WITH both the UK Chancellor of the Exchequer and the President-elect of the United States making major speeches a few days ago about how to tackle the effects of global recession, one obvious contrast lay in the relative lack of emphasis placed on the drive for clean energy by Alistair Darling.
Yes, there was renewed commitment to energy efficiency and an extra £150million lobbed into that particular pot.
But that falls a long way short of the New Deal-scale initiatives in the renewal of American infrastructure, with a high degree of emphasis on renewable energy and the transmission systems needed to support it, that Obama is talking about.
However, all may not be as it looked. The extension of the Renewables Obligation to 2037 is both welcome and necessary, even if it appeared a bit as if it had been brought forward and included in the Chancellor’s statement, rather than announced separately, in order to bolster the green credentials of the overall package.
This is a crucial announcement which directly addresses the concern that the ROC rug could be pulled from under some major investments 12 or 15 years into their life span.
And it has become increasingly clear that this could become a key factor in influencing whether or not major offshore wind projects will go ahead.
Now the big question is whether guaranteed extension of the ROC regime, with its heavily enhanced value for offshore wind, will be enough to give the kind of kick-start to projects that will allow the market to deliver vast investments over the next decade and guarantee the success of the third offshore licensing round.
It is a question which goes to the heart of the targets set for renewable energy over the next 20 years. The reality is that offshore wind offers by far the best chance of offering major hits. The technology is not in doubt and the planning issues should be much less acute than for anything onshore.
Overwhelmingly, the questions which affect the sector’s prospects are economic. Do the figures add up?
There is still something of a crisis of confidence in these prospects following Shell’s decision to pull out of the London Array – the largest existing offshore wind project – and BP also putting its interest in renewables, including offshore wind, on hold.
Centrica, which has just completed construction of the Lynn and Inner Dowsing projects off the East Anglia coast, is also reviewing its future programme, which would involve a further £4billion of investment.
That points to the hard fact that even the biggest companies are under severe pressure to cut spending and minimise risk in the current climate.
The pattern is repeated throughout Europe with Eon and Iberdrola, owners of Scottish Power, among those which have said they will be reviewing their rate of spending on renewables.
Nonetheless, there have been plenty of volunteers for the third round of offshore wind licences – though no guarantees about how deep their pockets are.
A few weeks ago, the Crown Estate – which appears to be a fully signed-up partner in progressing the developments – announced that there had been 96 expressions of interest and promised a one-door approach to planning issues so that there would be no repeat of the frustrations and delays that have so often accompanied major onshore applications.
Scotland does not, at present, have a lot to offer by way of offshore wind. When people talk over-glibly about Scotland’s vast renewable energy resources, they tend to ignore the fact that a high proportion of them are in water depths and hostile conditions which nobody is yet talking about mastering.
For the time being, we are limited to a handful of potential offshore wind sites on the east coast for which the Crown Estate recently invited expressions of interest, again with a strong response.
Amid all the negatives, there are a few factors working in favour of offshore wind development.
The fall in prices of steel and copper should make turbines cheaper. But there are still bottlenecks throughout the supply chain, and one of the great tragedies of all this is that the UK has failed to create a significant renewables manufacturing sector of its own (See Economist’s Eye – Page 22). So will offshore wind happen on anything like the scale that is both required and desired?
Last week’s announcement on extending the ROC regime will certainly help. But as with everything else at present, uncertainty will prevail until the final investment decisions are actually taken – and that means being able to raise the money for very large projects in very difficult circumstances.
If Government wants this to happen, it may yet have to intervene more directly to ensure that the great offshore wind boom does not become another mirage on the far horizon of time and lost opportunity.
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