The Renewables Obligation is the Government's key mechanism for encouraging new renewable generating capacity and will stay in place until 2027. The current Energy Review is looking at a wide range of issues including emerging renewable technologies such as offshore wind and will report shortly.
The DTI has a 2010 Target Team to remove the barriers to development of renewable energy and achieve the Government's target of 10 per cent. of electricity by 2010.
Many of the issues being tackled will assist the development of offshore wind beyond 2010. The higher cost of developing offshore wind remains an issue, and the costs of connection to the electricity grid are part of that. Grid connections are likely to form 10-15 per cent. of capital costs for the Round 2 wind farms, given the considerable cable lengths involved.
Certainty about how the grid connection costs will be funded, and the regulation that controls them, is therefore a key factor that developers need in preparing their business models.
In March this year the Government announced their decision to extend the existing onshore model of regulation of transmission links. Following a joint consultation with Ofgem the Government concluded that this approach has a number of clear advantages for offshore projects.
First, extending the regulated price control approach offshore will ensure consistency with the regulatory arrangements onshore. Secondly, it will provide a financial benefit to offshore developers by spreading the costs they face to connect to the onshore electricity system over a number of years. Finally, it will mean that the responsibility for developing the offshore transmission network will be shared by the system operator and the transmission asset owners who can bring their existing expertise to bear.
The DTI and Ofgem are now leading the project to put the new regime in place to connect a proportion of Round 2 projects in time to contribute to the 2010 target, and to ensure there is an enduring framework in place beyond 2010 for offshore wind and other forms of offshore renewables.
The Government have provided capital grants of £107 million to stimulate early development of a significant number of offshore wind farms under the Round 1 offshore wind programme. This will have a significant benefit in the development of offshore wind post-2010 by underpinning the development of the industry and equipment supply chains and will build skills, providing a learning experience which can improve confidence and help reduce future costs and enable future projects to proceed without the need for grant support.
The DTI established the Research Advisory Group (RAG) to facilitate a co-ordinated approach among the regulatory and funding bodies to address the key impact issues of Round 2 wind farm proposals. The DTI has allocated an initial programme budget of up to £2.5 million for offshore wind farm issues, and has collated a list of the potential environmental issues in relation to offshore wind farms and has taken forward and funded a number of these projects.
The DTI, MOD and Civil Aviation Authorities are working to develop mitigation technologies for offshore and onshore radar issues.
The Renewables Advisory Board is also working on the longer term economics of offshore wind to identify cost savings for Round 2 projects.
While Round 2 offshore wind projects will contribute to our targets for 2010 and beyond, there are also enormous economic benefits for the UK in offshore wind. The DTI’s Business Development Team is working to ensure that UK companies maximise the opportunities for offshore wind projects.