UK offshore wind power faces grid, finance hurdles
Date: 31-Mar-03
Country: UK
Author: Margaret Orgill
Finding billions of pounds to "rewire" Britain to hook up remote wind farms to the grid and overcoming banks' reluctance to invest in risky projects are major hurdles facing the sector, delegates at an offshore wind conference were told this week.
"Infrastructure is all. There is no point in generating power unless we can ensure that it is capable of being carried to the markets which require it," Energy Minister Brian Wilson told the conference.
Britain's electricity grid was built to transport power from coal, gas and nuclear power stations and needs to be rejigged to cope with wind farms, many of which are likely to be built in remote areas like north Scotland with poor grid links.
The first two commercial wind farms are being built off the Norfolk and Welsh coasts and another 15 are in the process of getting consents as Britain drives to increase its renewable power output to 10 percent of power supplies by 2010.
Last week, the Crown Estate, which grants seabed leases for offshore wind schemes, said it had received proposals for 70 sites in its latest licensing round.
Consultants ILEX have estimated that 1.3 billion pounds will need to be spent reinforcing the grid to meet the 10 percent target.
This rises to as much as 2.3 billion pounds if the government wants to meet its aim of 20 percent of the UK's power from green sources by 2020.
Government and the industry are holding discussions how to fund the expansion amid fears from wind power developers that they might be saddled with a large amount of the cost.
GRID NEEDS TO BE MORE EFFICIENT
Some experts say better management of the grid and building wind farms near transmission links is sufficent in the short-term and there is no need for costly reinforcements until a large number of turbines start whirring.
"Over the next five years we should try and use the existing network more effectively. Projects should be designed with the network in mind," said Guy Nicholson, managing director of grid specialists Econnect.
Renewable generators can appeal to regulator Ofgem if they think grid connection charges are excessive.
A small wind farm in Scotland recently won a ruling from Ofgem, cutting its connection charge to 250,000 pounds compared with a quote from the grid owner of five million pounds, he said.
"Ofgem agreed that...major grid reinforcements were not needed," said Nicholson whose firm advised the scheme and had argued for more efficient management of the grid.
BANKERS WORRIED ABOUT RISK
Finance will be needed if the sector is to expand rapidly but banks, burned by a recent collapse in power prices, are worried that the government could change the green power subsidy rules, hitting renewable project revenues.
"The amount of investment needed is huge - about six billion pounds to meet the 2010 target. That's a similar to the amount of debt in trouble with existing UK power plants," said Vivek Mittal, director of project finance at the Bank of Scotland.
"That's focusing bankers' minds on what went wrong and how to go forward."
The first two projects under construction, Scroby Sands and North Hoyle, are being financed by their developers, Powergen and Innogy.
Developers say the government must reassure financiers, looking at 10-15 year investments, that it will not suddenly change the rules of the guaranteed market for green power which it launched last year.
"The government needs to understand the bankers' concerns. Capital shies away from uncertainty," said Fintan Whelan, corporate finance manager at green power firm Airtricity.