United Kingdom

United Kingdom

RWE cuts losses in England

UK: Permitting restrictions and uncertain policy plans have prompted RWE Innogy to cut jobs and halt investment in England onshore, and freeze some Welsh and Scottish plans.

RWE Innogy's 32.8MW Goole Fields site in England
RWE Innogy's 32.8MW Goole Fields site in England

In the past year, developer RWE Innogy has cancelled nine projects in England, ending up to £250 million of potential investment and writing off between £5m-£10m already invested in the sites. The company would not disclose which sites have been cancelled.

The cancellation of the projects resulted in ten job losses as its UK onshore development division was cut by 25%.

The success rate of its permitting applications had fallen to an unacceptable level, causing it to cease developments in the country, it said.

Permitting decisions have already been devolved to Scotland, and are expected be devolved to Wales by the end of 2016. The systems there are easier and more accepting of wind projects.

The inspectors in England apply a 125-metre ruling for blade tip heights, meaning the latest models, which can reach 200 metres, cannot be used. Hans Bunting, CEO of RWE Innogy, said this meant the country was still using technology from 2008 and not utilising the most up-to-date turbines. 

Mike Parker, RWE Innogy's head of onshore wind in the UK, said an increase in tip heights up to 135-metres could see 20% more energy being captured.

He also said under the current permitting restrictions, onshore wind is still cost competitive with new gas installations, but would be cheaper if the latest technology could be used.

Support system woes

RWE has two onshore projects in England under construction at Batsworthy Cross and Goole Fields II progressing under the Renewables Obligation (RO) subsidy programme, plus a project in north Wales.

There are two further projects in Wales and a third in Scotland, which secured Contacts for Difference (CfD) deals in the first auction last year.

RWE's 50MW Glen Kyllachy project in the Scottish Highlands was approved by planning authorities but missed out on the RO grace period due to the longer timeframe for getting a grid connection in Scotland. RWE said the project has not been cancelled yet, but the company waiting for some clarity on support schemes.

Development of 12 further projects totaling 460MW in Scotland and Wales has also been paused while RWE waits for the government to finalise the arrangements for support of onshore wind in the UK.

But support for onshore wind seems unlikely, with the government's energy minister Amber Rudd moving last year to close the current RO system early and talking about the CfD replacement scheme only in relation to offshore wind.

Bunting said there was "logic" behind allowing onshore wind to bid for Contracts for Difference in the UK's quest to provide the lowest cost of electricity to the bill payer.

However, in the second reading of a new energy bill being discussed in the UK Parliament yesterday, Rudd said: "We have agreed to discuss with developers the prospect of onshore wind without subsidy if it has local community support."

The UK government has pledged to hold a further three CfD auctions by 2020, with the next one scheduled for the end of 2016.

Target markets

As a result of the uncertainty in the UK, RWE has decided to expand its development focus.

On top of emerging markets in Ireland, Turkey and the Middle east, announced last week, RWE said it is also interested in entering the US onshore market, following the five-year extension of the production tax credit.

Bunting said the US potential is "huge" with between 4GW and 7GW of new capacity possible each year under the tax credit phase out.

Offshore hope

RWE was positive about the UK's offshore sector, welcoming the plans to hold further CfD auctions for offshore, and is confident its 900MW Triton Knoll project will secure a contract in the next auction.

RWE is partnering with developer Statkraft on the project. The Norwegian firm, however, announced it was stopping further investment in offshore in December. RWE said Statkraft would continue to help develop Triton Knoll through the CfD auction process and to a final investment decision, at which point a new financial partner or partners will be found to support the construction of the project. 

Its 336MW Galloper project off the UK's east coast is under construction with onshore works already underway. Offshore installation is expected to begin in the summer.

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