The global need for decarbonization is clear, but a common barrier in accelerating investment in renewable energy is to source capital in a smart and timely way – particularly capital with the risk appetite to sustainably finance through greenfield project lifecycles.
The European Union climate targets for 2030 estimate an annual financing gap of EUR 9 billion in renewable energy infrastructure . Most of this financing will need to be met by the private sector . The current economic landscape shaped by the Covid-19 pandemic, which is expected to put more strains on public budgets, may also see even greater needs for private financing for long-term infrastructure essential for the United Nations Sustainable Development Goals.
As the least CO2-intensive region in Europe, the Nordics is often lauded as a role model in green energy transition. Nevertheless, its regional demand for clean energy generation remains huge. A 2019 study estimated that the Nordic region will need a “multi-fold increase” in wind power generation by 2050 to accelerate the phasing-out of fossil fuel-based and nuclear energy generation. Echoing this trend, the 2019 Declaration on Nordic Carbon Neutrality, a framework co-signed by the Nordic countries, also emphasizes the regional goal of accelerating towards carbon neutrality by scaling up sustainable solutions and greenhouse gas reduction.
So how can private funds be more innovatively mobilized for the renewable energy sector? One strategy is to unlock the financial strength of institutional investors through private funds. Representing one of the world’s largest capital pools, institutional investors such as pension funds and insurance companies can play an indispensable role in enabling global transition to a low-carbon economy.
Underscoring its commitment to Environmental, Social and Governance (ESG) standards, Siemens’ financing arm, Siemens Financial Services (SFS), recently finalized a seed investment in Prime Green Energy Infrastructure Fund, a fund managed by Prime Capital AG that focuses on investing in wind projects in the Nordics. This collaboration marks SFS’ first ownership stake in a renewable energy fund allowing the group to diversify its asset portfolio in support of climate action.
As an established investor in the onshore wind energy market, SFS traditionally supports single, large-scale renewable energy projects. As a seed investor in Prime Green Energy Infrastructure Fund, SFS as a minority shareholder, alongside Prime Capital and other institutional investors, is helping to enable the fund as a vehicle that activates multiple sources of capital at a scale that support multiple onshore wind projects at the same time.
The Fund’s share of project benefits will result in 3,200 GWh of renewable energy generated per year, enough to supply 860,000 households with clean energy and resulting in avoided emissions of 1,400,000 tons of CO2.
Prime Capital is an independent institutional alternative asset manager, based in Frankfurt, with a proven track record managing renewable energy assets. Prime recently announced the closing of its 254 MW “Stavro” onshore wind project located in the northern part of Sweden. The project, realized in close collaboration with Siemens Gamesa Renewable Energy (SGRE), was acquired by a consortium of investors including SFS. This followed an earlier partnership in 2017, in which SFS also invested in Prime’s 281.4MW Project Nordlicht, an onshore wind project located in northern Norway. Looking forward, SFS’s investment in the new Prime Green Energy Infrastructure Fund will take the collaboration between the two companies to a new level.
Investing in the Prime Green Energy Infrastructure Fund is an innovative way for financial companies to mobilize capital in order to accelerate decarbonization. Private funds such as these connect multiple assets to capital from multiple investors which helps fund several renewable energy projects vs. directly investing in a single, large-scale energy project.Steffen Grosse, Siemens Financial Services, CEO Equity Finance
This collaborative approach serves as a trend-setting example of how innovative capital setup can unlock the financing necessary for energy transition. SFS looks to replicate this investment model in other regions in the future.
We have a long-standing relationship with SFS and are excited to embark on this journey to provide the necessary pool of capital to develop new onshore wind projects in the Nordics.Andreas Kalusche, CEO of Prime Capital