Octopus Energy launches £3bn offshore wind fund

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Octopus Energy is launching a new fund to invest £3bn in offshore wind by the end of the decade, in a boost for the technology following a string of setbacks.

The UK energy company’s new Octopus Energy Offshore Wind fund is opening with a £190mn cornerstone investment from Tokyo Gas, the Japanese utility that owns almost 10 per cent of Octopus, while Octopus is in the process of raising the rest from outside investors.

Executives said it was part of plans Octopus announced in July to deploy £15bn of investments in offshore wind by 2030. The fund will focus on projects in Europe, at all stages of development.

Zoisa North-Bond, chief executive of Octopus’s generation arm, said offshore wind had “massive” potential: “We look forward to welcoming on board more investors so together we can tap into this huge offshore wind opportunity worldwide.”

Tokyo Gas, the main distributor of gas in Japanese cities, is making a push into cleaner energy, as well as expanding globally. It bought a 9.7 per cent stake in Octopus for $200mn in December 2020 as part of a deal in which the two companies also launched Octopus in Japan.

Kentaro Kimoto, vice-president of Tokyo Gas, said it wanted to “accelerate the developments of offshore wind”, and its investment in the new fund would “reinforce the strategic partnership with Octopus Energy”.

The companies are launching the fund at a challenging time for offshore wind, with developers under pressure from surging costs because of high interest rates and supply chain strains.

The pressures are particularly affecting projects in the US, where several developers are trying to renegotiate electricity sales agreements to take into account rising costs.

Ørsted, the world’s largest wind developer, this month abandoned two large projects off the coast of New Jersey saying it had “no choice” given the challenging economics.

In an effort to get projects in the UK started, the government this week increased the financial support available to UK offshore wind developers, raising by 66 per cent the maximum price for the technology in the next auction round for government subsidy contracts.

Octopus’s generation arm started investing in offshore wind in 2022, taking stakes in major projects including Ørsted’s 1.2GW Hornsea One wind farm in the North Sea.

In September, it bought a 10 per cent stake in the 732MW Borssele III and IV wind farm on the Netherlands side of the North Sea. This week, it entered Germany’s offshore wind market, buying a 5 per cent stake in the 288MW Butendiek wind farm, from Zurich utility ewz.

Octopus’s household retail supply arm is on course to become the UK’s second-largest household energy supplier, with 6.5mn customers, after it bought Shell’s household supply arm this year, with the deal now going through regulatory approval.