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Finance and grid big obstacles -- Offshore UK conference

Difficulties with financing and grid infrastructure are the biggest obstacles to the development of thousands of megawatts around Britain's coasts, a conference in London on offshore wind farms heard. Bankers and investors are wary of financing offshore projects because of political risk and uncertainty under the UK's support mechanism for renewable energy, the renewables obligation, speakers warned at the British Wind Energy Association (BWEA) offshore wind conference on March 26-27.

The lack of a firm commitment by government to increase the level of the renewables obligation above 10% after 2010, and volatility in the market for renewable obligation certificates (ROCs), could scare off potential investors, delegates were told. "Financiers do need surety about ROC values," said the BWEA's James Glennie.

In the first round of the UK offshore program, projects are stand alone and small in size -- most less than 100 MW. This made banks reluctant to become involved on a limited recourse basis, he said. "In round two, I expect we will see much larger developments with sharing of infrastructure and some phasing of projects." This will make financing easier.

Fintan Whelan, from Airtricity, also homed in on ROC values. "The government needs to do something to make ROCs more effective. They need to understand bankers' concerns and take account of them," he said. Energy Minister Brian Wilson agreed that finance is a key impediment, and he appeared willing to take on the issue. "Let's make sure we get a regime in place that gives the finance community more certainty," he said.

Another viability issue for offshore wind is the cost of renting the wind farm site, said Whelan. He called on the Crown Estate, the seabed landlord, to take a longer term view and shape a more "friendly" lease agreement. This would involve developers making site lease payments later in the project's life rather than on a yearly basis from the outset. Bankable leases, he said, are being discussed by the BWEA and the Crown Estate.

Despite the focus on financing, topping the list of obstacles to offshore development is grid infrastructure, stressed Glennie. The existing grid was built with synchronous conventional generation in mind, he pointed out. First round offshore developers are already grappling with problems connecting to the grid, he said. In its present state, the network could accommodate only around 1.5 gigawatts of offshore wind instead of the potential of up to 9 GW in planning.

Wilson also identified transmission as a major obstacle. "Infrastructure is all. The focus of lobbying in support of renewables must move away from individual projects and technologies to infrastructure," he said. "There is no point in generating power unless we can ensure that it is capable of being carried to the markets which require it," he said. The regulatory system must help government's aspirations for renewable energy and not place impediments in its way, said Wilson.

Looking beyond round two, Wilson said that new areas will not be offered for lease until they have undergone environmental assessment. He added that the government is to bring forward legislation to enable developments beyond the 12 mile territorial limit as soon as parliamentary time allows.

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