United Kingdom

United Kingdom

Remote UK projects' competitiveness 'highly uncertain'

UK: Remote island wind (RIW) projects may struggle to be awarded capacity in upcoming tender rounds due to the absence of a price floor, the government has admitted.

Projects on the remote islands such as the Isle of Lewis are eligible to compete in the UK's next CfD tender (pic: Flickr/Mumbles Head)
Projects on the remote islands such as the Isle of Lewis are eligible to compete in the UK's next CfD tender (pic: Flickr/Mumbles Head)

Projects on remote islands — defined as UK islands at least 10km from the mainland — will be eligible to take part in the next wave of CfD auctions, due to take place in May 2019.

In an impact assessment, the UK government’s department for business, energy and industrial strategy (BEIS) stated its preference of classifying RIW projects as a "distinct sub-class of generating station" and as a less-established "Pot 2" technology.

This is because they would "be unlikely to be competitive against other more established technologies" — which includes onshore wind and solar PV — in ‘Pot 1’.

If they cannot compete with other ‘Pot 2’ technologies, however, RIW projects will not be awarded a contract.

BEIS added that the extent to which such projects are able to compete against other ‘Pot 2’ technologies is "highly uncertain".

Remote islands’ isolation and lack of grid connection with the mainland limits projects’ ability to sell the power they produce, the government explained.

They would also have higher construction and operating costs, according to the government’s impact assessment.

These increased costs are largely due to the need to connect them from the mainland — an expense which would only be partly offset by increased load factors".

In the UK’s most recent CfD auction, ‘less-established’ technologies in Pot 2 included advanced conversion technologies, dedicated biomass with CHP (combined heat and power), and offshore wind.

Contracts were awarded for support ranging between £40/MWh (€44/MWh) and £74.75/MWh (€83/MWh).

Typically, offshore projects have greater capacities than onshore wind farms and benefit from project synergies with other sites in the same offshore area — particularly when its the same developer — thereby reducing prices.

The cheapest wind farms in the September 2017 CfD round, securing deals at £57.50/MWh, were Hornsea Project Two (1,386MW) and Moray East (950MW).

By comparison, an EDF-led consortium plans to enter its 180MW Stornoway project on a remote Scottish Island into the May 2019 tender round.

Antony Skinner, a renewables partner at law firm Ashurst, warned that remote island projects may struggle against other less-established technologies:

"There is a real risk that by not introducing a minima for remote island wind projects, such projects may struggle to gain a CfD at a strike price that will make them viable.

"This is what happened to tidal stream projects in an earlier CfD round which were provided with a high permitted price but were told that they needed to compete with offshore wind, which they were not in a position to do. Therefore, no tidal projects were successful in the CfD auction."

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