UK projects to prosper under industry aid

After experiencing an onslaught of blistering attacks during the height of the global economic melt-down, the sight of a long line of smiling faces may have heartened an otherwise dejected UK chancellor.

With not even the faintest hope that his new-found friends were savers, grateful for the rescue of their ailing banks, in the run-up to the countries budget announcements it appeared that the assembled masses were lobbyists, working for some of the most powerful industries in the land.

Whilst political lobbying has, for decades, been part of the pre-budget bartering process, the intensity of the negotiations were unprecedented due to the decimated state of the UK economy.

So whilst the green lobby jostled with the oil and gas lobby who fought off the road haulage lobby which was trying to side-step the car lobby, the chancellor had the responsibility of sorting the grain from the chaff, leaving offshore wind with...£525m. "Hoorah!" cried everyone (except the nuclear lobby), finally the industry has all the cash it was looking for!!

Err, cash? Hm, no. What the chancellor actually promised was to temporarily raise the Renewables Obligation Certificates (ROC) banding level for offshore wind, a move was designed to bolster the projected economics of offshore wind farms currently under development.

There is no doubt that the decision had been influenced by the on-running saga of the London Array Project, a high profile development in the Thames estuary, which has been plagued with delays and mired in doubts over its economic viability for months.

At times it proved difficult to seperate the developers genuine concerns over the projects commercial viability and their political posturing for further concessions (= increased profit margins).

What is certain is that had the Government not intervened with industry support, this national icon in the battle against climate change would not have been operational by 2012, when the eyes of the world would be fixed on East London for the 2012 Olympic Games.

Centrica had added to the political pressure with a demand for changes to the ROC banding scheme and eventually the treasury relented, awarding offshore wind operators 2 ROCS for every megawatt of electricty produced. The change will be temporary (only available between 2011 and 2014), but it seemed to appease wind developers and secure the London Array Project for good...

The firms behind the world’s largest wind farm, the project, are poised to approve the long-delayed project after Alistair Darling announced an aid package for the industry. A final investment decision on the £3 billion project will be made soon and construction is expected to begin later this year. If all goes to plan, the first phase will be completed in time to provide power to London for the Olympic Games in 2012. - The Times, 27th April 2009.

No sooner had the industry digested the implications of the ROC re-rating, than the British Wind Energy Association announced that five UK offshore wind projects had been saved by the budget. These were:

- London Array, Thames Estuary – being developed by E. On, Dong and Masdar;
- Gwynt y Môr, north Wales – RWE npower renewables;
- Walney II, Cumbria – Dong Energy;
- West of Duddon Sands, Scotland – ScottishPower, Dong and Eurus Energy; and
- Lincs, Lincolnshire – Centrica Energy.

Cynics could have argued that these projects may have been sat upon until the Government had made up its mind on the right level of industry support required, but BWEA spokesman Charles Anglin was in no doubt that the new fiscal reforms had made a difference...

"If these firms had not been able to come to financial close on their projects, not only would they have been delayed, some of them would have been cancelled."

Anders Eldrup, CEO of Dong Energy, said: "It is encouraging that the investment regime has now been created to allow us to implement our strategy of considerably expanding Dong Energy's position within sustainable energy. With the two ROCs, we can now begin the construction of Walney I and II."

So for the moment, Alistair Darlings olive branch appears to have appeased the industry, the public, the media and his colleagues. Whether it will be enough in the longer term is still to be seen. Half a billion pounds of support does'nt seem to be all that much when you consider that it will cost nearly twice that amount to get each of the aforementioned wind farms operational, but other aid is being made available. Earlier this month, the European parliament approved €565 million in aid for offshore wind projects under the EU Economic Recovery Plan and the UK will undoubtedly benefit from these funds.

In a recent meeting between industry leaders however, it wasn't the cash that was being seen as the ultimate support, but changes to the bureaucratic framework that has hindered so many offshore wind projects. Developers expressed concerns over the cumbersome planning permissions process, grid connection delays and shortage of skills and services, which were seen as the greatest hurdles to maturing developments.

Increasing the rewards for operational offshore wind farms is one thing, providing support for early-stage projects is a whole new ball-game altogether. As to the question of whether the Government can step up to the mark and meet these industries needs as well? Well the signs are good, but for the moment its still a case of lets wait and see.