Financing the Energy Transition – Repowering Wind Farms

Introduction

Wind power is a fundamental part of Europe's net zero agenda. However, as with any technology, wind turbines have a limited lifespan (typically around 20-25 years). Some of the earliest wind farms in Europe (commissioned in the early 1990s) have already reached the end of their original lifecycle and, according to WindEurope, about a fifth of the continent’s c. 90,000 operating onshore turbines are at least 15 years old. Older turbines tend to be much less productive (and increasingly less economical) than newer models. 

This represents a fundamental challenge for the sector, but also presents opportunities for developers and funders looking to redevelop / finance the redevelopment of existing sites with newer (and more powerful and efficient) technology, a practice known as "repowering". 

In this briefing, we look at some of the key considerations for financing wind farm repowering projects.

Options when a wind farm reaches the end of its operational life

Market overview

WindEurope has estimated that between 2023 and 2030 83 GW of European onshore wind power capacity will reach 15 years of age, of which it is estimated that ultimately: (i) 70 GW will be life-extended, (ii) 7.8 GW will be decommissioned and (iii) 5.6 GW will be repowered.¹ On average, Denmark, Spain and Portugal have the oldest wind farms in Europe.² The UK government has estimated that 1.3GW of onshore wind (approximately 2/3 of Britain's existing onshore wind capacity) will reach the end of its operating life by 2030 and c.2.2GW by 2035.³

Repowering is already happening across the continent. Examples of large-scale projects include: (i) the Windplan Groen project in Flevoland in the Netherlands, which will see 98 turbines replaced with 90 newer turbines, increasing the total installed capacity from 168 MW to over 500 MW; and (ii) the Elster wind farm in Saxony-Anhalt in Germany, which will see 50 of its turbines replaced with 18 newer ones, increasing the total installed capacity from 30 MW to nearly 120 MW. 

While the rate of repowered projects coming online is increasing, there are concerns that not enough projects are being repowered. This is in large part due to wider challenges faced by the industry, as well as a lack of government subsidies.

Over the past couple of years, as part of its REPowerEU Plan and European Wind Power Action Plan, the EU has responded by passing a raft of new legislation, including the Emergency Regulation on Renewables Permitting (December 2022) and the revised Renewable Energy Directive (October 2023), which seeks to facilitate repowering renewables projects, in particular through expediting the permitting process for such projects. Though some industry insiders remain sceptical of the on-the-ground impact of such measures at a national level, there have been notable increases in permitted new onshore wind repowering projects in Germany and Spain in recent years. 

In July 2024, the UK government removed a de facto ban on onshore wind in England and published a consultation on including onshore wind in the "Nationally Significant Infrastructure Projects" regime, which would mean that planning decisions on large developments would be taken at a national (rather than local) level. In January 2025, the UK’s Contracts for Difference (CfD) auction scheme for renewable energy projects was reformed to support fully repowering projects (i.e. those which decommission and recommission the existing site) which have reached the end of their operational life. From CfD Allocation Round Seven (expected in mid-2025), repowering onshore wind projects which meet the required criteria will be allowed to apply for a CfD. Forward bidding into the CfD will be permitted, such that the repowering projects are not required to decommission, and lose their revenue stream, before applying. In its Clean Power Plan 2030 published in December 2024, the UK government announced further measures to support renewables repowering, including changes to government policies on planning. 

Financing considerations

In some respects, repowering projects are similar in financing terms to greenfield wind farm projects. Issues such as construction risk and revenue certainty apply to greenfield and repowering projects alike and the financing techniques used to finance greenfield projects (notably limited recourse project finance) can generally also be used for repowering projects. However, the unique characteristics of repowering projects (which involve both dismantling an existing operating asset and commissioning a new asset) give rise to specific considerations. We consider a number of these below.

Financing structure

Incumbent developer or new developer

A repowering project may be procured by either the incumbent developer of the existing wind farm or a "new" developer which has acquired / is acquiring the wind farm. If the latter, the financing structure may need to cater for both: (i) the acquisition of the wind farm and (ii) the design, construction, operation and maintenance of the repowered project. Lenders will also want to see appropriate responsibility and risk allocation for dismantling / decommissioning where a new developer is taking on the repowering project.

Single asset vs portfolio

A repowering project may comprise a single asset or may be part of a wider portfolio of assets (not all of which are being repowered and which include a mixture of development /construction phase assets and operating assets). Where a portfolio is being financed, it may be possible to cross-collateralise different assets in the portfolio and use revenues generated by operating assets to service the financing of repowering works. In both cases, this may increase the financing options which are available to the project.

Existing financing arrangements

Whilst it is likely that any original debt financing of the project will have been repaid by the time that a repowering is being considered, the project company / developer may have existing debt in place at this point (e.g. if the original debt has been refinanced). If there is existing debt in place, then (unless the finance documents already expressly cater for the repowering, which is unlikely) lender consent will usually be required for a repowering and so early engagement with the existing lenders will be essential. 

Pre-completion revenues

A repowering project may potentially generate significant revenues prior to completion of the repowering works. If the repowering works are completed in phases, some repowered turbines may come online while others are still in construction. In addition, the developer may (if technically feasible) choose to keep some existing turbines running while the repowering works are ongoing and may also look to sell the equipment being replaced (e.g. turbines and/or blades) if there is a market for it.  The interaction of phasing with any support contracts, such as a CfD, will need to be carefully considered. For example, the UK CfD is expected to require the generator to declare that the existing generating station has reached the ‘end of operating life’ or would have done if it hadn't been decommissioned, in order to satisfy the Operational Conditions Precedent and start receiving CfD payments.

