The world’s first offshore wind fund is in the UK, and money is pouring in

Energy Shocks
Energy Shocks

The UK has already built more offshore wind power facilities than any other country. Now a fund exists to allow investment exclusively in the offshore industry—and money is pouring into it.

The fund is a product of the Green Investment Bank (GIB), which launched in 2013 and is wholly owned by the UK government. According to the GIB, the fund is the world’s first dedicated to investments in power generation from offshore wind. If it reaches its target of £1 billion ($1.8 billion), it will also be the largest renewables fund in the country.

On April 1, the bank announced that the fund had raised £463 million ($684 million), since it began taking investments in the summer of 2014, with money coming from pension funds and one unnamed sovereign wealth fund. The UK trade press has speculated that this was the Abu Dhabi Investment Authority (ADIA)—the second-largest sovereign wealth fund in the world, which derives most of its revenue from the oil industry.

If ADIA is behind the investment, it’s another example of money from fossil fuels pouring into green investments, as has been the case with Norway’s huge oil fund, the largest in the world and an investor in green technologies and forest preservation. A spokesman for the GIB declined to comment. ADIA did not respond to a request for comment, but we will update this post with any response.

Pension funds have increasingly been seeking out investments in renewables, in part because of low yields from government bonds they have in the past used to achieve steady returns. Offshore wind farms, while expensive to build, offer returns from selling the electricity they produce throughout their lifespan. The GIB fund has a life expectancy of 25 years, the bank said.

Edward Northam, head of investment banking at the GIB, told Quartz that investors had treated the bank with “a healthy degree of skepticism” when it first appeared on the scene three years ago. But since then, he said, the bank had been able to offer enough education, and proof that its investments work, to make even technologies seen as more risky attractive.

Offshore wind is a UK speciality, and the seas around England, Wales, Scotland and Northern Ireland already contain more offshore wind generation than the rest of the world combined. Much more is planned, including a windfarm the size of a small country in the already-crowded UK North Sea.

The money paid into the fund so far has already been transferred to two projects, Rhyl Flats off North Wales, which has been running since 2009, and Sheringham Shoal off England’s east coast, which has been operational since 2012.

The GIB’s fund may be the first purely for offshore wind, but it is by no means alone. Over the past few years several dedicated renewables funds have sprung up in the UK, as conduits for institutional money into the renewables industry, including onshore and offshore wind, solar, and even more niche technologies such as anaerobic digestion.

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