Two offshore wind farms approved by the UK government last Friday are only likely to proceed if the economics stack up under new prices for offshore wind power, to be unveiled by ministers within the next two weeks.
The approved offshore wind farms – Centrica's Race Bank (580MW) and Warwick Energy's Dudgeon (560MW) development – represent a combined investment of around £3bn and are both planned for the Greater Wash off the North Norfolk coast. "The economics of the [Race Bank] project remain dependent on the outcome of the Government's Renewable Obligation banding review," said Centrica, which was simultaneously refused consent for its proposal for a 540MW offshore wind farm at Docking Shoal due to the potential threat to Sandwich tern colonies at Blakeney Point and Scolt Head Island.
The government issued a statement on Friday saying it would publish the results of the Renewable Obligation (RO) banding review, setting out support levels for renewable electricity technologies for the period 2013 to 2017, "shortly". The regulations will take effect on 1 April 2013 and are expected to see slight cuts in the subsidy for offshore wind from the 2ROC/MWh it gets today (and expected to remain so for projects accredited up to 2014/15) to 1.9ROC/MWh and 1.8ROC/MWh for projects accredited in 2015/16 and 2016/17 respectively (severe cuts of 10-25% are expected for onshore wind).
Mark Hanafin, Managing Director of Centrica Energy, said achieving consent for Race Bank "is an important milestone", but that a thorough appraisal of project costs will be conducted "with a view to making a final investment decision early in 2013."
Centrica noted it has "already incurred considerable costs and has been awaiting planning consent for more than three and half years" in relation to Docking Shoal. "It is essential that the UK maintains an efficient planning process without undue constraints on development if stretching renewable energy targets are to be met," it said.
Warwick Energy, which still needs planning permission for an onshore substation to allow the electricity generated from the offshore wind farm to enter the national electricity transmission network, is hoping to secure £1.5bn in private finance over the next 12 months to build Dudgeon 32km offshore, north of Cromer. Mark Petterson, Project Director for Dudgeon, said the company hopes to start construction next year.?Power generation is currently scheduled to commence by late 2015, subject to the remaining substation consent being received in the near future and "the timely availability" of construction finance.
Energy minister Charles Hendry said the two approved projects will bring the UK significant investment and jobs and means the country now has 6.6GW of offshore wind power either operational, under construction or consented. "We have also shown that we are mindful of other consequences, such as the impact on bird populations, in deciding that it would not be appropriate to consent all three applications," he added.
