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Offshore wind costs alarm Centrica

The cost of offshore wind farms has continued to soar, Centrica said, leading the company to review the economics of its £4bn wind power investment programme. The spiralling costs of offshore wind threaten to derail the government's renewable energy plans, which rely heavily on offshore turbines because of the difficulty and delays in obtaining planning permission for onshore wind farms.

The cost of offshore wind farms has continued to soar, Centrica said, leading the company to review the economics of its 4bn wind power investment programme.

The spiralling costs of offshore wind threaten to derail the government's renewable energy plans, which rely heavily on offshore turbines because of the difficulty and delays in obtaining planning permission for onshore wind farms.

Centrica, which owns British Gas, on Friday said the investment cost of offshore wind power had risen to about 3m for every megawatt of installed capacity, up from estimates of about 2m per MW earlier in the year.

At that price, offshore wind is even more expensive in capital terms than building new nuclear power stations, which has been costed at about 2.5m per MW in Britain.

Centrica said that soaring costs, coupled with the rise in the cost of financing, meant that "we need to revisit all our numbers to ensure that our projects are economic before we give them the go-ahead".

It insisted it remained "committed to developing further renewable generation...provided we can see clear returns on what would be a series of very big investments."

It has also emerged that the financial crisis has hit... more [truncated due to possible copyright]  

The cost of offshore wind farms has continued to soar, Centrica said, leading the company to review the economics of its £4bn wind power investment programme.

The spiralling costs of offshore wind threaten to derail the government's renewable energy plans, which rely heavily on offshore turbines because of the difficulty and delays in obtaining planning permission for onshore wind farms.

Centrica, which owns British Gas, on Friday said the investment cost of offshore wind power had risen to about £3m for every megawatt of installed capacity, up from estimates of about £2m per MW earlier in the year.

At that price, offshore wind is even more expensive in capital terms than building new nuclear power stations, which has been costed at about £2.5m per MW in Britain.

Centrica said that soaring costs, coupled with the rise in the cost of financing, meant that "we need to revisit all our numbers to ensure that our projects are economic before we give them the go-ahead".

It insisted it remained "committed to developing further renewable generation . . . provided we can see clear returns on what would be a series of very big investments."

It has also emerged that the financial crisis has hit Centrica's attempt to bring in outside investors to back its offshore wind development programme.

Centrica has plans to build 1,600MW of offshore wind capacity, of which about 360MW has so far been installed. At today's prices that implies a further commitment of about £4bn - a large sum for a company with a market capitalisation of £11.4bn.

Last month Centrica announced a £2.2bn rights issue, but that money is ear-marked for its plan to spend £3.1bn on buying 25 per cent of British Energy, the nuclear generator.

Talks with possible investors in Centrica's wind farms continue and the company has signalled it would be prepared to go below a 50 per cent shareholding, but there is no timetable for negotiations to be concluded.

Centrica is Britain's biggest operator of offshore wind farms and the UK is the world leader for offshore wind capacity, having recently overtaken Denmark.

That reflects the technology's lack of popularity in other countries, where siting turbines on land is easier.

However, there have been signs of confidence. Vattenfall, the state-owned Swedish energy company, has made a concerted push into offshore wind in the UK. RWE Npower, the UK arm of the German energy group, last week bought a half share in the 500MW Greater Gabbard offshore wind farm from Scottish and Southern Energy for £308m.

The London Array was last month rescued by Masdar, Abu Dhabi's green investment vehicle, after Royal Dutch Shell pulled out earlier this year.


Source: http://www.ft.com/cms/s/0/0...

NOV 14 2008
http://www.windaction.org/posts/17911-offshore-wind-costs-alarm-centrica
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