Offshore wind spending sails to new heights and there’s more to come

Renewable energy has proven remarkably resilient despite the challenges presented by the COVID-19 pandemic, with the gains in one specific segment more than offsetting investment declines in other areas.

According to research company BloombergNEF (BNEF), final investment decisions for offshore wind developments totalled $US35bn ($49.3bn) in the first half of 2020, up 319 per cent year-on-year.

Investment decisions were made on 28 projects including the giant 1.5 gigawatt (GW) Vattenfall Hollandse Zuid array off the coast of the Netherlands that will cost an estimated $US3.9bn.

This was enough to drive overall investment in new renewable energy capacity up by 5 per cent to $US132.4bn despite declines in onshore wind and solar investment.

“We expected to see COVID-19 affecting renewable energy investment in the first half, via delays in the financing process and to some auction programs … but the overall global figure has proved amazingly resilient – thanks to offshore wind,” BNEF head of analysis Albert Cheung said.

By contrast the International Energy Agency forecast energy spending in 2020 would decline by almost $US400bn.

More offshore wind investments to come

The segment is not keeping still with the US state of New Jersey looking to add between 1.2GW and 2.4GW of power generation capacity in its second offshore wind solicitation.

Along with the first phase of 1.1GW that was awarded to Danish renewable energy giant Ørsted in 2019, the new solicitation will take the state closer to its goal of producing 7.5GW of offshore wind power by 2035.

Ørsted itself recently signed a power purchase agreement with Taiwan’s TSMC for the entire 920 megawatt capacity from its planned Greater Changhua 2b & 4 offshore wind farm that is expected to reach a final investment decision in 2023.

The Japanese government is also drafting a bill to identify new development sites for 1GW of installed offshore wind capacity per year from 2021 to 2031.

Meanwhile, Polish utility PKN Orlen has submitted an environmental study for an offshore wind project capable of generating up to 1.2GW of power in the Baltic Sea.

The study’s findings will be used to plan the project’s implementation while minimising environmental impact of the wind farm’s development and construction.

In Australia, the 2GW Star of the South project that is proposed off the coast of Gippsland, Victoria, is being spruiked as a potential replacement for the early exit of Yallourn, one of the state’s three remaining brown coal power generators.

Neodymium-praseodymium demand could rise

The growth of the offshore wind power segment (along with the revival of the currently stalled electric vehicle sector) could drive demand for neodymium-praseodymium (NdPr), rare earth metals used in the manufacture of neodymium-iron-boron (NdFeB) permanent magnets.

These magnets are used in practically all offshore wind power turbines and are also common in EVs.

Any increased demand for NdPr would be welcomed by Australian companies that are looking to develop their respective rare earths projects.

Arafura (ASX:ARU) has just received key mineral leases for its Nolans NdPr project that grants it an initial 25-year tenure over the resource in the Northern Territory.

Nolans has a reserve of 29.5 million tonnes (Mt) grading 2.9 per cent total rare earth oxides (TREO) with NdPr making up 26.4 per cent of the rare earths content.

Hastings Technology Metals (ASX:HAS) received a shot in the arm this month after securing in-principle eligibility for the Finnish Export Credit Scheme for a commercial contract of $75m for its Yangibana project in WA.

The project has an ore reserve of 12.2Mt grading 1.13 per cent TREO with NdPr content of about 40 per cent.

Ionic Rare Earths (ASX:IXR) is currently drilling to increase resources at its Makutuu rare earths project in Uganda.

The unique ionic adsorption clay-hosted project, one of the few outside of China, has high proportions of critical rare earth oxides.

Earlier this month, Pensana Rare Earths (ASX:PM8) reached a heads of agreement with China Great Wall Industry Corporation to co-operate on the Longonjo project in Angola.

This could see the company seek the proposed debt financing component of the engineering, procurement, construction and financing contract from commercial banks in China.

Northern Minerals (ASX:NTU) is completing a $22m placement that will be used for the continued development of its Browns Range pilot project, which is currently on care and maintenance due to the COVID-19 pandemic.

RareX (ASX:REE) raised $2.3m through a share placement in June and flagged that it would kick off a 6,000m reverse circulation drilling at its Cummins Range rare earths project this month.

A review found that NdPr makes up an average of 22.1 per cent of the Cummins Range rare earths content.

ARU, HAS, IXR, PM8, NTU and REE share price chart

At Stockhead, we tell it like it is. While Arafura Resources, Ionic Rare Earths and RareX are Stockhead advertisers, they did not sponsor this article.