UK offshore wind subsidies “can’t last forever” – Rudd

In her first address to the country’s offshore wind sector, UK energy secretary Amber Rudd (pictured) this week gave the keynote speech at trade group RenewableUK’s Global Offshore Wind 2015 conference.

Amber Rudd

She made it clear that the government plans to back offshore wind, which she called “one of the 21st century’s industrial success stories”, pointing to the sector’s growth from the UK’s first offshore wind farm in 2000, producing 4 MW, to the current world-leading 5 GW of installed capacity from 30 wind farms.

Rudd’s appearance came as the wind industry was still reacting to the government’s recent decision to cancel subsidies for onshore wind a year earlier than planned, a decision Rudd defended in her speech. “We already have enough onshore wind in the pipeline,” she said, to meet the government’s 2020 targets. “Without limiting [onshore wind], we would have too much. It is appropriate to curtail further subsidized deployment of onshore wind, balancing the interests of developers with bill-payers and other [renewable] technologies.”

While Rudd told the offshore wind sector that the government “will back you”, she said the sector’s costs must be “progressively reduced” so that it “becomes more and more competitive, requiring less and less public support so the future is sustainable and subsidy-free”.

There is “no bottomless bill-payer support” for low-carbon technologies, she added, warning that “subsidy levels cannot be sustained indefinitely. [Subsidies are] provided now to enable the industry to reduce costs, invest and innovate. Government must help technologies eventually stand on their own two feet, not encourage permanent subsidy reliance.”  

Cost reduction must happen now for the sector “to expand into the 2020s and beyond,” she added, saying she was “pleased the industry is straining every last sinew to make this work.”

The government will announce the details and budget of its new Contracts for Difference round in the coming weeks, she said.  

The offshore wind industry’s reaction to Rudd’s speech was muted, with attendees at the conference seeming more pleased about the fact that she had turned up to speak to them than about what she actually said, and with many noting that she had failed to offer clear policy signals.  

Fergus Ewing MSP, Scotland’s minister for business, energy and tourism, said he was “heartened” by Rudd’s “strong support” for offshore wind, but noted that “there also needs to be clarity of support beyond 2020” and that he was “extremely disappointed by the UK government’s decision to end support for onshore wind next year”. The Conservative government’s manifesto pledge “wasn’t to scrap existing subsidies,” he said; “it was to end new subsidies. We saw the government scheme as going to continue until Electricity Market Reform took over in 2017.” Ewing said he was “concerned” about the impact of the decision, specifically about the “70 per cent of projects that may be axed in Scotland, with a possible investment loss totalling £3bn ($4.7bn)”.

Benj Sykes, Vice-President, Wind Power at Dong Energy, said he “took away great encouragement that [Rudd has] clearly understood where this industry is, but – equally importantly – she sees what we could deliver for her government”. But he also said the industry needs clear policy signals going forward. “Dong is quite a big investor,” he noted, having put “around £5bn into the UK’s energy infrastructure in the last six years, and we intend to invest another £5bn over the next five years in building capacity. But it all depends on clarity.”

Gunnar Groebler, head of Vattenfall’s renewable energy business unit, agreed that “having that clarity for us, as a European investor, is important. We are confident in the UK and would like to invest here, but there are other markets as well. Clarity is a key thing for us going forward”.

Michael Hannibal, CEO of Siemens Wind Power, echoed this theme, saying: “We need clarity, or else the future looks blurry and nobody will come and invest in the UK if it is blurry. We need clarity about what will happen between 2020 and 2030. Now we’re working on 2020 projects, but [Rudd] kind of took that away. We hope the support the UK government has given will continue.” For the future, Hannibal noted that “the industry knows we’ll have to work with less subsidies and are committed to doing so.” 

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