Large European banks, among them UniCredit and BNP Paribas, have reported exposure to green energy transactions at €8bn to €12bn, or more than 16% of their common equity Tier 1 capital. Loan syndication for renewable energy projects has grown exponentially in the past five years. Waning government-backed subsidies for green projects in solar or wind energy have done little to deter institutions, as technological advances have made many renewable energy alternatives more cost-competitive when measured against traditional fossil fuels.
Subsidies may be on the decline, but there is arguably more political will than ever to push clean energy developments, as shown by the European Commission’s Action Plan for Sustainable Finance, published in March 2018. The report outlines the need for €180bn to be invested in renewables to meet the pledge to reduce carbon dioxide emissions by 40% by 2030. Investment in green energy has become one of the industry’s leading topics over the past couple of years.
Moody’s projects that solar and wind energy generation will continue to grow rapidly in Europe over the next five to six years. The biggest growth in clean energy projects over the past decade has been driven by wind power generation, but this is expected to drop off and slow down to 2% annual growth. Plans to extend the life time and possibly expand nuclear plants across Europe are hampering future growth.
However, solar energy is set to surge at a much faster rate of 10% every year until 2025. The higher growth is mainly thanks to declining costs of installation and increased efficiency of solar power generation. Syndicated loans for wind energy still outstrip those for solar projects, but solar is gaining ground each year. International banks, mainly from Japan and the US, have muscled their way into the European market. But enthusiasm for financing solar energy projects has come mainly from European banks, with Crédit Agricole and Société Générale leading the way.
