United Kingdom

United Kingdom

UK confronts hurdles to wind ambition

UK: There were plenty of reasons to celebrate at the three-day RenewableUK event, held last month in Glasgow at the Scottish Exhibition and Conference Centre on the bank of the River Clyde.

The UK industry had just passed the 5GW milestone of installed capacity and completed its first gigawatt of offshore wind. And over a 24-hour period in September, wind had supplied more than 10% of the UK's electricity.

Looking forward, the UK's commitment to EU low-carbon and renewable-energy production targets calls for a massive increase in wind capacity.

Wind energy in the UK has the best prospects of anywhere in the world today, said Keith Anderson, managing director of ScottishPower Renewables, the UK arm of Spain's Iberdrola. At this time of economic crisis, the industry is expected to kick-start an indigenous manufacturing industry, creating thousands of jobs, he said.

Planning woes

But there are policy holes in the government's wind power objectives, Anderson warned. With thousands of megawatts of onshore wind stuck in the planning system, the industry was waiting "with trepidation" to see new legislation, due to be published shortly.

A new Decentralisation and Localism Bill - which Anderson described as the greatest gift that anti-wind-farm campaigners have ever seen - will give communities in England and Wales increased powers to thwart wind farm developments in their areas.

But onshore wind farms are hugely important to the UK. "Without them we haven't got a hope in hell of achieving our renewable energy targets," Anderson said. He urged the government to support all renewables, "not just the renewables you can't see", he said, referring to offshore wind.

In fact, offshore wind was highly visible throughout the conference and on the exhibition floor. It was the sole topic of a third of conference wind sessions - and more than a third of the 320 exhibitors were involved in the offshore wind business. "Offshore wind is today's darling of the piece," commented RenewableUK chief executive Maria McCaffery. "It has huge investment and employment potential; everything seems to be revolving around it." But the industry must not lose sight of how much is riding on onshore wind, she cautioned.

Under the present planning regime, onshore consenting rates have dropped across the UK from 76% to 44% over the past year, she said. The new bill threatens to make the situation even worse.

Despite being "one of the most considerate and generous", the wind industry has a job to win hearts and minds, she said. For too long the myth has gone unchallenged that onshore wind brings no benefits to local people. New research shows that for every megawatt installed, £1.3 million (EUR1.5 million) is spent locally over the project's lifetime, she pointed out.

Meanwhile, the industry has been lobbying government for business rates - taxes for occupying non-domestic property - from wind farms to directly benefit local communities. It scored a small victory when the government agreed rates should be retained locally for six years. "Now we are pressing for six years to become the full life of the project," said McCaffery.

Question mark

Market reform is another big question mark hanging over the industry. The government is considering changing support for large-scale renewables away from the current quota system, based on renewable obligation certificates (ROCs), towards a system of fixed-price contracts, usually known as feed-in tariffs.

The industry needs a clear long-term support mechanism, said Anderson. He said the way forward is the Renewables Obligation (RO), in which renewable-energy producers receive a set number of green certificates for every megawatt hour of output. He hit out at criticisms that, under the RO, electricity from wind is more expensive in the UK than elsewhere in Europe.

The reason that British wind power costs more is that retailers are not able to procure enough renewable generation to meet their RO obligations, he insisted. "That's not the fault of the RO mechanism; that's the fault of the planning system and the lack of grid." He also blamed "colossal" land rents and the higher construction costs associated with wind farms being built on peat for the high costs.

From a banker's perspective, Nick Gardiner of French bank BNP Paribas warned that a switch to fixed-price contracts would risk a loss of momentum for offshore and onshore wind finance. Starting with a clean sheet, banks would usually prefer a feed-in tariff, he said. "But we have grown up with the RO," he added. "A switch now would be quite challenging for the banks and might create a hiatus."

With renewed appetite for financing wind now apparent in the banking market, Gardiner was concerned about the lack of onshore projects coming through the planning system. BNP Paribas is one of three banks working with the European Investment Bank to provide cheaper loans to smalland medium-sized onshore wind projects. Despite the more attractive interest rates charged under the plan, there is still capacity to do more wind deals. "I don't think this is the fault of the banks (that) we are not seeing that project pipeline coming through," he said.

SHORING UP SCOTLAND'S AMBITIONS - LEADER PROMISES INVESTMENT, Reports Ros Davidson

The leader of Scotland's devolved parliament, first minister Alex Salmond, announced an investment fund of at least £70 million (EUR82 million) over the next four years at the RenewableUK conference last month. The fund will help strengthen manufacturing and ports for offshore wind turbines and components.

The National Renewables Infrastructure Fund (N-Rif), he told a packed session, will help leverage an estimated 28,000 jobs and £7.1 billion (EUR8.4 billion) in value to Scotland's economy over the next decade. The monies will be delivered via the country's two key investment agencies, Scottish Enterprise and the Highlands & Islands Enterprise.

The fund is already open for business, and declarations of interest are invited by December 11. In contrast, the UK's energy and climate ministry is investing just £60 million (EUR71 million) from April 2011 in similar ports in England - a far more populous country.

"We are determined to stimulate the market and act decisively to trigger vital capital investment, and launch the next phase of Scotland's renewables revolution," said Salmond. Scottish Enterprise CEO Lena Wilson, in comments delivered outside the conference, added that this was the right time to build on Scotland's ambitions as the capital of global offshore wind. "We have a short window of opportunity to capitalise on our strengths, and this fund will enable us to turn our offshore wind aspirations into reality," she said.

The Scottish investment fund complements part of the National Renewables Infrastructure Plan, which included a promise to develop three offshore manufacturing hubs in Scotland. Scottish Enterprise has estimated that more than three times the new £70 million (EUR82 million) investment fund will actually be needed to upgrade key Scottish green-energy sites.

Salmond reminded the Glasgow audience of Scotland's aggressive goal of renewable energy contributing 80% of Scotland's electricity consumption by 2020. "That is a target which many people, just a few years ago, would have regarded as pie in the sky, hopelessly ambitious," he said. "Now, I suspect, most of us are confident that even that revised target will be exceeded over the next ten years." Salmond is confident that, by 2025, Scotland will end up exporting renewable energy, most from wind.

A former energy economist, Salmond slammed Scotland's "punitively" high grid connection charges for generators, which are in some cases more than six times higher than in the south-east of England, or as much as £80/kW (EUR94/kW) per year in areas most remote from population centres. UK energy regulator Ofgem and the energy and climate ministry are in the process of setting new rules.

Salmond, who is also the leader of the separatist Scottish Nationalist Party, reiterated his call for the UK government to remove what he called the restrictions on access to the £191 million (EUR225 million) of Scotland's fossil fuel levy funds to invest in renewables industries. The money is seen as part of Scotland's block grant from the UK government, rather than a green energy fund over and above the grant - which is what Salmond has been pushing for.

"We must and we will continue to press the (UK) treasury to release these funds now due to Scotland. They remain vital for the development of offshore wind and marine power, for heat networks and technology to deliver our renewable-heat targets - and vital, too, for our communities, so they can invest in and benefit from the green economy," he said.

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