U.K. Offshore Wind Policy Risking Jobs, Investment, Dong Says

  • Dong urges government to announce post-2020 funding, targets
  • Danish developer has invested 5.5 billion pounds in U.K.

The U.K. government’s failure to spell out future policy on offshore wind power is putting the industry’s growth at risk, said the country’s biggest developer, Dong Energy A/S.

Developers, turbine makers and cable suppliers are being kept in the dark over government plans from 2020, according to Samuel Leupold, chief executive officer of Dong’s wind-power unit. The “complete silence” of U.K. Prime Minister David Cameron’s administration is jeopardizing investment decisions, innovation and potential job creation, he said Thursday in an interview in Norddeich, Germany, where he was attending the opening of Dong’s Borkum Riffgrund 1 offshore wind farm.

Compared with the Netherlands or Germany, the U.K. market is one where “we have much more uncertainty,” Leupold said. In the U.K., key offshore actors have “decisions on their table on additional manufacturing capabilities just when the government is completely silent on how things look post-2020.”

The U.K. government is dithering on setting a date for the next clean-power auction. That’s sparked fears with Dong and other companies that subsidy-aided growth in offshore wind power may stall, after Energy Secretary Amber Rudd already announced cuts in assistance to onshore wind, solar and biomass projects.

Rudd’s Plans

The U.K. influences offshore wind-market developments across the continent, said Leupold. That’s because Britain has more than half of the world’s installed offshore wind turbines, with 4,494 megawatts of installed capacity at the end of 2014.

The U.K.’s second wind-power auction of so-called contracts for difference will decide funding for projects beyond 2020. Winning bids receive a guaranteed price for their electricity for 15 years, regardless of prevailing wholesale prices.

Rudd has said she’ll make proposals in the fall for when the next auction will be, without specifying a date. Her department is also in talks with the Treasury over extending beyond April 2021 the government’s Levy Control Framework, which sets an annual budget for consumer-funded assistance to renewable energy that rises to 7.6 billion pounds ($11.7 billion) in fiscal 2021 from 4.3 billion pounds this tax year.

“We have neither a target for expansion as in Germany nor have we clarity on the funding and the legislation around it,” he said. Germany has set an offshore target of 15,000 megawatts by 2030 and the Netherlands a target of 4,300 megawatts by 2023.

Losing Momentum

The U.K. “really risks that momentum in job creation is going to suffocate,” said Leupold. Dong has invested 5.5 billion pounds in the U.K. since 2004, 4 billion pounds of which is tied to offshore projects.

Dong is confident that the cost of generating offshore power will continue to fall, Leupold told reporters in separate comments. Providing generating volume continues to expand, offshore will be as competitive as gas-fired power -- costing on average 85 euros ($97) per kilowatt-hour to generate -- by 2025, he said.

Dong is looking beyond European markets with the possibility that its planned initial public offering of stock will ease access to finance for renewable energy projects, said Leupold. The company will decide whether to develop projects off the Massachusetts seaboard after state legislation in the first quarter of next year determines funding support, he said. Taiwan is also a potentially interesting market, he said.

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