Forthcoming changes to the banding of renewable obligation certificates (ROCs) will likely affect the onshore market. From 1 April 2013 onshore wind projects will receive 0.9 ROCs/MWh, down from the current 1 ROC/MWh they receive. There could be a rush to build before the change comes into effect, as projects need to be generating in order to be accredited. Industry body RenewableUK expects most of the 1.5GW currently under construction to make the deadline.
When the change was announced last autumn, RenewableUK warned it would lead to a reduction in onshore deployment by 2017, from 12GW to 10.4GW, mainly hitting small community projects. Whether this proves accurate remains to be seen. Developer Ecotricity, which operates many oneand two-turbine projects, said the change would not affect its plans, as these have been based on a rate of 0.8 ROC/MWh.
However, uncertainty caused by the changes is one reason why 2011 saw the lowest deployment since 2005. Only 403MW was installed onshore last year, and 291MW offshore. This was significantly down on RenewableUK's forecasts, which predicted close to 1.5GW. The organisation said the shortfall was due to developer over-optimism, but that projects were now moving forward. The first weeks of 2012 saw a surge in investment in onshore wind, and UK law firm McGrigors reported more than £200 million in new investment over just six weeks. It said that an end to uncertainty regarding ROC rebanding was one factor.
Incentives for 2014
The new rules will see ROCs eventually replaced by feed-in-tariffs with contracts for difference (FIT CfD). Generators will receive a top-up payment when the wholesale price for electricity is below a pre-agreed price and pay money back when the wholesale price rises above a strike price. This mechanism will be introduced in 2014, although generators will be able to choose between ROCs and the FIT CfD until 2017.
A lack of information about how contracts will be designed and delivered has concerned the industry. But this year should see more detail emerge about how the new support system will work, and legislation to reform the UK electricity market will begin its passage through Parliament in May.
Onshore, a record low in new permitting approvals last year has the industry worried - just 26% of proposed new capacity was approved in England and 39% in Scotland, according to RenewableUK. There is a fear that the situation could worsen in 2012, particularly in England, as policy changes kick in.
The government is due to publish the final version of simplified planning policy guidance early in the year. The development industry and environmentalists were concerned by the draft version, with its undefined "presumption in favour of sustainable development" and lack of guidance to local authorities on how they should balance competing priorities.
In Scotland, the industry fears that changes to grid-connection fees - suggested by electricity market regulator Ofgem - may hamper growth in the islands, where there is great potential thanks to high wind speeds. Proposals under Ofgem's project TransmiT will see connection fees cut, but not enough to make viable around 1GW of wind generation planned for Shetland, Orkney and the Western Isles, says the economic development agency Highlands and Islands Enterprise.
In Wales, a backlog of permitting applications continued to grow in 2011, with only two projects of 22MW consented. There has been significant opposition to plans for new wind farms and transmission pylons, especially in mid-Wales.
Northern Ireland's wind-energy sector has been growing rapidly, boasting 398MW of installed capacity as of January 2012 - 64MW more than a year earlier - and another 550MW with planning consent. In addition, around 600MW of projects await consent and bids are being developed for 600MW of offshore capacity. But growth is at risk due to network constraints and Northern Ireland's extremely limited interconnection with the Republic of Ireland and the UK mainland.
While manufacturing companies have been sizing up UK locations for potential offshore facilities, there has not been much action in manufacturing for onshore equipment. Danish turbine manufacturer Skykon put its Scottish tower factory into administration early last year, less than 12 months after it bought the facility from Vestas. The facility was acquired by SSE and Marsh Wind Technology in May last year.
Bridge manufacturer Mabey Bridge opened a £38 million tower manufacturing facility in Chepstow, Wales, in order to deliver on its preferred-supplier framework deal with Repower. In January 2012, it announced a multi-million-pound order to deliver 35 towers to Nordex.
Offshore wind's contribution to Britain's electricity generation mix continues to grow and is one of the most significant in the world to date. Activity over the next few years will be dominated by the next wave of development in the waters of the North Sea, Irish Sea and English Channel. The government hopes this third round of development will take offshore wind capacity to 18GW by 2020.
In order to meet this target, the cost of offshore wind will need to be cut from £150/MWh to £100/MWh. The government has set up a special task force to investigate how this can be achieved, led by RenewableUK chairman Andrew Jamieson. Financial support for offshore wind was downgraded in last year's ROC review, although the final result was not as bad as the wind industry had feared. Currently, offshore wind earns 2 ROC/MWh, but this will drop to 1.9 in 2015/16 and 1.8 in 2016-17. Currently, the UK has 14 offshore wind farms totalling 1.5GW, of which 1.36GW is in waters off England, one generating 10MW off the Scottish coast and two generating 150MW in Welsh waters.
This year will see continued efforts to adapt ports to become offshore wind supply hubs. Several manufacturers are assessing where to base new facilities. Last year, Siemens announced plans to build a £100 million turbine factory in Hull and a possible assembly facility in Grimsby. It also opened a training centre in Newcastle-upon-Tyne.
Gamesa opened a wind technology centre in Glasgow, but delayed deciding on a manufacturing plant - to be located in either Leith - in Edinburgh - or Hartlepool. Vestas is looking at setting up a handling port or, possibly, a manufacturing facility at Sheerness, on the Kent coast, while Dong is considering a handling or manufacturing facility in Belfast, Northern Ireland. Repower is also planning a turbine manufacturing plant, but has yet to confirm its location. The UK ports eventually chosen by wind manufacturers are set to emerge as offshore centres on a par with those in the Netherlands, Germany and Denmark.