Offshore wind developers could be set to benefit from a new round of Government subsidies for renewable energy following a larger-than-expected Westminster funding commitment.
UK Energy Minister Ed Davey yesterday announced a new tranche of support for renewable projects, with industry body Scottish Renewables saying the scheme, over 15 years and worth up to £300 million in its first year, could boost prospects for a sector still being courted by officials in Fife and Dundee.
A competitive auction for the new Contracts for Difference will begin later this autumn, with up to £235m per annum available for offshore wind projects following large-scale reform of the energy markets.
The subsidy agreements guarantee operators a minimum price for the power generated by their installations, providing certainty for investors looking for a return on their capital.
Mr Davey and his colleagues at the Department for Energy and Climate Change expect the procedure to help deliver new green energy while lowering average annual bills by more than £40 by 2030.
Solar and onshore wind projects will compete for a smaller yearly pot of £65m, reflecting their position as already viable technologies.
“We are transforming the UK’s energy sector, dealing with a legacy of underinvestment to build a new generation of clean, secure power supplies that reduce our reliance on volatile foreign markets,” Mr Davey said.
“By making projects compete for support, we’re making sure that consumers get the best possible deal as well as a secure and clean power sector,” he added.
Scottish Renewables said that the budget boost “may potentially increase the likelihood of projects securing support in the first allocation round later this month”.
But the industry body also called for DECC to reveal details of future funding rounds, and said the department must redouble efforts to secure European state aid clearance for special CfDs suited to the remote Scottish islands.
In March, energy giant and major renewable developer SSE announced it would take the first phase of its huge Seagreen wind project in the outer Firth of Tay and Forth no further than the planning consent stage, amid a lack of confidence in the viability of the UK’s offshore wind sector.
Its decision followed the exclusion of the project from UK Government subsidy schemes. But it also said it would continue to invest in the Beatrice prospect in the Moray Firth which did pick up public backing while cutting its equity interest from 75% to 50%.
A spokesman for the group last night said its plans for Seagreen “remain unchanged”, but added that SSE would make no comment on its approach to the new CfD auction because of commercial confidentiality constraints.
The three-phase 3.5GW development is by far the largest of three major wind arrays being pursued by developers within striking distance of Scotland’s east coast. At present rates, it would be expected to cost in excess of £10bn.
Both the Neart na Gaoithe windfarm, off Fife Ness, and the Inch Cape prospect off the coast of Angus missed out on a subsidy award last year after DECC judged offshore wind projects elsewhere in the UK to be more affordable.
Mainstream Renewable Power, developer of the 450MW Neart na Gaoithe, has since indicated it would seek approval for the project under the outgoing renewable obligation certificate system. No one was available for comment last night.
Repsol Nuevas Energias, which owns a 51% stake in the 905MW Inch Cape windfarm, did not respond to The Courier’s request for comment.
Meanwhile GDF Suez, which had backed plans for a £200m windfarm on Lewis, has pulled out of the project, citing delays to a subsea cable needed to carry the electricity generated to the mainland.