The British Wind Energy Association told the UK Government today that it has to intervene if the UK renewable energy target is to be met.
Talking about its written submission prior to next week’s budget, BWEA Chief Exec Maria McCaffery said:
“Large scale wind deployment is vital to reaching the UK’s goal of generating up to 40% of our electricity from renewables by 2020.
The current economic climate has caused a number of developers to put projects on hold, threatening the UK’s targets, and leaving the country exposed to volatile fossil fuel prices. Building a clean energy sector in the UK is an important part of our economic recovery, and we need to maximize the opportunities to develop sustainable energy projects which would otherwise be delayed by the recession.
We are keen to work closely with Government to deliver solutions to this renewables crunch, and to secure the UK’s long-term competitive advantage as a magnet for low carbon investment.”
Reasons for struggling onshore and offshore wind energy projects are cited as the value of the £, rise in construction costs and availability of project finance.
The BWEA believes that timescales for some Round 2 Offshore wind energy projects are being stretched to avoid deteriorating finances and say that there are £10 billion worth of ’shovel-ready’ schemes, which could be released to boost the economy if project finance and economics are improved.
Specifically it calls for Government to:
- Underwrite floor prices in Power Purchase Agreements (the contracts between developers and consumer supply companies): Government would essentially be taking the role of insurer of agreements signed between generators and suppliers, removing price risk and giving greater security to lenders.
This, the BWEA says will “assist both onshore and offshore schemes, but would be particularly helpful for the onshore sector which is heavily dependent on bank-led project finance“. BWEA also proposes three policy options specifically for offshore schemes from which Government should choose:
- Socialising offshore grid costs: Relieving developers of the cost of the offshore grid would have significant cost benefits, and is done in other offshore markets, most notably Germany. This could be done without the use of Government funds by retaining the competitive offshore transmission regime but socialising the payment of transmission charges across all grid users, rather than just the project developers directly involved.
- Direct Capital Relief: A programme of capital grants or carefully designed Enhanced Capital Allowances would effectively ‘buy down’ the recent cost increases and make projects cost effective.
- Increasing the offshore Renewable Obligation Certificate (ROC) multiple: An emergency review of the ROC multiple for offshore wind to increase its value from the newly introduced 1.5 ROCs per MWh.
Such an approach appears to be an “about turn” from the BWEA’s submissions to the Renewable Obligation review last year where it a) advocated the continuation of the Renewables Obligation system rather than feed in tariffs (which is in effect what it is suggesting by underwriting Power Purchase Agreements). It was also cautious about increasing ROCs for offshore wind energy because of the risk of this lowering ROC values for onshore wind energy projects – making them unviable. The submission is therefore likely to cause friction within the wind energy industry.
Both the BWEA and New Energy Focus reported today that the number of wind farm planning applications submitted in the UK are down this year with the lowest submission figures since 2002. Both blamed the economic situation, however it is more likely to be the case that wind energy developers are too busy trying to get their wind energy projects out of the planning system to have time to put new projects in.
