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Wind farm ambitions dealt a blow

 

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Financial Times: Wind farm ambitions dealt a blow

By Fiona Harvey and Rebecca Bream

Published: May 2 2008 03:00 | Last updated: May 2 2008 03:00

Shell’s surprise decision to pull out of the world’s biggest planned offshore wind farm, the 341-turbine London Array in the Thames Estuary, has thrown into doubt Britain’s attractiveness as a site for offshore wind farms.

The UK was set to be the world leader, with more generating capacity planned than any other country. A combination of high wind speeds, generous subsidies and a long coastline gave Britain distinct advantages.

But Paul Golby, chief executive of Eon, which along with Shell and Denmark’s Dong Energy was one of the three partners in the London Array consortium, now appears pessimistic about the scheme.

“The current economics of the project are marginal at best – with rising steel prices, bottlenecks in turbine supply and competition from the rest of the world all moving against us,” he said

Dong said it was considering its options.

The government’s view is the UK must invest heavily in offshore wind power if it is to meet the European Union target of generating 20 per cent of energy from renewable sources by 2020. The country’s share of the target means it must generate about 40 per cent of its electricity from renewables.

Onshore wind farms have hit the buffers because opposition from local groups has mired most planning applications in years of delay. Growth in the proportion of electricity generated from renewables has stalled: it rose from 4.2 per cent in 2005 to just 4.6 per cent in 2006, and the amount of new wind capacity added last year was less than three-quarters of that built in 2006.

Siting turbines off the coast seemed a better option, and John Hutton, business secretary, gave a target last year of erecting 33 gigawatts of offshore wind generating capacity by 2020. So far, seven offshore wind farms are operational, five under construction, nine have received planning permission and another six are awaiting permission.

The Department for Business, Enterprise and Regulatory Reform said this “suggests that offshore wind is commercially viable”, and said that offshore wind farms could receive 1.5 Renewables Obligation Certificates per megawatt hour, compared with one Roc for onshore wind.

But spiralling costs are changing the equation. The cost of wind turbines has rocketed on the back of rising commodity prices and soaring demand, and offshore farms face added costs, such as hiring vessels and connecting to the grid. The cost of the London Array was estimated at £1bn in 2003, but by 2005 had risen to £1.5bn and today could be as high as £2.5bn.

Shell’s decision revealed a weak spot in the government’s plans. The company said it would continue to invest in wind in the US, where it can build much cheaper onshore turbines. If other multinationals take the same view, investment in the UK may drop off.

The UK was “not competitive” with other countries, said Richard Robb, chief executive of Christofferson, Robb and Company, an investment management company that owns a 300MW farm under construction off the coast of Thanet.

 

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