McCullogh warned that government would not be allocating any more financial support to offshore wind, such as capital grants. The industry needs to find more novel solutions within the Renewables Obligation (RO) market framework to allow developers of large offshore round two projects to bridge the funding gap while at the same time avoiding destabilising the RO market, he said.
Under McCullough's proposal, developers would sell their Renewable Obligation Certificates (ROCs) to a government agency at a fixed price out to 2027 -- the current term of the obligation. The Pioneer ROC purchase agreement (PRPA) price would be derived from the agency's forecasts of future ROC prices. This places political risk and risk from future movements in ROC prices on the shoulders of the agency, while giving offshore developers certainty of revenue, lowering the project cost of capital. The cost to government is limited to underwriting the risk.
The PRPA "is not necessarily going to be everybody's cup of tea," said McCullogh. "But bear in mind that there ain't a silver bullet and if we are serious about trying to find a way [to make offshore work] we do need to think out of the box."