On 23 September the UK renewables sector was celebrating the opening of the 300MW offshore wind farm situated off the Thanet coast in Kent. The wind farm’s status is quite simple – it is the largest worldwide. No wonder there was pride when the VIPs looked out to sea.
For many years, Sweden’s leading energy company, the state-owned Vattenfall, has espoused the cause of renewable energy. Although the company’s previous wind farms have been built in the Baltic Sea, it is now expanding internationally. Off the Thanet coast, it has installed 100 3MW turbines manufactured by the Danish firm Vestas.
The total cost of this wind farm, much of which is related to the costs of the installed turbines themselves, is between £800 million and £900 million. On a per megawatt basis, this indicates a cost of between £2.5 million and £3 million. By way of comparison, the cost of new gas-fired plant is approximately £500,000 per megawatt. However, the latter needs expensive gas to operate, whereas wind plants receive their power source effectively free of charge.
Capacity levels vary markedly as well. Offshore wind farms will often be operating when their power is not needed – in the middle of the night for example – and may well be literally becalmed at peak hours of demand. To that extent, offshore wind power is unlikely to be suitable for base-load purposes, but it still has a contribution to make within a mixed electricity generation system.
Nonetheless, 23 September was a signal day for the renewables sector, which – for better or for worse – has worked and lobbied hard for almost two decades.
The following day is likely to be less fondly remembered, given the contents of a leaked Cabinet Office memo that was reproduced in the Daily Telegraph.
Many directors and employees of UK-based renewables organisations will have choked over their cornflakes as they read about the Coalition Government’s ‘Bonfire of the Quangos’. This process, whilst integral to saving money as part of the Comprehensive Spending Review (CSR), has been carried out separately. But the message remains the same: justify both what you do and the money you spend.
In its quango article, the Daily Telegraph concluded – and this has not been denied by Government spokesmen – that some 177 quangos were to be abolished, a large number were to be merged and 350 were to be retained, including Ofgem, which has been widely criticised in the past.
However, a Damoclean sword hangs over the fate of a further 94 quangos. Surprisingly, perhaps, this list includes Ofwat, the fulcrum of the water sector. Many of the 94 are agricultural, educational or health quangos, but a surprisingly high number of energy/cleantech quangos were also cited as being under review.
Included within this category are the Carbon Trust, Consumer Focus, the Energy Savings Trust, the Environment Agency, the Fuel Poverty Advisory Group and the Renewable Fuels Agency. It is a lengthy list, and at least some of these quangos seem certain either to be abolished or at least to be integrated elsewhere.
In any event, substantial job losses seem likely. And, in the medium term, a larger, more integrated, renewables quango may emerge.
Crucially, 20 October will see the publication of the CSR. The renewables industry, given its small size in the context of a £150 billion public sector net borrowing figure, is unlikely to face massive cuts.
Recent indications suggest, though, that the prospects for the Severn Barrage (a proposed tidal power scheme on the River Severn, between England and Wales) have receded in recent months, despite decades of engineering studies, and recently introduced feed-in tariffs may be scaled back.
A week is a long time in the renewables sector.
Nigel Hawkins is a Director of Nigel Hawkins Associates, which specialises in the provision of investment and policy research.
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