The British Wind Energy Association (BWEA) today called on chancellor Alistair Darling to use his budget later this month to save wind farm projects struggling for investment.
The industry lobby group said that, with the exception of the major electricity generators, onshore developers were struggling to raise finance for their schemes at commercially viable rates.
Meanwhile, huge rises in the cost of offshore development due to a range of factors including the pricing of risk by contractors is threatening the viability of a slew of projects.
The BWEA has warned the Treasury that if the current momentum for wind projects - the last six months has seen the largest rises in onshore and capacity built - the government risks missing its EU target to generate 15% of its total energy demand by 2020, which is likely to require between 35% and 40% of our electricity to come from renewables.
“Large scale wind deployment is vital to reaching the UK’s goal of generating up to 40% of our electricity from renewables by 2020,” said BWEA chief executive Maria McCaffery.
“The current economic climate has caused a number of developers to put projects on hold, threatening the UK’s targets, and leaving the country exposed to volatile fossil fuel prices.”
The BWEA’s Budget Submission calls for the government to underwrite floor prices in Power Purchase Agreements, with the government essentially taking the role of insurer of agreements signed between generators and suppliers, removing price risk and giving greater security to lenders. This, claims the BWEA, would assist onshore and offshore schemes, but would be particularly helpful for the onshore sector which is heavily dependent on bank-led project finance.
The BWEA also proposes three policy options specifically for offshore schemes from which it recommends the government should chooses from:
- Socialising offshore grid costs: Relieving developers of the cost of the offshore grid would have significant cost benefits, claims the BWEA, and is done in other offshore markets, most notably Germany. This could be done without the use of government funds by retaining the competitive offshore transmission regime but socialising the payment of transmission charges across all grid users, rather than just the project developers directly involved.
- Direct Capital Relief: A programme of capital grants or carefully designed Enhanced Capital Allowances up to £2bn would effectively ‘buy down’ the recent cost increases and make projects cost effective.
- Increasing the offshore Renewables Obligation Certificate (ROC) multiple: An emergency review of the ROC multiple for offshore wind to increase its value from the newly introduced 1.5 ROCs per MWh.
“The fundamental economics of wind remain sound, and in the longer term commodity prices are likely to continue to fall, while increased competition in the supply chain will also bear down on prices,” added McCaffery.
“However, today, assistance is needed to help overcome a once in a generation economic downturn affecting the wind and marine energy sectors.”
The budget will be announced by Darling on April 22.