The Department for Energy and Climate Change (DECC) first announced its plan for the 25 GW of offshore wind back in December 2007. Speaking at an industry conference, energy and climate change minister, Lord Hunt, said that the 25 GW of wind in the territorial waters of England, Wales and the UK renewable energy zone by 2020 was a 'practicable and realisable' figure. “Wind is to be the largest single contributor to the legally binding target of 15% of energy from renewable sources by 2020”, said Hunt, adding that within this target offshore wind had a great contribution to make.
This announcement came at the same time that the government's GBP 15 billion tender to build power cables connecting offshore farms to the grid in conjunction with regulator Ofgem was officially open. According to DECC, the competitive tender fixes a twenty-year flow of revenue for the new offshore grid companies. DECC also revealed that the UK was in discussions with the European Commission, EU member states and other stakeholders over the development of a 'supergrid' connecting UK offshore farms with projects in other European waters.
Gordon Edge, director of economics & markets at wind industry body the British Wind Energy Association (BWEA) said companies had been “queuing up” to bid in round three. Interviews will take place between 1 and 10 July, while nominations of preferred contractors will be announced by month end.
A BWEA report released simultaneously said a steep hike in the cost of building offshore farms had put the brakes on progress on offshore construction but predicted a stable outlook in the run up to 2015, envisaging capital costs of approximately GBP 3.1 million per MW of installed capacity.
A further stumbling block to the industry was lack of an indigenous supply chain, said BWEA CEO Maria McCaffery. Edge acknowledged that project finance would be scarce in the sector until the attached risks disintegrated, adding that offshore wind was a "bigger boys' game", requiring balance sheet financing.
Meanwhile, Lord Hunt believes that the new announcements made by his department will restore confidence in the industry, which has been considerably shaken after projects such as London Array saw partners leaving.
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