RenewableUK: Offshore wind projects are 'grinding to a halt'

Trade association issues stark warning to government after RWE shelves investment plans for Galloper offshore wind farm

RenewableUK has issued a stark warning to the government over the future of the offshore wind industry, after RWE added another project to the growing list of schemes that have fallen victim to policy uncertainty.

RWE on Friday announced it had shelved plans to invest in the Galloper offshore wind farm, which was being built in conjunction with SSE as an extension to the 500MW Greater Gabbard project off the coast of Suffolk.

The announcement comes almost exactly a year after RWE halted work on the £4bn Atlantic Array Round 3 offshore wind farm in Wales, claiming its deep water and unfavourable conditions would simply make it uneconomic.

With Galloper due to come online in 2017, RWE said it could not be sure that it would be able to secure government support through the current Renewables Obligation (RO) incentive scheme or the new Contract for Difference regime that is due to replace the RO in 2017.

Earlier this year, Galloper failed to secure financial aid through an early CfD round, prompting SSE to warn that it was reviewing its own investment plans in the scheme.

Now, RWE has pulled out all together, leaving the future of the entire scheme hanging in the balance.

"Despite positive investor interest, including that of the Green Investment Bank, and support from the project's supply chain partners we are disappointed to announce the decision not to continue with the development of Galloper in its current form," said RWE in a statement. "This decision reflects the tight time scales available to secure financing whilst still achieving accreditation under the Renewable Obligation, which overall results in an unacceptable balance of risk and reward as compared with the investment disciplines embraced by the RWE Group."

The decision means RWE is left developing just a handful of offshore wind projects in the UK - the soon-to-be completed Gwynt y Mor scheme in North Wales and Triton Knoll. It also has a stake in the giant Dogger Bank Round 3 project being developed by the Forewind consortium.

A spokesman for RenewableUK told BusinessGreen that it was too early to tell if RWE was pulling out of UK offshore wind altogether, however the trade association issued a stark warning to the government that the future of the industry was by no means certain.

Maria McCaffery, RenewableUK chief executive, said offshore wind projects "stopping unnecessarily should be a matter of concern" for government.

"RWE's announcement shows that getting projects actually built can't be taken for granted, even after they've received consent and even after early construction work has begun," she added.

Her comments represent a marked shift from the industry over the growing number projects being ditched by developers, including Scottish Power's Argyll Array and the extension to London Array - the world's largest offshore wind farm.

Until now, RenewableUK has remained mainly positive over the future of the industry, arguing that attrition is normal and the project pipeline remains healthy.

However, McCaffery on Friday said she was concerned that the lack of clarity on support levels post 2020 was damaging investor confidence. She warned that the switch from the RO regime to CfDs has "left developers working under extraordinarily challenging conditions" forcing some projects to "grind to a halt".

"This means that British jobs and economic growth are being jeopardised. More than 13,000 people in the UK now owe their livelihoods to offshore wind," she added. "Supply chain companies up and down the country are counting on projects such as Galloper to go ahead. In the long term, it means that our potential to employ up to 44,000 people in the UK's offshore wind sector by 2023 is being undermined."

She called on the government to deliver a long term vision for the period after 2020 to help industry plan their investments. "The lack of a long-term strategy is stifling confidence and large-scale projects may fall by the wayside," she said. "To provide the UK with energy security, as well as bringing down costs through economies of scale, the industry needs to know how much offshore wind capacity Ministers want to see installed by 2030. That would send an unequivocal signal to investors and thaw the freeze in the board rooms of big companies seeking to invest billions in Britain's renewable energy sector."

Her comments came on the same day that Scottish Energy Minister Fergus Ewing criticised the government for failing to provide enough financial support for offshore wind projects through the Levy Control Framework, while offering up to £25bn in financial support for the nuclear power industry.

The Scottish government on Friday gave consent to four giant offshore wind projects, but warned they would be competing for a relatively small pot of money.

"The budget for offshore wind (and other less established technologies) in the first of these [auction rounds] scheduled for autumn is £235m, [is] thought to be enough to support around 800MW of offshore wind in UK waters," he said. "This inevitably means that growth in green energy will be restricted, a sector where Scotland has a competitive advantage. In addition, The lack of a 2030 decarbonisation target until at least 2016 leaves a high degree of uncertainty for investors and could adversely impact investment and development of projects."

A spokeswoman for the Department of Energy and Climate Change however defended its policies,maintaining that it has "created the right investment conditions for offshore wind to flourish".

"The UK is still the world leader in offshore wind. The sector is still growing, generating huge investment, creating jobs and supporting businesses around the country," she added.