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Renewables: Turbulence in offshore wind

"It is clear that people are rowing back on early investments," he says. ...Early tremors of concern arose last year when George Osborne, the chancellor, told the Conservative party conference: "We're not going to save the planet by putting our country out of business." Some interpreted this to mean the UK would water down its renewables targets if they made British businesses less competitive.

At first glance, the UK offshore wind market could hardly be more appealing to potential investors.

Britain's commitment to meeting its share of EU clean energy targets means it will probably have to get about 30 per cent of its electricity from renewable power sources by 2020 - up from just 9 per cent in 2011.

Much of that extra energy is expected to come from wind farms, and, given the growing opposition to onshore parks, that means a large chunk should be generated offshore.

The UK's seas are home to about 800 turbines, thanks to the relatively shallow waters, strong winds and generous subsidies. This has produced 2.7GW of offshore wind capacity, more than the rest of the world combined.

There are many more developments in the pipeline following the last two offshore wind licensing rounds, in which developers were awarded sites with 7GW of capacity in 2003 and about 31GW in 2010. Other sites awarded off Scottish waters in 2009 are expected to amount to a further 4.8GW of capacity.

"We are seeing a pipeline that is set to deliver another 6GW in the next four years, so we are trebling the capacity that is already there," says Nick Medic, director of offshore renewables... more [truncated due to possible copyright]  

At first glance, the UK offshore wind market could hardly be more appealing to potential investors.

Britain's commitment to meeting its share of EU clean energy targets means it will probably have to get about 30 per cent of its electricity from renewable power sources by 2020 - up from just 9 per cent in 2011.

Much of that extra energy is expected to come from wind farms, and, given the growing opposition to onshore parks, that means a large chunk should be generated offshore.

The UK's seas are home to about 800 turbines, thanks to the relatively shallow waters, strong winds and generous subsidies. This has produced 2.7GW of offshore wind capacity, more than the rest of the world combined.

There are many more developments in the pipeline following the last two offshore wind licensing rounds, in which developers were awarded sites with 7GW of capacity in 2003 and about 31GW in 2010. Other sites awarded off Scottish waters in 2009 are expected to amount to a further 4.8GW of capacity.

"We are seeing a pipeline that is set to deliver another 6GW in the next four years, so we are trebling the capacity that is already there," says Nick Medic, director of offshore renewables at RenewableUK, the wind and marine energy trade body.

Some industry observers, however, say there are signs of a slowdown.

The sites awarded in the 2010 round are still some way from receiving final approval from planning authorities, but of the 16 sites awarded in 2003, eight have yet to take final investment decisions.

Tellingly, some developers are not committing to firm orders for equipment such as turbines or transmission cables, says Ian Temperton, head of advisory at Climate Change Capital, a London-based investment manager.

"It is clear that people are rowing back on early investments," he says.

"We won't see hard evidence of a slowdown for the next couple of years, when the next lot of final investment decisions are due to be taken. But the thing that is absolutely slowing down is pre-financial close commitments."

The weak economy is likely to be one reason why companies are hesitant to make firm commitments. Another is that there is growing uncertainty about the UK coalition government's support for a green economy.

Early tremors of concern arose last year when George Osborne, the chancellor, told the Conservative party conference: "We're not going to save the planet by putting our country out of business." Some interpreted this to mean the UK would water down its renewables targets if they made British businesses less competitive.

This year, Mr Osborne has stirred up even more controversy by writing to Ed Davey, Liberal Democrat energy secretary, to say he wanted the government to give "a clear, strong signal that we regard unabated gas as able to play a core part of our electricity generation to at least 2030 - not just providing back-up for wind plant or peaking capacity".

The comments infuriated many Liberal Democrats, who saw it as a rejection of the UK's low-carbon commitments.

Mr Davey, meanwhile, is about to bring to parliament a long-awaited energy bill that will phase out the existing subsidies for new wind farm entrants by 2017 and replace them with a system involving long-term contracts that guarantee generators a set price.

The trouble is that this price is unknown and is likely to stay that way for some time.

It is also unclear how much influence the Treasury will have on the final shape of the new support regime, known as electricity market reform (EMR).

That is one reason why seven of the world's leading wind turbine manufacturers, including Vestas Wind Systems of Denmark and Siemens of Germany, wrote to Mr Davey in October to say the reported disagreements within government and speculation over the future subsidy regime had "caused us to reassess the level of political risk in the UK".

"Historically the UK has benefited from being known as a country with low political risk for energy sector investments," the companies said. "Undermining that reputation would have damaging consequences for the scale of future investments in the UK energy sector."

The manufacturers' concern is understandable, says Paul Coffey, chief operating officer of RWE Innogy, the division of German energy group RWE that is building several UK offshore wind parks.

"Almost all the turbine suppliers have very significant overcapacity in their portfolio already. Against that background you need to tread carefully in investing in brand new production capacity," he says.

"To be confident to build that capacity, you have to believe in an overall government commitment to an energy policy that includes offshore wind. At the moment we have EMR and there is insufficient clarity about how offshore wind will be treated under EMR.

"It has created a bit of a delay in the plans of the developers, and that means the equipment manufacturers will also [have to] stand by and wait."


Source: http://www.ft.com/intl/cms/...

NOV 5 2012
https://www.windaction.org/posts/35302-renewables-turbulence-in-offshore-wind
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