DONG Energy, E.ON and Masdar announced yesterday that they will invest 2.2 billion euros in the 300 turbine + London Array project 12 miles off the Kent and Essex coasts in the UK.
The announcement means that the first phase of the world’s largest offshore wind farm will go ahead. The onshore work for the 1000 megawatt project is due to start in early 2011.
Dr. Sultan Al Jaber, CEO of Masdar, said: “The leadership of Abu Dhabi recognizes the importance of global collaboration and engagement to deploy renewable energy on a large scale…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.”
Paul Golby, the chief executive of E.ON UK, said: “The project was on a knife edge but the changes to the incentive regime tipped the balance. The London Array would not have been economic without the additional support.”
Prime Minister Gordon Brown said: “The London Array is a flagship project in our drive to cut emissions by 80% by 2050 and meet future energy needs. The UK is a world leader in offshore wind farms, creating jobs and prosperity for the economy. That’s why we have increased our support for this technology as we move towards a low carbon future. “E.ON, DONG Energy and Masdar are to be congratulated for their work on the London Array.”
Vast scale offshore wind farms are essential if the UK is to meet its renewable energy targets. The financial mechanism which obligates electricity suppliers to source electricity from renewable energy is known as the Renewables Obligation (RO). Recently proposed government changes to the RO does not provide additional government funding for green energy but merely “shifts” existing value created by the mechanism in favour of offshore wind energy. Under the amended RO, the green certificate allocation (renewable obligation certificate or ROC) for offshore wind has been raised from 1 to 2 ROCs per MW hour (MWh). ROCs are saleable and therefore hold value. Any changes to the value however potentially disadvantage the value for other green technologies such as tidal power as a result.
There are also questions being asked about whether the change to the ROC value, suddenly announced by Gordon Brown in the budget – without wholesale industry consultation – helps the medium term health of the wider offshore wind industry (as opposed to just helping the London Array project).
Project managers in the offshore wind energy industry not involved in London Array are frustrated because the sudden demand for wind turbines created by the announcement has left them without wind turbines for well over a year unless they have already placed an order for their project with a wind turbine manufacturer. Furthermore wind turbine manufacturers have responded rapidly to the announcement, immediately stepping up the prices of wind turbines because the demand is so high and they can get away with it. This is resulting in all the additional value being sucked right out of offshore wind energy again leading to likely future investor uncertainty.
Problems have plagued the offshore wind industry for years from difficulties securing the turbines themselves to the building of specialised vessels for construction. In the hostile conditions of the North Sea – available time windows for wind energy project construction present huge challenges and therefore costs. The offshore wind energy industry is however pushing on through in the struggle to secure turbines, the right vessels and skilled people.
Climate Change Secretary – Ed Miliband said: “The London Array sends an important signal about the UK renewables market and the confidence of major suppliers, and vindicates the decision in the Budget about the ROCs…this is another green light for green energy. It’s a vote of confidence in the support the Government has put into backing renewable energy…The UK is already the world’s leading offshore wind power and this multi-billion pound project will help keep us there, cut our carbon emissions and contribute to secure energy supplies.”
