Offshore wind developers should expect “much earlier certainty” about the price they will receive for electricity generated, thanks to the UK’s incoming financial support scheme, according to energy minister Ed Davey.
Davey's comments also suggest that offshore wind developers are among a handful of companies already in discussions with the government about an early form of the new financial incentive scheme.
Speaking at a Confederation for British Industry (CBI) event today, Davey provided more information about how the UK government envisages its new contracts for difference (CfDs) regime, due to replace the existing renewables obligation (RO) scheme from 2017.
Davey confirmed that the UK Department of Energy and Climate Change (DECC) is in bilateral talks with six wind and biomass developers about so-called final investment decision (FID) enabling agreements. These are to be forerunners to CfDs, allowing developers to agree a long-term level of financial support from government for a handful of large-scale, near-term projects.
Speaking with Windpower Offshore, Davey would not confirm whether any offshore wind projects are among the six projects under discussion. But given the high value of offshore wind projects, it is highly likely that some developers are in talks about securing FID-enabling agreements.
Outlining how CfDs will operate from 2017, Davey said he is “attracted” to the idea of awarding low-carbon developers “early” CfDs as way of supporting their efforts to secure project finance.
An early CfD could be agreed once a project has secured all permitting and grid connection consents, suggested Davey, adding that in exchange, developers would be expected to commit to progressing their projects at a “reasonable pace”.
In Germany, offshore wind construction permits include a series of deadlines set by the regulator, which developers are obliged to meet in order to retain their rights to build.
Confirming that the UK government will publish its energy bill next month, Davey emphasised that DECC has listened to concerns about the need for CfDs to be legally countersigned by a “robust” third party.
A new UK Government-owned company will “probably” be created to act as the single counterparty requested by the low-carbon energy sector, said Davey.
Discussing how a strike price for offshore wind will be set, Davey confirmed to Windpower Offshore that in the long term DECC expects to establish strike prices via auctions. But the first tranche of CfDs will be based around technology-specific strike prices, to be arrived at in a “similar” way to RO banding.
Although the energy bill will confirm the details of some aspects of the CfD regime, further detail will emerge next year, with National Grid currently seeking industry comment on the cost of energy for specific generation technologies.