PROFESSIONAL SERVICES SECTION SPONSOR INVESTMENT IN WIND
Wilkin Chapman LLP is a full service law firm operating out of Lincolnshire and East Yorkshire. The firm delivers an unparalleled range of legal services to corporate and private clients who are locally, nationally and internationally based. One of its nine branches is located in the Humber region which has become a specialist hub for the renewables sector.
www.wilkinchapman.co.uk | 01472 262626
This article looks at the historic and forecast investment trends in UK offshore wind and is drawn from analysis prepared as part of the recent Renewable Energy Association (REA) publication on investment in renewable energy for their 2014 publication REview – Renewable Energy View.
ANALYSIS
Our analysis in figure 1 below shows that offshore wind dominates both historical and forecast investment in UK offshore wind. In the period between 2010 and 2013, £7.7bn was invested in offshore wind which represented over 50% of total wind investment in the period and over 25% of all renewable electricity investment. In capacity terms, over 2.5GW of capacity was added.
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Given the long lead times in developing and constructing offshore wind projects, there is good visibility on the investment and capacity additions through the next few years. The long expected dip in projects coming on materialises in the next few years. The potential for this was recognised by industry some years ago, with Round 1.5 and Round 2.5 leases launched to bridge this gap and the potential from Round 3 due on later in the decade.
IMPORTANT FEATURES
There are a number of important features worth highlighting regarding investment levels and capacity additions later in the decade…
• Projects due to commission after March 2017 will be required to bid into the new Contracts for Difference market, due to be launched later this year. There is still uncertainty around how this will work in practice, although with more projects in development than money in the Levy Control Framework (LCF) pot, the outcome of the auction is likely to be competitive
• We have seen some developers, shelve or abandon plans for Round 3 projects, in part as a response to the gap between LCF funding and the number of projects in development
• Investment drops off at the back end of the decade and we expect that much of this will be capacity that received early CfDs (3.2GW in total)
• Investment is constrained to the governments reference scenario for offshore wind which expects 8.0 GW of installed capacity by 2020 and 9.6GW by 2021
Fig 1 – Investment and capacity in offshore wind power, 2010-2020 (£bn, GW)
NET EFFECT
The net effect is that offshore wind is still expected to remain the most invested technology in the UK with an additional £12m of investment between now and 2020. The analysis also highlights the importance for the industry to have greater certainty regarding the post 2020 market both in terms of available LCF funding and some government set volume ambition for offshore wind.
Ronan O’Regan - PwC 50
www.windenergynetwork.co.uk
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HULL & HUMBER SPOTLIGHT ON
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