The EdenTree Green Infrastructure Fund aims to provide investors with inflation-mitigating income from low-correlation investments in companies that provide infrastructure that generates positive environmental outcomes. Offshore wind is a significant
part of this, and the fund has exposure through its holdings to some of the world's largest offshore wind projects, such as Hornsea 1.
Offshore wind is, simply speaking, one of the best forms of energy generation we have. Not only does it not produce greenhouse gases or deplete natural resources but offshore wind in particular benefits from higher wind speeds and more consistent winds
than those on land. The cost-efficiencies of large offshore wind farms are also such that building more offshore wind should reduce consumers' electricity bills relative to depending on fossil fuels. The global energy transition relies on this technology.
As such, it is not surprising that the UK government has invested heavily in offshore wind. The UK already has approximately 14GW of offshore wind capacity - more than any other country in the world. The government has pledged to grow this to 50GW by
2030, which itself is but a step on the path to net zero by 2050. There is already a pipeline of projects in progress to achieve this aim, but hitting these ambitious targets and remaining a global leader will require further construction progress
year after year.
To support the buildout of offshore wind, the UK has a system where developers bid for government-backed contracts that guarantee a fixed floor price for electricity to be generated, and developers bid for access to these contracts. Only this year they
didn't. This year, in the months ahead of the auction, wind farm developers had warned that the government was not likely to be able to commission more construction if they did not raise the floor prices offered to reflect rising costs of labour and
materials. The government did not listen, and we are now in the embarrassing position that no bids were received.
Previously, this system has supported years of growth in offshore wind capacity and the hope is now that the UK government will listen to the wind power industry and improve the auction process next year. Ultimately, more wind power will be built, but
where it will be built, and which consumers will benefit, will depend on where there are market structures in place that allow investors to generate a return from making such investments. Developers and owners such as those we invest in have global
remits, and we would anticipate continued investment in beneficial offshore wind, wherever in the world it is built.
The views contained herein are not to be taken as advice or recommendation to buy or sell any investment or interest. The value of an investment and the income from it can fall as well as rise, you may not get back the amount originally invested. Past
performance should not be seen as a guide to future performance. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association. Firm Reference Number 527473.