At the Hamburg wind conference last week, the mood was gloomy. But savvy investors know downturns are the best time for bold contrarian bets – and floating wind looks promising.

Certain aspects of these events are predetermined. People will hold pre-arranged meetings, attend corporate-compatible presentations and think about wearing more comfortable shoes.

What’s really enjoyable are the unscripted conversations while walking around. The best moments occur at more selective parties, with fewer but well-targeted guests (and occasionally good food and drinks – although no one seems to remember to serve real champagne).

Such guests are often old farts, reminding each other of their own old age and happy to trade juicy stories from the past and present.

Sellers vs buyers

One item came up repeatedly. Most seasoned offshore wind industry players want to buy assets, but their corporate overlords prevent them.

Everyone agrees the mood is gloomier than onshore wind, solar, or batteries, where plenty is happening, even if not everywhere.

Most large players are still selling down, focusing on fewer “strategic” assets or countries and waiting for a different signal. Recent talk of Macquarie considering an exit from its Corio Generation unit will add to the sentiment.

Everybody else courts the remaining buyers, and they are not complaining (as much) about the situation.

Most agree the noisy exit of oil and gas companies has not helped, although there is little sympathy for those who overpaid for assets, overshot bloated budgets and complained loudly about a lack of profitability.

Another point of agreement is on utilities, which played their “heads I win, tails I whine” game in auctions.

Big players get big headlines in papers read outside the industry. Their complaints make for breathless stories about the problems, which structural opponents are happy to amplify.

Wisdom of the crowd?

The mood music is relentlessly negative. This makes investment committees’ decisions to go against the “common wisdom” harder.

Eventually, an oil major will make a substantial acquisition, saying conditions have changed or stabilised or improved, and that they expect offshore wind to be profitable. This declaration will win headlines and encourage others to become optimistic once more.

Several European utilities have entered and exited offshore wind at least twice before realizing the sector made sense for them. The oil and gas companies will likely do the same repeat dance.

It takes more than a high-profile transaction to change the narrative. The RWE purchase of Vattenfall’s UK assets was seen as a sale, not a purchase. Even though the price was not distressed, it was portrayed as bad news for the sector.

The feedback loop of industry pessimists and journalism needs to change. It is easier to sell the gloom, than the gain. So this may take some time.

Blood in the streets

In the meantime, the market remains slow and choppy. This makes it the perfect time to make bets that will become highly profitable.

This sounds like the best time to advance floating wind. With many giving up, everybody sees the risks and downsides.

People still dream of the profits made by early offshore wind investors, believing those assets were “easy to understand” and safe.

But this ignores that those early investors were lonely when they made their original investments. They took scary risks and spent years making these projects safe assets.

It’s the same now – floating wind looks scary, and there are real questions about its feasibility and cost.

It may never work (or be cost-competitive against alternatives). But now is the best – and possibly the only – time to bet for outsized returns.

People crave precedents to reassure them that floating can work at scale. There’s no secret: someone needs to build that precedent at a reasonable and replicable (or improvable) price.

Whoever takes that bet today will need to spend hundreds of millions of pounds. They must build the infrastructure to build floaters serially and provide performance guarantees, or own the assets until they are safely operating.

However, the early mover will dominate the market for a few years – and be able to sell the assets at a profit.

Technology owners

This is true of floating technology companies – there’s too much choice and not enough certainty.

Certainty will come from owning the engineering and industrial risks and delivering projects. The good news is that the companies expected to take on such challenges have the skills to do so. It’s their job to manage these risks. If they can’t do it, nobody can.

The great thing about offshore wind is that, outside of a handful of ignorant outsiders, nobody has taken unreasonable risks.

Construction, development, merchant risk and new markets, all attract appropriate premiums. There’s ebb and flow but, outside a few outliers, prices have been consistent.

Floating projects can be valued accurately if they operate correctly with contracted costs and revenues. The advantage for risks taken now on such projects is easy to calculate where there are tariffs or strong tariff expectations.

As understanding of risk evolves, so does asset pricing. In eight years, everyone will wonder why they didn’t make such an easy decision.

Erkan Uysal, co-writer, and Jérôme Guillet are the managing directors of SNOW.

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