Strong sponsors may push for pre-completion revenues to be treated as "equity" for equity contribution and financial ratio purposes. While this may be acceptable to lenders in some cases (albeit lenders will usually require significant disposal proceeds to be applied in mandatory prepayment of their debt), this will be a point for negotiation on each transaction.  

Property

A repowered project will need to have the necessary property rights in place at financial close. 
If the project site is held by the developer as leasehold or equivalent (as is typically the case), then the lease(s) will need to be reviewed to check whether it accommodates the repowering (e.g. whether the remaining term of the lease covers, or there is an option to renew / extend the lease to cover, the term of the repowered project). Landowners are generally becoming more astute when it comes to lease extensions of onshore wind sites, so any proposed lease extension may lead to discussions about rent review (e.g. linking rent payments to revenues generated by the repowered project). 
Even if the term of the lease is sufficient, the nature of the repowering project (which may, for example, involve replacing existing turbines with larger models or co-location with new assets, such as battery storage) may still mean that landowner consents, amendments to the lease(s) or potentially even entry into a new lease(s) / option agreement(s) are required, which will need to be factored into the project timeline. 

There will also be an exercise of checking whether any existing rights of way and/or other easements (e.g. cabling rights) on/to the project site and any property rights of other project stakeholders (e.g. the distribution network operator (DNO)) will be fit for purpose for the repowering. 

Permitting and grid connection

Similarly, all necessary permits and grid connections will need to be in place as a condition precedent to funding. 

Permitting

New planning permissions will often be required for repowering projects, as the original planning permissions will usually be time-limited and include parameters for the permitted project (e.g. turbine height restrictions). 

A new environmental impact assessment may also be required, although the scope of such assessment may be limited to the changes to the original project resulting from the repowering. 

The terms of the original generation licence (or generation licence exemption) will also need to be checked. While generation licences are not usually time-limited, if the repowering will increase the generation capacity of the project, then a new generation licence / exemption application may be required.

Grid connection

The existing project will in most cases already have a grid connection in place at the time of a repowering, as grid connections do not tend to be time-limited. However, changes to the project's generating capacity and type of technology resulting from the repowering may mean that the existing grid connection agreement(s) require amendments or, in some cases, a new grid connection agreement(s) need to be entered into. 

Given current constraints on grid capacity across the continent, it is essential that developers start discussions with the relevant transmission or distribution network operator at an early stage. 

EPC and O&M

A repowering project will require new construction contracts on bankable terms. The developer may wish to re-engage the original construction contractors for this role (if they are available), given their familiarity with the project site and the existing asset. However, repowering may also be an opportunity for the developer to conduct a re-tendering exercise. 
Lenders will want to ensure that the construction package is coherent and fully-integrated. For example, if different contractors are appointed to carry out the dismantling works and the installation of new equipment, robust interface arrangements should be put in place between the various works packages. 

With respect to the operating phase, parties will need to consider whether the existing O&M arrangements are retained or whether these are amended / replaced, assess the impact of the repowering on any existing manufacturers' warranties (in the case of partial repowering) and review the terms of any manufacturers' warranties relating to the newly installed equipment. 

Offtake arrangements

At the point at which most wind farms are considering repowering, any original power purchase agreement(s) (PPAs) are likely to have expired / be approaching expiry, meaning that the repowering will involve entry into new PPAs and/or other offtake arrangements. Any initial subsidies of the original project (e.g.  Renewable Obligation Certificates or feed-in tariffs) may also have expired and so new subsidies (if available) may need to be obtained for the repowered project. In each case, these will need to be on terms satisfactory to lenders.  

If any existing PPAs are still in place, then these should be reviewed to assess the impact of the repowering. If amendments / replacements / terminations of existing PPAs are needed, then these will need to be completed prior to financial close.

Any existing or replacement PPAs should also be reviewed to ensure they remain fit for purpose in light of market changes expected during the lifetime of the repowered assets. For example, if zonal pricing is introduced in GB as is currently being considered, price and volume risk for a repowered project could be significantly different to that of the original project.

Price cannibalisation and curtailment are expected to have an increasing impact on repowered wind projects, compared to projects to-date, as more renewable projects come online and seek to take advantage of favourable weather conditions at the same time, pushing electricity prices down, whilst electricity grids are struggling to deal with the additional capacity required to accommodate increased generation. Repowering onshore wind projects will need to enter into revenue arrangements, on terms satisfactory to lenders, which address the resultant risk of lower wholesale market revenues. More co-location of onshore wind and batteries is also expected to enable wind projects to take advantage of periods of higher electricity prices.

We have considerable experience advising on wind and other renewables financings. If there are any points in this article you would like to discuss, please feel free to get in touch with any of the key contacts below.

For more information on financing the energy transition and other related insights, see our energy transition hub here, which includes our June 2024 article on "Snatching defeat – What went wrong for Europe's wind power" and all of the previous articles in our "Financing the Energy Transition" series.

Notes

1. WindEurope, End of life and repowering trends, and policy recommendations on repowering, July 2024
2. WindEurope, Repowering Europe’s wind farms is a win-win-win, December 2022
3. Department for Energy Security and Net Zero, Contracts for Difference for Low Carbon Electricity Generation: Consultation on proposed amendments for Allocation Round 7 and future rounds, January 2024