UK boosts support for offshore wind

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9 December 2013, Nuclear, Solar, Wind

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Long-term financial stability is critical to the development of renewable energy projects; the CFD support scheme is designed to improve this through the provision of a guaranteed, stable price of power for generators. This in turn can potentially reduce risk and lower the costs of new projects, which should eventually feed through to customers. The issue lies within the length of time it takes to do so - a period during which politicians need to refrain from unnecessary comment on renewables support other than to further enhance certainty for investors.

The increase in support for offshore wind and the corresponding reduction in support for onshore wind may also be seen as a partially politically motivated rebalancing act of the UK's wind industry. Offshore wind is considerably more expensive than onshore wind, with a strike price set at ?155/MWh compared with ?90/MWh when the scheme becomes operational in April 2014. However, the unaccounted costs of the visual impacts of onshore wind farms can be high and have caused heated debate, becoming an ever more serious political factor.

The strike price for offshore wind under the CFD has been revised upward from April 2017 to ?140/MWh compared with the draft strike price of ?135/MWh that was announced in the summer - a 9% reduction instead of a 13% reduction from the current strike price of ?155/MWh over a four-year period. Considering the long lead times for offshore wind projects, this figure will be relevant to current planning applications and may have an immediate effect on the supply chain for the industry.

However, forecasts for cost-cutting in the offshore wind industry have been overly optimistic and the proposed reductions in support levels over the next five years have already led to the postponement of offshore wind farms such as RWE's Atlantic Array and Centrica's Race Bank projects. As explained in one of Datamonitor's recent articles ("Centrica doubts offshore wind profitability," November 8, 2013), an increase in the proposed level of financial support was required to prevent a major slow-down in the UK's offshore wind industry but despite the recent changes, the industry still faces an uphill struggle to reduce costs sufficiently as offshore wind projects move into ever more challenging environments. / / @DatamonitorEN

Source: MarketLine

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