The decision comes after the UK government announced increased support for offshore wind under the Renewables Obligation (RO) in its April budget. Projects reaching financial close in the RO year 2009-10 will receive two renewables obligation certificates (ROCs) per megawatt hour, up from the 1.5 ROCs that had just been introduced from April this year compared to one ROC/MWh for onshore wind. ROCs are sold to electricity retailers by wind farm owners to raise additional income in addition to energy sales. Retailers must acquire ROCs or pay a fee to buy out of their legal obligation to source a rising volume of their electricity sales from renewables. From 2010-11, the volume of ROCs for each megawatt hour of generation will reduce slightly to 1.75 ROCs in 2010-11 before reverting to 1.5 the year after.
The London Array is owned 50% by Dong, 30% by E.ON and 20% by Masdar, which bought into the project after Shell pulled out, saying the expected returns did not match up to its requirements. Until the boost in offshore support, the partners had been holding back from committing to taking the final investment decision, citing the current economic climate which made the project "marginal" at best.
The partners claim to be satisfied that the project is now financially viable and are keen to push ahead with construction and to produce the first renewable power in 2012. London Array is the second project to proceed since the government's announcement of two ROCs, the first being Dong's 216 MW second stage of its Walney project in the north Irish Sea.
Siemens has won the prestigious contract to supply the 175 turbines for the first phase of London Array. The turbines will be built on a 90 square mile site, around 12 miles from the Kent and Essex coasts in water depths of up to 23 metres. The location enjoys average wind speeds of 9.2 metres per second. Siemens Transmission and Distribution has been awarded the contract for the onshore electrical design work.
From Siemens Energy, CEO Wolfgang Dehen notes the improved market framework. "Projects are now more profitable and hence more attractive for investors. In addition to the London Array offshore project, Siemens expects that more offshore projects will be commissioned in the near future." He adds that Siemens is already installing wind turbines at five offshore projects in the UK and Denmark and it has orders for more than 3300 MW on its books.
Onshore work at London Array is to start this summer, with offshore work to begin in early 2011. First power will flow from the project in 2012. The second phase will later add enough turbines to take the capacity to 1 GW, making it the world's largest offshore wind farm, supplying enough power for some 750,000 homes, or 25% of all homes in the Greater London area.
British Prime Minister Gordon Brown says the London Array is a flagship project in the country's drive to cut emissions by 80% by 2050 and meet future energy needs. He says the UK is a world leader in offshore wind farms. Dong Energy CEO Anders Eldrup says the approval of London Array is a "significant cornerstone" in the company's strategy to increase its electricity from renewable sources. "Dong Energy has built approximately half of all offshore wind farms in operation in the world today. Entering into the world's largest offshore wind farm project further strengthens Dong Energy's leading position in this field."
Sultan Al Jaber, CEO of Masdar, adds that the Abu Dhabi leadership recognises the importance of global collaboration on large scale renewables deployment. "The London Array represents Masdar's strategic approach to renewable energy, whereby real partnerships are formed between government and the private sector. This project is a great achievement for the UK government, E.ON, Dong Energy and Masdar, which exemplifies our commitment to build cooperation to take renewable energy further down the path to widespread global adoption."