High costs temper investor appetite for offshore wind

Bond Dickinson logoFollowing news that major wind farm developers have halved their spending on offshore electricity generation projects (See the Scottish Energy News 27 January 2014) the Bond Dickinson law firm suggests that this is a ‘normal market maturation process’.

 Latest figures obtained by Scottish Renewables from offshore wind developers with projects in Scottish waters about their investments in Scotland during 2013 indicate that  £28.9m was spent in 2013 compared to £63.6m in 2012. Total investment to date now stands at £193.4m.

Lindsay Leask, Senior Policy Manager, Scottish Renewables, said: “Uncertainty throughout the industry is growing as none of the major projects planned for Scottish waters have had their planning applications determined yet, and the details around accessing market incentives are still unclear.”

 Richard Cockburn, Aberdeen-based Renewables Partner at law firm Bond Dickinson said: “Offshore wind still remains one of the higher cost energies at a current cost per MWh being somewhere north of £150/MWh, dependent on which study you read.

“The government has put in place an Offshore Wind Cost Reduction Task Force which has an aim of reducing the cost to £100/MWh by 2020.

 “Costs have though gone up in recent years due to a number of factors, not least of which is currency fluctuations, so this has been making offshore developers re-evaluate the economics of their projects.

 “There is also a sense that the UK offshore wind market is maturing – a number of projects are now in the water with more than 1,000 offshore turbines producing a capacity of over 3.6GW and more are on the way.

 “But with that comes perhaps a tempering of the full-on enthusiasm with which the first offshore wind projects were launched. Businesses are looking afresh at the figures underpinning their projects and making hard-nosed decisions about the future of those projects.”

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