Summary and implications

It has been a busy start to the year in the wind sector. The industry has seen the growing impact of the Coalition Government on renewable energy. With the early arrival of the Feed-in Tariffs (FITs) review, the progress of the Localism Bill and the recent announcement that wind energy firms are to pay local communities, the Government is increasingly exerting its influence. February has also witnessed continued investment in the growth and development of the wind sector, especially in the North East, but not everything has been plain sailing for developers.

This article intends to provide an overview of:

  • Recent industry developments;  
  • The potential influence of recent changes in the legislative framework; and  
  • A round up of the latest investments in wind.  

Industry Development  

OFTO regime  

Last month, Ofgem announced that eight bidders have qualified to compete for three high-voltage transmission links to offshore wind farms as part of the latest competitive tender process. The bidders are competing for the links to the Gwynt y Môr, Lincs and London Array offshore wind farms, the total capacity of which represents 1.4 GW. The successful bidders were:  

  • Balfour Beatty Capital;  
  • Blue Transmission (a consortium of Macquarie Capital Group, Barclays Infrastructure Funds Management and Frontier Power);  
  • Cheung Kong Infrastructure Holdings/Hongkong Electric International;  
  • Green Energy Transmission (a consortium of Equitix and AMP Capital Investors);  
  • Mitsubishi;  
  • National Grid;  
  • Transmission Capital Partners (a consortium of Transmission Capital, International Public Partnerships, and Amber Infrastructure); and  
  • Ventran Consortium (a consortium of BRITEL Fund Trustees – as custodian of BT Pension Scheme – and Universities Superannuation Scheme).  

In the spring, Ofgem are planning to select a shortlist of bidders who will go the final stage this summer where a winning tender will be selected.

Ofgem also expect to start the tender process for three more projects – Humber Gateway, West of Duddon Sands and Race Bank – this spring. In total, the six projects represent £1.9bn in offshore transmission links and expect to connect 2.8 GW in clean, renewable energy.

UK's largest offshore wind farms power up

Last month, two of the UK's biggest offshore wind farms successfully transmitted electricity onshore, increasing the UK's renewable energy output. Scottish and Southern Energy activated three of the 140 turbines at the Greater Gabbard offshore site, and Dong Energy and Scottish and Southern Energy also activated the turbines at Walney.  

Dong and Scottish and Southern expect to put all 102 turbines at the Walney site into action by the end of the year. The combined output of the Greater Gabbard and Walney sites means there will be an additional 683.6 MW of electricity connected to the grid by the end of the year. The companies also plan to double the number of turbines at Walney, creating an extra 183.6 MW of electricity from the site by December 2011.

Round 2 backlog

However, despite these positive developments in the wind sector, there are reports that the industry could face severe disruption in the coming years. Three offshore wind farms from Round 2 are yet to secure planning permission. Siemens and Prysmian, leading supply chain companies, have warned they may fail to increase production ahead of Round 3 if these projects remain in limbo.

Round 2 projects may clash with the first stage of Round 3 causing unmanageable demand Their main concern is that construction of the Round 2 projects will clash with the first stage of Round 3 causing an unmanageable demand for parts and services. Provided the Round 2 projects can begin construction in the next three years, it is expected the supply chain companies can in turn ramp up production in time to cope with Round 3.  

However, Warwick Energy have confirmed the construction timetable for the Dudgeon offshore wind farm – one of the three Round 2 projects still awaiting planning permission – will fall back 12 months because planning permission for an onshore substation was refused.  

Potential legislative changes

Developers to pay local communities

Under a new protocol launched this month by RenewableUK and the Energy Secretary, Chris Huhne, to ensure onshore wind farms benefit local people, wind energy firms will pay £1,000 a year per MW of installed wind power to local communities for the lifetime of the developments.  

Firms have agreed to pay the yearly fees to communities located nearby planned projects. Wind farm planning applications for projects with a capacity of five MW or more must be accompanied by a commitment to benefit local communities.

Localism Bill may affect planning applications

Last month, the Government's Localism Bill received its second reading. There are major concerns that the Bill will cause serious delays to renewable energy projects and empower local groups in opposing plans for new wind farm developments.

The Bill intends to give councils the power and authority to make planning decisions in their area, specifically providing powers to call local referendums on any local issue. In effect, this will give councils and local communities the power to delay and oppose planning applications for energy projects, such as wind farms.

Planning applications for wind farms could take an average of 45 months At presen,t wind farm planning applications take an average of 27 months to reach a decision. According to Juliet Davenport, Chief Executive of Good Energy, the effect of the Government proposals could increase this by a further 18 months, crippling development plans in the renewables sector.

UK round-up: investment in wind

On 9 February, E.on received permission to proceed with their proposed 230 MW offshore wind farm. The development will see 77 turbines positioned eight kilometres off the East Riding coast. The tender process is expected to start later this year with an aim to have the turbines in action by 2014. The project reaffirms the North East's position as the centre of the offshore wind industry in the UK.

Siemens and Associated British Ports have agreed to build one of the first major offshore wind turbine manufacturing plants in the UK, at Alexandria Dock in Hull. The plant will cost £180m and include a deepwater berth and wind turbine plant.

The Spanish company, Gamesa, have announced their plan to build a €50m research and development centre in Glasgow. Gamesa have also shortlisted Harwich, Humber and Tyneside as the potential locations for a new wind turbine manufacturing plant. The final decision is expected to be announced in June. It is clear Gamesa have placed the UK at the centre of their long-term offshore wind strategy.

Next month, Vestas will announce the specifics of their six MW offshore wind turbines. Industry insiders are excited about how Vestas intend to increase the cost-efficiency of wind energy. There is much speculation about a shift from a gear based system to direct drive, with the issues of ongoing maintenance and wind turbine downtime increasingly a concern for developers.

Eneco announced, on 17 February, they will build a wind farm, covering 76 square miles off the south coast of England near the Isle of Wight. The proposed wind farm will provide 1,200 MW of capacity and is part of the Crown Estate's Round 3 project.

Investment managers in clean technology, Hazel Capital, have invested £5m in UK turbine company QuietRevolution. The aim for QuietRevolution is to expand their capacity and produce double the number of their innovative vertical-axis turbines to be installed in the UK within the next 12 months. The agreement guarantees a minimum of 150 turbines will be installed, with Hazel responsible for selling them once they are active.

Mitsubishi Power Systems Europe announced its intention to invest up to £100m in offshore wind research and development in Scotland over the next five years. The aim is to create mass production of its low-cost, recyclable offshore wind technology.

Click here for 'Overview: future projects and development'