Wind News

Friday 12 February 2010

Investors are put off by the high cost of offshore wind development in the UK

Investors and members of the wind and renewable supply chain have expressed concern that the sheer scale of the offshore wind challenge will make it impossible for the market alone to respond, writes Rachael Meredith.

This issue was one of many raised at a lively debate hosted by the Carbon Trust and the British Wind Energy Association (BWEA) in London last night (February 11), when panellists tried to convince members of the industry that the offshore wind challenge should be seen as a great opportunity for the UK.

While the general consensus of the panel - which included representatives from environmental group Greenpeace, Norwegian power company Statoil ASA, the Crown Estate and Northern Irish shipyard Harland & Wolff, along with the event hosts - was that things are moving forward with offshore wind, the feeling in the room was more one of great uncertainty.

With the Crown Estate's Round 3 offshore wind licensing programme expected to deliver up to 32GW of renewable energy in British waters (see this NewEnergyFocus.com story), members of the audience noted that securing investment and building the infrastructure and supply chain to accommodate that could prove very difficult without more government help.

Justin Rowlatt, the BBC's "Ethical Man", coordinated last night's debate and put forward the question of why people would invest in offshore wind when they can invest in gas, which is much cheaper.

In response, chief executive of the Carbon Trust, Tom Delay - who had outlined in his opening address that investment in offshore wind would cost upwards of £75 billion and only provide a rate of return of around 8% - said: "The reality is we can meet many of our energy needs by investing in gas which is a cheaper solution, but won't lead to job creation.

"We are all going to have to get much better at doing things quicker and cheaper and actually, this is one of the very best industries to invest in."

In terms of investing in a UK supply chain for offshore, he added: "You will never get 100% local content in this but we need to maximise it."

Foreign investment

Another issue raised by an audience member was the fact that the main energy companies who would be likely to invest in offshore wind are all based abroad and so questioned why they would invest in the UK, especially with a small rate of return on offer.

However, panellist Anne Strømmen Lycke, vice president of wind power at Statoil ASA, explained that even though Statoil is a Norwegian company, it has seen the opportunity in Britain and so is investing.

She argued that global companies, wherever they are headquartered, were investing all over the world and so it did not really matter where they were based.

Supply chain

One area which was subjected to prolonged debate was how realistic it would be to develop an offshore wind supply chain in the UK and, as a result, create the 75 thousand "green" jobs predicted by 2020.

As it stands, much of the offshore wind supply chain is based abroad, with the UK dependent upon imported components.

At a meeting last month, the government's Renewables Advisory Board (RAB) warned that government investment in ports and quaysides in the UK was needed to stimulate green jobs, as leaving port developments to the open market would deliver suboptimal investment (see this NewEnergyFocus.com story).

Continuing on from this argument last night, Con O'Neill, financial director at Belfast shipyard Harland & Wolff, said: "By not investing in UK ship yards you will have to rely on imports. Government should invest in them because of the social benefits of having people in these sort of jobs.

"Also, we have the skills to be able to do this in the UK, so let's make the most of the opportunity."

Rob Hastings, director of the marine estate at the Crown Estate, added: "We don't have a choice - we need to have turbines and other equipment in the UK, so we must get the supply chain in place."

However, he added that the majority of this investment would be coming from the private sector, which again was met with scepticism from audience members who fear the challenge is too great.

"Can do attitude"

Trying to inject some enthusiasm into the mix, panellist Robin Oakley, head of climate and energy at Greenpeace, said: "We have got a short time line and so offshore wind is absolutely crucial, it is essential, so let's get behind it. It is going to require changes and re-regulation but it is also going to require less of a ‘no can do' attitude and more of a ‘can do' attitude.

"We need to get on board and say this is something we can do and are going to do."

Maria McCaffery, chief executive of the BWEA, added: "We are going to have a greater and greater contribution from renewable energy in our energy mix and the biggest contribution will be from offshore wind. The biggest issue is how much benefit we are going to get and that depends on your appetite.

"It is going to happen anyway and we have to learn the lessons of where we lost out to European neighbours for offshore wind before."