Turbine manufacturer warns UK small-medium wind power industry at risk as wholesale prices fall faster than costs

 

A Norvento 100kW turbine
A Norvento 100kW turbine

Recent growth in the 15kW-500kW small and medium wind market in the UK may be undermined in the coming years by an overly aggressive feed in tariff degression that has not given the industry time to enact a proportional reduction in supply chain costs.

That is according to medium-scale wind turbine manufacturer, Norvento, and echoes the findings of the recent Renewable UK 2015 Small and Medium Wind UK Market Report.

Norvento’s nED100 wind turbines mainly operate in the 15kW – 100kW (inclusive) FiT band – although may sometimes operate in the band immediately above (100kW+ to 500kW), if more than one turbine is installed on site.

While both bands have experienced growth this year, the higher band has seen an eightfold increase in capacity over the past two years, which most likely reflects the availability of a more generous incentive in this period. 

However, the consistent growth of the 15-100kW band since the inception of the FiT scheme in 2010, coupled with the recent increase of the 100-500kW band, demonstrates that the medium wind sector as a whole is the real success story of the UK distributed wind incentive scheme and has become a significant part of the rural economy. The financial boost provided by the FiT regime has played a key role in supporting this growth.

Unfortunately, the process of tariff degression, which has been in place since 2012 and lowers payments as more capacity is brought online, has taken place at a rate that has not been conducive to establishing economies of scale in medium wind.

Since the introduction of the small and medium wind Feed-in Tariff in 2010, the industry has managed to reduce the CAPEX costs of a standard medium wind project by approximately 11% on average.

In the same period, tariffs have degressed by 35% on average (according to RenewableUK data for the 15-500kW range). A further tariff degression is expected this April.

In light of this imbalance, there is a clear requirement to adjust capacity thresholds and thereby slow down the overall rate of tariff degression before the industry sees an adverse effect on turbine deployment and overall growth. Norvento has joined RenewableUK in urging the incoming UK Government to take the opportunity to review these thresholds this summer.

Ivo Arnús, Director of UK Business Development, Norvento, said: “The FiT regime in medium wind has been under a lot of scrutiny of late, but arguably not for the right reasons.

“Recent media reports regarding the practice of turbine de-rating have given the impression that there is a generous support mechanism in place, and, while this might be the case in some specific FiT bands, we should not generalise across the whole scheme, as, in reality, the feed-in-tariff is a finite resource – and is running out faster than the industry can keep up with.”

“If the UK medium wind market is to sustain current momentum and maintain its industry-leading status, it’s crucial that firms throughout the supply chain are given time to develop economies of scale and thereby lay the foundations for future success.”

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