Axed windfarm puts govt subsidy levels in spotlight

The cancellation of one of the world’s largest planned offshore windfarms has highlighted the costs of next-generation turbine technology and the need for financial certainty, the renewables industry has warned.

German energy firm RWE yesterday announced it was pulling the plug on the 1.2GW Atlantic Array scheme that would have seen 240 turbines built off the north Devon coast, after deciding the technical challenges involved were too great in current market conditions.

A spokesperson for industry body Renewables UK said no other projects proposed for the UK’s third round of offshore windfarm development were in imminent danger but the cancellation came against a backdrop of mixed government messages about renewable energy and the slow progress of energy market reform.

‘If money was no consideration there might have been a way of using this site in its current state, but the economic realities are that it would be far too expensive to do so at the moment,’ Robert Norris told The Engineer.

The UK currently has around 3.7GW of offshore wind capacity producing an estimated 8.9TWh of electricity a year. The third round of offshore development could add a further 33GW of capacity if all proposed projects go ahead.

However, most of the Round 3 sites are much further out to sea, often in deeper waters and harsher conditions, and so are likely to require more advanced technology than that currently deployed.

A trial site of one such technology – floating turbines – will be built off the coast of Aberdeenshire following an agreement between the Crown Estate and Norwegian firm Statoil announced on Monday.

But there are worries within the industry that the subsidised energy “strike price” due to be offered to new offshore projects under the energy market reform bill currently passing through Parliament – £155/MWh in 2014/15 falling gradually to £135/MWh in 2018/19 – will not be sufficient to support all planned developments.

The Crown Estate’s head of offshore wind, Huub den Rooijen, said that the nature of the Round 3 projects meant further cancellations were likely but this would actually benefit the industry.

‘Paradoxically, this is a positive development because it provides greater clarity to key stakeholders such as supply chain and consenting bodies, and brings greater focus to the investment opportunities,’ he said in a statement.

RWE insisted its decision to cancel the Atlantic Array related to the particular combination of challenges at the site – including the type of bedrock and the strength of tidal currents – and that the firm remains committed to its other UK offshore wind projects.

The company, which has debts of around €33m (£28m), has pulled out of a number of projects across its portfolio including renewable, nuclear and fossil-fuel schemes in the last few years in what appears to be a consolidation of its business.

RWE’s UK renewables spokesperson Stephen Thomas said the economics of government subsidies were a factor in the cancellation but the company had not been pushed by an uncertain investment market and policy environment for offshore wind.

‘Even if we had people falling over themselves to invest ­– and we haven’t got that far with the project because it’s still in planning – if you go back to the costs, to the technology required, it’s just not feasible or economically viable right now.’

He added: ‘We’ve got much more favourable projects that are much less technically challenging so let’s focus our time and energy and resources on those project.’

Industry analyst Ronan Murphy, senior editor of VB Research, said that while the official line was that the cancellation was a one-off, it was never a positive sign to see such a large project abandoned.

He added that the uncertainty created by the slow progress of the Energy Bill had a wider effect than just discouraging investment in wind farms directly.

‘Part of the way to surmount technical difficulties is to have a thriving supply chain in place and you cannot have that when uncertainty exists in the sector.’