United Kingdom

United Kingdom

UK's 2030 offshore capacity could be as low as 12GW

UK: The UK's hopes of delivering the world's largest offshore wind energy programme are hanging in the balance, according to a new report commissioned by the Crown Estate, which manages the seabed around the UK.

The UK hopes to have 40GW installed offshore by 2030. But according to the UK Offshore Wind Market Study, produced by GL Garrad Hassan and Redpoint, its 2030 offshore capacity could be as low as 12GW with the bulk of this constructed prior to 2020.

Following interviews with developers, manufacturers, financial institutions and government stakeholders, the report lists a number of barriers to the full-implementation of Round 3. These include concerns about a lack of clarity on government policy and the availability of finance.

Others include capacity issues and the lack of supply chain competition — especially with regard to transmission — and difficulties in equity recycling once the project has been completed. This is partly due to a lack of track record for offshore wind technology.

The report says consultees expressed "concerns about the government's long-term commitment to offshore wind and the political uncertainty created by the impending reform of the electricity market. These factors were regarded as the most serious constraints on the rate of offshore wind deployment in the future."

Elsewhere, the report points out concerns over a perception that a reduction in the offshore cost of energy is a prerequisite for investment and government backing. However, the industry said this could lead to a catch-22 situation as long-term political support and investment was needed to bring this about.

Those consulted revealed a scepticism about the availability of finance and new sources of capital. This is exacerbated by "the asymmetry between construction risk and the number of players who can manage these risks effectively, the limited knowledge sharing and cooperation amongst the key players as well as the credit rating agencies treatment of joint venture structures".

Looking into the possibility of the UK's offshore capacity being as low as 12GW, the report says this would be brought about if the government moved away from low-carbon and renewable commitments to focus on competitiveness overseas. It says questions over government commitment remain the biggest barrier to future progress.

However, there is still cause for optimism. Government commitment to EU 2020 targets and the implementation of the electricity market reform could lead to significant investment in offshore technology and infrastructure. This in turn could lead to a reduction in the cost of energy and increased confidence from investors.

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