Offshore wind support put under scrutiny

Ministers should reconsider the level of support provided to offshore wind farms under the Renewables Obligation (RO), British Gas managing director Phil Bentley told MPs.

Giving evidence at a hearing of the new House of Commons Energy and Climate Change Committee on 4 February, Mr Bentley said the RO is "insufficient to get some of these bigger investments offshore off the ground… at the moment the economics don’t quite work." He said the major issue is construction costs, including the price of steel and rig rates.

Offshore wind now receives one Renewable Obligation Certificate per megawatt hour. From 1 April 2009 this will increase to 1.5 ROCs/MWhr (ENDS Report 389, pp 42-43 ). A spokesman for British Gas parent firm Centrica confirmed its view that even this higher level of support "does need to go up."

The economics of large offshore wind projects have also been questioned by Eon. Chief executive Paul Golby recently told the Financial Times the proposed London Array, in which they hold a 30% stake, is "on a knife edge."

"Costs have gone up quite severely," said Gordon Edge, director of economics and markets at the British Wind Energy Association (BWEA). "But it’s not yet clear how long that’s going to last." If costs came down rapidly, changes to the RO banding might not be necessary, so temporary support might be more appropriate.

Bands are scheduled for review starting in October 2010, with any changes to come into force on 1 April 2013. An emergency review can be triggered if the Secretary of State is satisfied of a sustained variation in costs, for instance the price of steel. Emergency review would not be rapid, requiring parliamentary time and a new RO Order with a statutory consultation of at least six months.

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