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Largest wind farm rescued by state

Financial Times

By Ed Crooks, Energy Editor

Published: May 13 2009 03:00 | Last updated: May 13 2009 07:29

The London Array, set to be the world’s biggest offshore wind farm, has been given the go-ahead after being rescued by a boost in government subsidies.

The companies behind the project said they were proceeding with the first phase, in which 175 turbines with a capacity of 630 megawatts would be constructed in the Thames estuary at a cost of about £2bn.

That is four times the size of the largest offshore wind farm in operation today.

In January, Eon, the German company that has 30 per cent of the Array, said the project was “on a knife edge” because of soaring costs and a finance shortage.

Paul Golby, chief executive of Eon UK, said yesterday: “With current commodity prices and carbon prices, the London Array would not have been viable without additional support.”

In the Budget, the government changed the renewables obligation, the subsidy scheme for electricity from renewable sources, to make it temporarily more generous to offshore wind farms.

If approved this year, offshore wind farms will receive twice the annual subsidy, known as “renewables obligation certificates”, paid to onshore developments. Previously the payment had been 1½ times greater. One rival wind power generator described it as the “let’s get the London Array built clause”.

The government has put a high priority on the Array, described by Gordon Brown yesterday as a “flagship” project for his ambition to cut carbon dioxide emissions and secure energy supplies.

Frank Mastiaux, chief executive of Eon’s global renewables business, said: “It has been the upgrade to the . . . certificates that has allowed us to get this into the economic range of other projects.”

He said the Array had also been helped by the recession. Raw materials prices for turbines such as aluminium and steel had fallen “by a mile”, he said, and the project partners were able to negotiate much better rates with suppliers. The turbines will be supplied by Siemens, the German engineering group.

The London Array has had a troubled history. Last year Royal Dutch Shell, one of the original partners alongside Eon and Dong Energy of Denmark, pulled out, saying it wanted to concentrate on onshore wind in the US, where the technology had a longer record and the returns were more certain. Shell has since said it plans no new investment in wind power because oil and gas projects offer better returns.

The project was boosted when Masdar, the Abu Dhabi renewable energy group, joined the consortium.

But hopes that renewable energy could create large numbers of jobs in Britain were set back last month when Vestas, the Danish wind turbine producer, said it was cutting 600 jobs in Britain and probably closing its Isle of Wight factory.

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