The offshore wind industry issued a stark warning today about the future of its development pipeline, warning that imminent changes to the governments subsidy regime could leave many projects unable to raise funding. Writing on BusinessGreen, Maria McCaffery, chief executive of trade association RenewableUK, said that the governments recent announcement of a £205m budget for the first round of subsidies to be offered through new Contracts for Difference (CfDs) has resulted in muted shock across the renewables industry. The news that £50m will be assigned to support mature technologies, such as onshore wind and solar projects, while £155m will be provided for less mature technologies, such as offshore wind farms, sparked warnings across the clean energy sector that these expanding industries will face severe constraints throughout the second half of the decade. McCaffery argues that the offshore wind industry is facing a particularly serious threat as the £155m budget will fund just one 500MW wind farm, leaving five of the six large-scale offshore projects that are thought to be ready to apply for CfD support without access to funding. The government maintains that further funding rounds will be announced in the future, but McCaffery warns that there is only £1bn left in the total CfD budget through to 2020, and as such the next allocation round is unlikely to be much bigger than the current funding pot. This £1bn has to fund all future renewables, including any decision to fund converting coal stations to burn biomass and new carbon capture and storage schemes, she writes. Funding all of this will cost much more than £1bn. All these unknowns create significant uncertainty for investors, the complete opposite of the governments EMR [Electricity Market Reform] intentions. She adds that the first CfD allocation means the government may struggle to realise its ambitious expansion plans for the industry. It looks like we have a mismatch between industry aspirations and the governments energy policy, McCaffery writes. Back in 2010, the Crown Estate published agreed licences for nine new offshore wind zones. Each of these was large in scale and further offshore than previous sites. The rationale was simple: if offshore wind was to bring costs down and deliver the significant MWs needed to meet our renewable targets, ambition was the order of the day. The government vigorously backed this step up in ambition, supporting offshore wind through the 2013 Industrial Strategy. Yet today we face the challenge that many of these schemes, on which many hundreds of millions have been spent in planning and site investigation, cannot be funded under the current budget. RenewableUK is also concerned that any eroding of the project pipeline risks undermining planned investments in the UKs offshore wind industry supply chain, such as the new facilities being planned for Siemens imminent offshore turbine factory in Hull. Consequently, the group is today publicly calling on the government to deliver an urgent update on the scale of future budget allocations under the CfD regime and provide longer term clarity on the level of support developers can expect. Government needs to accept that actually 2019 is not that far away, McCaffery says. Government clearly understands this about our nuclear programme - setting prices out to 2023... Offshore wind needs similar visibility. This means providing access to CfDs before the second allocation round all the way to 2020/21, as well as action to establish a new Levy Control Framework which will fund projects - renewable, nuclear and carbon, capture and storage - in the 2020s. To develop an offshore wind farm can take 10 years. But right now we only have knowledge of support for six years and access to CfDs on a four-year horizon. A spokeswoman for the Department of Energy and Climate Change (DECC) stressed that the government was providing more support [for offshore wind] than any other country in the world. The money allocated to early CfDs and the first round in October means we could see six new projects adding up to around 3.5GW of new capacity, she said, referring to the additional early-enabling support provided to projects ahead of the £155m CfD allocation. This is in addition to the 5GW which is already installed or under construction and potentially further four projects, which may come forward under the Renewables Obligation prior to its closure, making around another 1.5GW.
Posted on: Mon, 18 Aug 2014 07:41:01 +0000
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