United Kingdom

United Kingdom

Analysis: Why did RWE decide to drop Atlantic Array?

UK: RWE killed off its involvement in the 1.2GW Atlantic Array offshore wind farm in the Bristol Channel, western England, on 26 November after spending five years and an estimated £13 million (EUR 15.6 million) on the project.

RWE has dropped its plans for Atlantic Array
RWE has dropped its plans for Atlantic Array

The German utility said it made the decision after recognising the "significant technical challenges specific to the zone" and comparing it with the viability of its other UK offshore projects. In short, the company has other projects it is working on that are easier to complete and do not require technology beyond the current crop of turbines and foundations being tested at the moment.

However, the decision to drop Atlantic Array, one of the largest of the UK's offshore projects to have been exited, comes amid a climate of uncertainty among UK offshore developers and problems in RWE's home market. Although RWE insisted government agenda played no part in the decision, the Crown Estate, which manages the sea bed in UK waters, spoke openly about the UK entering a period of "attrition" that would halt offshore projects.

Redundancies

RWE's move also comes against a backdrop of issues in the German company's home market, including job cuts and a comment from CEO Peter Terium that the company was passing through a "vale of tears" while promising to make cuts to its operations. RWE reported a EUR 73 million loss in the third quarter of 2013. Job cuts are planned as well. In the UK alone — a day after the Atlantic Array announcement — RWE made 1,400 redundancies to its UK operations, albeit in the name of subsidiary Npower.

Scrapping offshore wind farms could be easier than cutting jobs. Out of RWE's four UK offshore projects — Dogger Bank, Gwynt y Môr, Triton Knoll, and Atlantic Array — Atlantic Array was one of only two the company was not locked into with other companies. The other project, Triton Knoll, has been under development for longer and is arguably more suitable for offshore development with its deep sand seabed. An investment has also already been made in an expensive radar system for the local air force base.

Although a planning application had been filed in June, there is no doubt Atlantic Array had been struggling through the development process. At the beginning of the year RWE aimed to install 417 turbines in the Bristol Channel. However, in May the company reduced this figure by 139, following what it described as environmental concerns and local feedback, while it still hoped to limit any reduction in capacity by using larger turbines. RWE said this is unrelated to the cancellation of the project.

Outlining the reasons behind its decision, RWE said the wind farm faced substantial technical challenges. These include bedrock, a water depth of 45 metres, difficult currents and "incredibly challenging" seabed conditions. "The guys on the project looked at what technology was available and came to the conclusion that to use current technology would be very expensive and that floating turbines might be better," a spokesman said.

The project originally came to public attention in 2007, when it was originated by Farm Energy, the same company that launched London Array, in the Thames Estuary. In 2008, RWE's UK subsidiary Npower acquired Channel Energy, a vehicle set up by Farm to run Atlantic Array. From this a new company, Zero Carbon Marine would be created to move the project forward.

Asked why it did not spot the potential problems with the project earlier, seeing as the Bristol Channel is such a known quantity, RWE said it needed to make a proper study of the area. He said: "These things take time, we would have known a certain amount of info upfront but it's not until you get the technical surveys that you know. Once done that's an incredibly accurate picture."

However, according to those familiar with the project, the environment at Atlantic Array has been known for a number of years. Peter Crone, director of Zero Carbon Marine who launched Atlantic Array at the outset along with London Array, and "one of the guys" working on the project, said it was no more challenging than a number of others being developed. "If you believe [RWE's reasoning] you believe that zones 1 and 2 are doomed. Navitus Bay [offshore wind farm] has a huge overlay of sands and gravel."

Crone added the earlier reductions to capacity had little to do with the decision to cut the project. "The reductions happened because of what we found out about the seabed conditions. Mobile sand waves prevented development of the north of the zone. and it was moved further from the Devon coast for visual reasons, around 2-3 kilometres to lessen the visual impact. Also, offshore wind is a modular build process, 1,500MW doesn't make sense because 600MW is what you can connect to each offshore substation platform, assuming two transformers and two 220kV cables per platform. So 1,200MW is an optimum build capacity."

Looking ahead, Crone added Zero Carbon Marine would continue its association with the project: "We're going to ask the Crown Estate what their intentions are and are looking at taking it further, at least until it's consented. Obviously we can't continue the present consenting process as that's been pulled by RWE. But if you leave it for two years the sunk costs to date will be completely wasted as the environmental statement will be out of date."

There may be life for Atlantic Array beyond being a test bed for floating turbines. One surprising aspect of RWE's development process is that it never installed an anemometer in the area, so no one actually knows what the wind capability is. Therefore it is questionable how RWE's cost analysis stacks up. Based on studies in the land area around the Bristol Channel it looks like the area, helped by the fact it faces onto the open Atlantic, could deliver average wind speeds of around 10m/s. If so this, coupled with the fact it is so close to land, may make it a more cost-effective site than RWE has allowed.


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