Germany’s development bank KfW sees slow take-up of offshore wind loans

Only 15% of a €5bn facility announced in 2011 has been paid out.

German state-owned development bank KfW has admitted that the take-up of its €5bn loan programme for the construction of offshore wind parks has been slow since the programme was announced in June 2011.

Back then, the German government identified the expansion of offshore wind energy as a major priority of the so-called “Energiewende,” or the switch to renewables from nuclear power. No less than 10GB of new offshore wind energy capacity was to be installed in the German part of the North and Baltic seas by 2020.

Yet the effort has been fraught with difficulty. Due to the great distances from the coast – 100km in some cases – the construction and connection of North Sea wind parks has taken more time than anticipated. Meanwhile, considerable institutional finance, whether from private banks, pension funds or insurers, has not materialised. Given these constraints, the government now expects just 6GB of offshore wind power capacity by the close of the decade.

In the KfW’s case, the bank says that just 15% of the €5bn it set aside for offshore wind nearly three years ago has been paid out. That money has gone to three wind parks in the North Sea – Meerwind, Global Tech 1, and Butendiek, in which Danish pension investor PKA has a 22.5% stake.“There’s no denying the fact that until now, the development of our loan programme has proceeded slowly,” said KfW Chief Executive Ulrich Schröder at the bank’s annual news conference in Frankfurt yesterday (April 14).

Schröder attributed the reluctance of institutions, including pension funds and insurers, to get involved with German offshore wind to uncertainty about the future of renewable subsidies. Last year, the previous centre-right government drastically scaled back support for new solar power installations.

But Schröder also said that since the government had unveiled a reform of the EEG (Germany’s renewable energy law) which maintains fixed, 20-year subsidies for offshore wind parks, the KfW expected to finance more of the facilities. A fourth transaction could be announced soon, he added.

Of the €72.5bn in new business that the KfW wrote in 2013, 38% was for environmental and climate protection, making it the world’s biggest “green financier.” The projects the KfW funds fall into three categories: renewable energy, energy efficiency and green renovation of old buildings. Through its investment unit, DEG, the KfW is also a major player in microfinance in developing countries. According to the bank’s latest business report, DEG’s provided €630m in microfinance in 2013, half of which went to Africa.