There will be a slower and more moderate reduction in the UK government's financial support for offshore wind over the next five years than had been previously proposed. However, questions remain about the attractiveness to investors of UK offshore wind projects, in light of the government's newly-emphasised commitment to prioritising gas-fired power generation.
Details of offshore wind subsidy levels for 2014-2017 were released today by the UK Department of Energy and Climate Change (DECC), as part of its review of support for all types of renewable electricity generation. A dispute between DECC and the UK finance ministry delayed the announcement, however, widespread and frequently-adverse press coverage about this row appears to have pushed DECC into releasing the information.
There is good news for developers of offshore wind farms planning to secure financial support via the UK's existing renewable obligation certificates (ROC) regime between now and 2016/17.
For developers signing RO agreements between now and 2014/15, projects will receive two ROCs per MWh as a top-up in addition to the price at which they sell their electricity. In 2015/16, support will fall to 1.9ROCs/MWh and in 2016/17 it will drop to 1.8. This is more generous than the 1.5ROCs/MWh that had been proposed DECC for 2014/15 onward.
DECC also emphasises that a new strategy for maximising gas-fired generation will be published in the autumn. "We do not expect the role of gas to be restricted to providing back up to renewables," it states. This focus on gas is widely seen as a concession to the UK finance ministry.
From 2017/18, a new system for supporting all types of low-carbon electricity generation, including nuclear and conventional thermal with carbon capture and storage, will enter into force. This will seek to reduce volatility in the revenue earned by low-carbon generators and will be based on so-called contracts for difference (CfDs).
UK offshore wind developers are concerned that the government's existing plans for the CfD-based regime are poorly thought-out and risk undermining the attractiveness of their projects to potential investors.