Wednesday 19 February 2014

DECC insists UK key to slashing offshore wind costs

The Government today insisted the UK has a key role to play in reducing the costs in the offshore wind industry.

The comment comes as developers of the London Array offshore wind farm, the largest in the world, cancelled plans to expand it.

In a briefing, DECC officials claimed no country has the same opportunity to drive down costs in the offshore wind sector as it assured the UK will remain the world leader.

DECC believes the Electricity Market Reform (EMR) will help attract investment in the sector, with the Contracts for Difference (CfD) scheme expected to play a vital role.

CfDs pay the generator the difference between the cost of investing in a particular low carbon technology, called the ‘strike price’ and the average market price for electricity, known as the ‘reference price’.

A DECC official said: "The key thing with the Contracts for Difference is there is reduced risk for investors and they offer better value for money for consumers."

He added the expected cost reduction is reflected in the strike prices, which are to reduce from £155/MWh to £140/MWh in the next four to five years.

There was 4MW of installed offshore wind capacity in 2000 but has risen to 3.6GW now – in comparison to Germany at 520MW and Denmark at 1.2GW - with a 36% increase in the last year alone. DECC expects to see 20GW of total installed capacity by the end of the decade.

It claims the offshore wind sector has the potential to create 35,000 jobs and contribute £7 billion to the economy by 2020 "if costs come down and more is deployed".