Wind farm builders face ‘perfect storm’ forward of key announcement
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ind farm builders are dealing with a “perfect storm”, the UK boss of a significant vitality firm has stated forward of a key announcement which could deal a blow to the nation’s renewable vitality aspirations.
Companies are set to seek out out on Friday whether or not they’ll win new contracts to construct large wind and photo voltaic farms across the nation.
But trade watchers are fearful that few companies would have requested to be awarded a contract to construct the offshore wind farms which are so wanted to fulfill the Government’s aim of decarbonising the nation’s electrical energy provide by 2035.
The UK boss of Vattenfall, a significant builder of offshore wind farms, advised the PA news company that the sector is dealing with rising costs and squeezed provide chains.
Unfortunately, within the final yr or two, the world has modified
“We are in this kind of perfect storm facing into a very, very difficult macroeconomic climate,” Lisa Christie stated.
“And unfortunately, the government support framework for offshore wind just hasn’t kept pace.”
Each yr the Government awards contracts to provide renewable electrical energy to British households for 15 years at a set worth.
By guaranteeing the worth that an organization will likely be paid for its electrical energy, it provides companies certainty that they won’t go bankrupt ought to electrical energy costs crater. It additionally helps preserve family payments decrease than they might in any other case be if electrical energy costs soar.
The system has helped push down the worth of renewable electrical energy over current years and can present hundreds of latest wind generators and photo voltaic panels, producing inexperienced electrical energy for the UK.
When firms are bidding for these contracts those who say they’ll present electrical energy on the most cost-effective worth are chosen to win a contract. But there’s additionally a most that these firms are allowed to bid.
This yr offshore wind producers had been allowed to bid at most £44 per megawatt hour (MWh) of electrical energy. In 2015 when the primary public sale was launched the utmost bid allowed was £155 per MWh. These figures are adjusted for inflation to 2012 costs.
There are actually main worries that the businesses won’t suppose that they’ll cowl their hovering prices at simply £44 per MWh, so won’t have put in lots of, if any bids.
Last month Sweden’s Vattenfall stated it had hit pause on development on one of many wind farms it was constructing off the coast of Norfolk. It had promised to offer electrical energy from the location for £37.35 per MWh.
The firm stated the price of constructing an offshore wind farm had soared by 40% for a lot of the trade.
Ms Christie, its UK nation supervisor, stated the system – referred to as contracts for distinction (CfD) – has labored nicely so far, however that within the final yr the local weather has modified.
“The CfD mechanism has been really good to date which is why the UK is a world leader in offshore wind, also coupled with the fact that we have excellent offshore wind resources in the UK and lots of experience and expertise,” she stated.
“But unfortunately, in the last year or two, the world has changed.
“We’ve had a war in Ukraine, we’ve seen huge supply chain squeezes across the globe. We’ve seen our cost of capital go up like everybody else and we’ve seen the cost of commodities go up.”
The warnings should not new. In May, commerce physique EnergyUK stated this yr’s public sale “will fall well short of delivering the expansion of offshore wind needed to hit the Government’s target” for the UK to construct 50 gigawatts of offshore wind capability by 2030.
The outcomes of the fifth public sale spherical for contracts for distinction are anticipated to be introduced on Friday, though a publication time has not been confirmed.