Offshore Wind Faces Trouble in the UK
For many years, the UK has been a leader in offshore wind.
Out of the top 10 largest offshore wind farms in the UK, 6 belong to the UK. These include the Siemens-owned London Array and the Greater Gabbard wind farm, the largest and second largest, respectively.
However, that all could change soon, as the UK’s government moved last week to cap renewable energy subsidies at £200 million per year. The idea behind the move is to subsidize renewable energy producers who offer electricity with lower carbon emissions than those providing the same service with fossil-fuels. They hope to foster competition so renewable energy is provided to the consumers at the lowest possible cost.
The UK’s government called the subsidies a “boost” for renewable energy. Energy and Climate Change Secretary Ed Davey was exceedingly positive about the allocation of the funds.
“Our plan is powering growth and jobs as we build clean, secure electricity infrastructure for the future. By radically reforming the electricity markets, we’re making sure that de-carbonizing the power sector will come at the lowest possible cost to consumers,” Davey said. “Average annual investment in renewables has doubled since 2010—with a record breaking £8 billion worth in 2013. These projects will create green jobs and green growth, reduce our reliance on foreign-controlled volatile energy markets and make sure bill payers get the best possible deal.”
Naturally, renewable energy companies were not thrilled about the move, as they said it represented a large reduction in the support they were already receiving.
The funds will be distributed across three broad categories: strongly established forms of renewable energy such as solar and onshore wind, the conversion of fossil-fuel burning plants to biomass, and to less established forms of renewable energy, such as offshore wind.
RenewableUK’s Director of Policy Dr. Gordon Edge noted the policy’s direct effect on offshore wind.
“A successful launch of the first CfD allocation round is fundamental to building investment and industrial momentum. An excessively cautious approach affects the UK’s offshore wind industry in particular,” Dr. Edge said. “The sector needs long term visibility to give the UK the best chance of securing a strong local supply chain to drive down the cost of offshore wind energy. Failure to set even an indicative budget for the second allocation round at this crucial stage means that visibility is now extremely limited.”
On Bloomberg’s The Pulse, host Guy Johnson drove the point home, saying that offshore wind was the industry that would really “feel the pain.” His guest Ilesh Patel, who is a partner at consultancy firm Baringa, agreed wholeheartedly.
“That £155 million funds 500 MW, we think, equivalent to the London Array for example, off the east coast of Kent. Now that doesn’t go very far at all—considering we’ve got 20 or 30 projects that size fighting over that. If we’re only going to fund one of those over the next 4 or 5 years, that’s going to be a huge challenge.”
Patel continued, assessing the changes to funding as a whole, saying “[the policy] is well intentioned, but what they’ve ended up doing is giving a little money to everybody, but not enough to anybody.”
When asked what offshore wind projects he thought would survive, Patel was frank.
“Only the best will survive,” he said, “probably the top 5 or 6 projects.”
There are those, however, who believe turning away from offshore wind is in the UK’s best interests.
Chairman of Terra Firma—the majority shareholder in Infinis Energy—Guy Hands believes that relying on offshore wind to meet the UK’s renewable energy targets could prove a costly mistake.
“The Department of Energy has set a target of 18GW of installed offshore wind capacity by 2020. But only 3.7GW is operational today, with 1.4GW under construction and another 2.4GW having received planning consent,” Hands writes. “Even if all these projects are generating power by 2020, which is a big if, we won’t be halfway to the 20 per cent target. The only way this shortfall could be met is if every offshore wind project currently in the early planning stages were to be developed, receive consent, and be operational within the next six years. Given the inevitable planning delays, difficulties in raising capital and constraints in the supply chain, this seems impossible.”
With the new cap on subsidies, the impossibility may now be even greater.
Still, there’s plenty of momentum behind offshore wind.
This weekend, the UK Green Investment Bank announced its hiring of two offshore wind experts to help boost support and funding for projects. The two joining are Nick Gardiner from BNP Paribas, who will take on the role of managing director for offshore wind, leading GIB’s offshore wind direct investment team, and Karl Smith, who was previously a director in GIB’s offshore wind investment team, taking on the newly-created role of fund managing director.
”This is an exciting time for GIB’s offshore wind business, as we continue to look at investments in construction assets and start fundraising for the UK’s first dedicated offshore wind fund,” head of investment banking at GIB Ed Northam said. “I look forward to working with our two new MDs as we realize our ambitious plans for the offshore wind sector.”
E.ON also won a huge contract for build a 700 MW off the east coast of England. They hope that the project will attract $3.4 billion in investments.
“We’re driving investment in our energy security, and our plans have made us no. 1 in the world for investment in offshore wind energy,” Ed Davey said. “This project is great news for Sussex, providing green jobs as well as driving business opportunities right across the country in a sector with a clear roadmap for long-term growth.”
This was before the reduction in funding was announced, however. Now, the outlook may not be as positive.
All but two UK regions failing on school energy efficiency
Most schools are still "treading water" on implementing energy efficient technology, according to new analysis of Government data from eLight.
Yorkshire & the Humber and the North East are the only regions where schools have collectively reduced how much they spend on energy per pupil, cutting expenditure by 4.4% and 0.9% respectively. Every other region of England increased its average energy expenditure per pupil, with schools in Inner London doing so by as much as 23.5%.
According to The Carbon Trust, energy bills in UK schools amount to £543 million per year, with 50% of a school’s total electricity cost being lighting. If every school in the UK implemented any type of energy efficient technology, over £100 million could be saved each year.
Harvey Sinclair, CEO of eEnergy, eLight’s parent company, said the figures demonstrate an uncomfortable truth for the education sector – namely that most schools are still treading water on the implementation of energy efficient technology. Energy efficiency could make a huge difference to meeting net zero ambitions, but most schools are still lagging behind.
“The solutions exist, but they are not being deployed fast enough," he said. "For example, we’ve made great progress in upgrading schools to energy-efficient LED lighting, but with 80% of schools yet to make the switch, there’s an enormous opportunity to make a collective reduction in carbon footprint and save a lot of money on energy bills. Our model means the entire project is financed, doesn’t require any upfront expenditure, and repayments are more than covered by the energy savings made."
He said while it has worked with over 300 schools, most are still far too slow to commit. "We are urging them to act with greater urgency because climate change won’t wait, and the need for action gets more pressing every year. The education sector has an important part to play in that and pupils around the country expect their schools to do so – there is still a huge job to be done."
North Yorkshire County Council is benefiting from the Public Sector Decarbonisation Scheme, which has so far awarded nearly £1bn for energy efficiency and heat decarbonisation projects around the country, and Craven schools has reportedly made a successful £2m bid (click here).
The Department for Education has issued 13 tips for reducing energy and water use in schools.