Every few years, sales of smaller renewable energy developers to large industrial players prompt talk that the sector is now well and truly “for the big guns only”.

That line of thought has only been reinforced by the arrival of deep–pocketed oil & gas majors and of big financial funds with their multi–billion-euro investment targets looking for ‘platforms’ – the latest buzzword for developers.

The recent purchase of Parkwind by JERA, after the sale a few months ago by wpd of its offshore arm to GIP (giving birth to Skyborn), which followed the record amounts paid for offshore wind leases in the UK and the US could be seen as the final nail in the coffin of a supposedly romantic era of renewables development where dreamers and idealists could still make it.

And yet, we at SNOW are choosing this moment to launch a company focusing specifically on small developers – and what’s more, we intend to be very active in the offshore wind sector. Are we crazy? Is it hubris? Time will tell, obviously, but there are a lot of reasons to be optimistic about the prospects of small scale, early-stage development work even in the most capital–intensive of sectors.

Why is that? The dispersed and decentralised nature of the renewables industry is part of the explanation. The industry comprises thousands of small-scale projects, particularly in the solar sector. Rooftop solar, agri-photovoltaic projects, and storage projects are inherently local and require relatively modest volumes of capital. These assets are only attractive to the bigger investors when they have been aggregated into large portfolios, which is not always the case.

As a result, there is a ‘long tail’ of projects that are owned by small developers, local industrial or real estate players, cooperatives and other retail investors. Developing such projects does not require a lot of money, and so this tends to be undertaken by individuals or small teams – and can be nicely profitable for them. There is continuing and growing activity at that scale, and the few developers who get big enough to be noticed by buyers or by the media are only the tip of the iceberg.

Furthermore, development capital is not the main constraint in early development, even in offshore wind. The limiting resource is a combination of entrepreneurial vision and time.

Beyond the need to identify suitable locations based on various objective factors – resource, impact, access, etc. – an entrepreneurial attitude enabling navigation of the unpredictable early hurdles is required, which dissuades most, and is usually incompatible with the command and control systems of the large organisations.

‘Boots on the ground’ and local credibility are crucial for effective communication with a diverse range of stakeholders, such as landowners, neighbours (including, increasingly, consumers), local and national public authorities, the grid operator, the military, local ports and fishermen for offshore wind, etc.

This requires patience, diplomacy and nimbleness as well as knowledge, but not extensive financial resources beyond the salaries for a small team and some supporting studies – and not too many layers of management to placate. Generally, larger developers tend to avoid this initial phase, opting instead to acquire projects once they have reached significant development milestones and require larger development budgets, which they are better positioned to offer and manage.

Small developers' stunning successes

So, there will always be small developers. Most of their projects will be bought once they get real enough – the question is how much of the development premium and how much of the long-term value of these early assets the smaller players can hope to capture. They are often forced to sell poorly, either because they run out of funding to take their project further, or because they don’t know how to interact with buyers.

Larger players lobby governments actively to make the market environment as hostile to smaller operators as possible.

They may have heard of due diligence, but do they know about ‘drag–along’, ‘true–up’ or ‘reserved discretions’? It is also the case that they have to exit projects because the larger players in the industry lobby governments actively – it sometimes seems it is one of their core skills – to make the market environment as hostile to smaller operators as possible.

The fact is that small developers have been stunningly successful in bringing large projects to fruition: remember that the first completed utility–scale offshore wind project in Germany was developed and built by a one-man startup, BARD, or that the largest project at the time, Gemini in the Netherlands, was developed and brought to financial close (with our help) by a two–man startup, Typhoon, with a few million euros between them, even after the utilities sued the government to cancel their lease, claiming they could never build it.

Utilities and oil & gas majors that keep on pushing regulators to impose high thresholds in terms of operating capacity or balance sheet size for participants to compete in auctions implicitly acknowledge the capabilities of the smaller players – the easiest way not to lose against more nimble developers is if they are not allowed to play.

SNOW’s team members have each helped renewable developers succeed, and as a team we remain committed to this mission. Our goal is to ensure that smaller developers capture the rightful value for their often thankless, but indispensable, work to further a successful global energy transition.

Jérôme Guillet, along with Emine Topal, Kevin Feldman and Erkan Uysal (joining in a few months) are the managing partners of SNOW, a new company focused on financing and development support for energy transition projects. www.snow-bv.com