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U.K. Offshore Wind Power Developers Need $46 Billion Financing, PWC Says
U.K. offshore wind power developers need 30 billion pounds ($46 billion) of financing to build the turbines required to help the nation reach its renewable energy objectives by 2020, PricewaterhouseCoopers said.
Sea-based wind farms play a “make-or-break” role in the U.K.’s goal to derive 15 percent of energy from renewables by 2020, the global accounting firm said today in a report. A total of 12 gigawatts of offshore wind capacity is needed by then, and just 0.3 gigawatts was installed last year, PWC said.
“Companies themselves are proceeding at a pretty slow rate,” PWC Global Energy Advisory Leader Michael Hurley said in a telephone interview. “For the country to meet its targets, that rate has to be significantly higher.”
Current incentives for building renewables aren’t enough to help utilities secure the funding needed for the capital expenditure, Hurley said. With banks and governments short on funds, the industry should tap into pension funds to secure the cash needed to build wind farms, he said.
The U.K. in April reached a total of 1 gigawatt of offshore wind generating capacity after projects by E.ON AG and Dong Energy A/S began producing electricity, according to the industry group RenewableUK. Farms with 4 gigawatts of capacity have planning permission or are being built and in January, the government awarded licenses for 32,200 megawatts of projects to companies including Centrica Plc, RWE AG and Statoil ASA.
Development Time
Murley said that because offshore wind farms take about three years to develop, companies would need to secure about 10 billion pounds initially, and in three years time, they would be able to use the newly built assets to secure the next 10 billion pounds of lending.
PWC proposed four mechanisms to make the industry’s returns more predictable, making it more attractive to pension funds. They are: a charge to electricity customers to cover the capital expenses, transferring ownership of the farms to the grid operator, which would recover costs through electricity providers and their customers, increasing the number of tradable Renewable Obligation Certificates awarded to offshore wind power, and making investments in the technology tax-free for the general public.
“This is about getting the momentum going to start to build the industry,” Hurley said.
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.
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