectors.