United Kingdom

United Kingdom

Facing an offshore funding crisis

It is not interference with bird feeding sites that is the biggest near term threat to the UK government's efforts to get offshore wind farms built, but the failure of its own free market economics, embodied in its renewable electricity financing scheme, to pay for them. Failure to achieve targets for renewable energy will torpedo government pledges to reducing energy dependency and emissions of carbon dioxide.

Over 600 MW of offshore wind farm capacity that has already received full planning consent (with no objections from bird protectionists) may not be built. This is because the government's system of financing renewable energy is not seen to be generating enough money to pay for offshore wind farms. There are fears about the future shape of the government's financing arrangements and about the solidity of electricity supply companies whose job it is to deliver the government target of 10% renewables supply by 2010.

The British Wind Energy Association is projecting construction of 1000 MW of (mostly onshore) wind power in the next two years. Yet even if these hopes materialise, they represent less than half the annual rate needed. In addition, the BWEA's projection is for less than half the 2600 MW of wind power that has already been given planning consent, but which has not been built. We could achieve the target if all the consented projects were installed.

Thirteen offshore sites in the first round of the government's offshore program have siting permits. Two have been built or are being built. In the case of six others (totalling 450 MW) I can find evidence of projected financial commitments to build them, but in the case of five offshore projects (totalling 640 MW) I can find no evidence of any financial plans to support developments. Given that 640 MW is more or less the same total as is presently installed, this does not augur well for the shape of the Renewable Energy Certificates (ROCs) financial procurement mechanism.

The worst case scenario for the wind power industry would be for the government to scrap the present funding regime and then leave the industry in limbo for years. A middle way might be to set up a German or Danish style system of fixed price payments for wind power specifically to fund offshore wind farms. Present arrangements to pay for onshore wind power and other renewable energy technologies could continue alongside this supplementary measure.

At the end of the day, whatever the funding system, somebody has to put some serious money into wind power schemes. Although some energy utilities have pledged funds there does not seem to be enough money to build the 8000 MW of wind power required by 2010 to fulfil the renewable obligation targets. Rather than invest themselves, UK energy giants have often been content to pay the fines the ROCs system imposes on them The major energy utilities need to be pressured into putting more money in to wind power investment in order to ensure that all of those wind farms given planning permission are quickly deployed.

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