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The winds of change are still too costly for E.ON

E.ON UK has delayed construction on two of its 100MW offshore wind farms, stating the schemes are not financially viable. This is a problem for the company, as it needs renewable power assets to meet its renewables obligation. For offshore wind as a whole this is a major blow, as it suggests that the renewables obligation is not providing enough of a subsidy to cover the economics of new farms.

E.ON UK has delayed construction of its planned 108MW Scarweather offshore wind farm until at least 2008. This comes on the back of delays to the building of another offshore wind farm in the Solway Firth, (called Robin Rigg), which will not be ready until 2007/08. It has stated that the engineering costs of turbines, cabling and foundations have increased significantly, by up to 30%, resulting in the company re-tendering the projects.

The renewable sector is heavily subsidized by the renewables obligation (RO), which requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity from renewable sources. The current target is 5.5% for 2005/06 rising to 15.4% by 2015/16. This demand subsidizes renewable power, where the price includes RO certificates which are either produced or paid for by suppliers in a buy out fund.

It is expected that the obligation, together with exemption from the Climate Change Levy for electricity from renewables, will provide support to industry of GBP1 billion per year by 2010.

This money is expected to be invested in the larger-scale building of offshore windfarms, which will bring... more [truncated due to possible copyright]  

E.ON UK has delayed construction of its planned 108MW Scarweather offshore wind farm until at least 2008. This comes on the back of delays to the building of another offshore wind farm in the Solway Firth, (called Robin Rigg), which will not be ready until 2007/08. It has stated that the engineering costs of turbines, cabling and foundations have increased significantly, by up to 30%, resulting in the company re-tendering the projects.

The renewable sector is heavily subsidized by the renewables obligation (RO), which requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity from renewable sources. The current target is 5.5% for 2005/06 rising to 15.4% by 2015/16. This demand subsidizes renewable power, where the price includes RO certificates which are either produced or paid for by suppliers in a buy out fund.

It is expected that the obligation, together with exemption from the Climate Change Levy for electricity from renewables, will provide support to industry of GBP1 billion per year by 2010.

This money is expected to be invested in the larger-scale building of offshore windfarms, which will bring 8,000MW of capacity over the forthcoming five or more years.

The program of building the larger offshore windfarms has been established by allowing developers to apply for rights in two major rounds. The majority of the round one farms have been built, such as E.ON's Scroby Sands farm, providing it with renewable power to meet its RO. However it appears that many round two farms are further from shore, of larger scale and do not have accompanying government grants that bolster the economics of the RO. It is evident that schemes with no additional government grants, such as Scarweather, are presently uneconomic, and those that are, such as the Robin Rigg scheme, still suffer from tendering delays.

Unfortunately for E.ON, not meeting its RO with its own production, it will be in a position where it has to pay the subsidy it was aiming to avoid. Another problem will be that not building the windfarms will result in the price or renewable power increasing through a lack of supply to meet the RO. Although this may make Scarweather projects more financially viable, it will result in E.ON paying more money into the RO scheme. It is also a blow for E.ON's marketing credentials as a renewable power supplier, which underpin much of its marketing in the retail market, using characters such as Powergen's 'Mystic Bob'.


Source: http://www.energy-business-...

DEC 12 2005
http://www.windaction.org/posts/679-the-winds-of-change-are-still-too-costly-for-e-on
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