![](https://www.nsenergybusiness.com/wp-content/uploads/sites/4/2018/03/VNIN_Aerial-3.jpg)
In November, the UK retained its fourth place ranking in Ernst & Young’s quarterly “attractiveness index” for renewables, a measure of how favourably potential investors view the country’s market.
Most significantly for the UK, it retained its position in both the long term and near term indexes for wind investment. The consistent ranking was something of a success for the UK, where wind power development has often been troubled, despite solid government support. It has sometimes seemed in the UK that the removal of one barrier to development has simply revealed another, but step by step development is being supported. There has been real progress in the past year, and the industry has responded with significant strides forward on three offshore wind farms – progress that will put the UK firmly in a leading position as an offshore wind developer.
Dealing with FSL
At the beginning of the year, the largest barrier to development was so-called final sums liability (FSL). It required project developers to make financial provision, at the very start of project development, for all the potential costs of upgrading the electricity grid so it could accept power from the wind farm. The early provision was required partly because grid operator National Grid was often required to begin upgrading work before it was known whether the project would win planning permission – notoriously slow in the UK. And the liability could be considerable, because the UK’s grid code dictates that new generation be accepted on an “unconstrained” basis, which requires that the wind farm’s full capacity can be exported to the grid at any time. Offshore wind farms – larger than those onshore and potentially connecting to the onshore grid at a relatively weak point – found themselves required to make provision for up to 10 % of project cost and for more than one developer the risk from final sums liability seemed large enough to halt all projects in the UK in favour of other markets.
FSL is one barrier to development that is being removed. In late summer National Grid won favour from the industry when it consulted on a revised proposal that would require much less commitment from developers. In the new regime, initial liability is fixed at the time National Grid makes its connection offer to the project developer. It is calculated using a broad fixed formula that includes the project capacity, the transmission zone in which it is located and the planned startup date. The cost can vary upwards from £1000/MW but is capped at £3000/MW. This is known as the User Commitment Amount and it must be paid if the project is cancelled or does not receive consent. If the project receives all the necessary consents, the initial liability is replaced by a “post-consent cancellation amount” which is calculated using a fixed formula: the capacity of the project multiplied by ten times the local transmission use of system charge. The developer becomes liable for the entire cancellation amount if the project is due to complete within a year and for a stepped amount if completion is up to four years away.
The new arrangements are being offered on a voluntary basis while changes to the connection and use-of-system charges are being made.
Removing other uncertainties
The UK government has also been working on removing other uncertainties, among them the arrangements governing the transfer of power from offshore wind farms to the onshore grid. For the first offshore wind farms this was a relatively simple matter of single or double cable connections to the local distribution grid. Newer offshore farms will, however, be bigger (in terms of turbines and capacity), further offshore and grouped in development zones that make it likely that connections will be shared. It has not been clear whether developers will be required to make their own connections or whether some or all of the offshore links will be part of the UK’s high voltage grid network. The Department of Trade & Industry (DTI), under whose jurisdiction this falls, also wants to introduce some level of competition into the offshore connections.
This issue should be resolved following a DTI consultation stretching into 2007. It proposes a similar structure to that on the UK mainland, in which grid connections are built by transmission network owners – onshore these are the National Grid in England and Wales and Scottish Power and Scottish and Southern Energy in Scotland.
It will be operated by a single transmission system operator, initially assumed to be National Grid, which operates the UK onshore network. Potential transmission system owners will be invited to compete to build parts of the network – whether as single connections or geographical areas has not been decided – which will allow for competition in the market as well as providing the Office of Gas and Electricity Markets (Ofgem), which regulates the transmission networks in the UK, with comparators to allow it to assess fair process.
As for developers who have to make connections to the wind farms before the new arrangements are in place, the DTI suggested it is likely they will be taken over by new transmission system owners, but pointed out that owning and operating transmission networks was “a regulated activity in the UK” so developers should plan their connections within that structure.
With the issue of final sums liability addressed, and significant moves taken towards finalising the offshore export regime, developers could be forgiven for thinking that all the barriers to offshore wind farms had been removed. That is not quite the case, as two developers have found this year.
Local difficulties
The government at Westminster has been solidly behind the industry, even if developers may have wished it would move faster on some issues. The UK’s local government is another matter, and while DTI has responsibility for so-called “Section 36” consents – granting planning permission for large scale power stations, including those offshore – it is local government that has to agree the relatively small onshore connection facilities for the projects. It is very unlikely that the local government will entirely halt flagship projects, but it can cause expensive delays or disruptive redesigns.
The London Array, a very ambitious project to build as many as 271 turbines in the Thames Estuary, fell foul of local planners in 2006. Proposals for the onshore substation required to import the power from the wind farm, to be sited at Cleve Hill on the south side of the Thames Estuary, required planning permission from Swale Borough Council and although the council’s planning officers recommended the application be granted, the planning committee turned it down.
It is far from the end of the process: the developers will appeal the decision and it can be “called in” by the Secretary of State for Trade and Industry if he considers it necessary for the decision to be taken at government level. But the process will be time consuming. Nor is it the only example of such local opposition: developers at Burbo, to be sited near the existing North Hoyle offshore wind farm and expected to go into operation in 2009, found that their permissions were delayed by months when what seemed like agreement on a substation site was withdrawn. The problem was solved when land was acquired adjacent to an existing substation site, but the costs incurred in replanning and repermissioning the cable route were significant.
Speeding up the planning process
Planning has been a consistent problem for developers of all kinds in the UK and has been a major obstacle to all types of power infrastructure. It is the most significant factor delaying implementation of new wind farms onshore, where projects have been subject to delays of several years, but related infrastructure has found the process still more problematic. Planning permission for an upgraded transmission line that will allow a large number of wind farms to be built in the north of Scotland is expected to take several years: developers are forewarned by the example of the most recent new transmission line in the UK, which took ten years to receive planning permission.
Once again the DTI has begun to address this issue, not just for power developments but for a variety of infrastructure projects. It published a consultation in November on moves to speed up the process, particularly the public inquiry step – in the UK a focus for attempts to slow down unwanted development that reached a peak with the two-year inquiry over the Sizewell B nuclear station. The consultation proposes, for example, to:
• require local authorities to register any objections to proposed developments within set timeframes;
• allow the Secretary of State to set a deadline for the submission of the Inspector’s report and recommendations;
• allow summary evidence to be read out to reduce the length of an inquiry;
• allow the inspector to direct that certain issues be primarily dealt with through the submission of written evidence; and
• allow inquiries to be held in concurrent sessions by a number of inspectors.
The changes are an important part of the UK government’s strategy to speed up the planning process for all new power projects, of which both wind farms and new nuclear stations are high on the agenda. They were welcomed by the British Wind Energy Association and should help speed up large projects. However, they do not address local planning issues such as the refusal of permission for the London Array substation at Cleve Hill.
Handling banding
After addressing the final sums liability, offshore grid and planning issues, the UK has looked at the remaining problems faced by offshore wind – seen as ultimately more likely to bring large tranches of power onto the grid – and attempted to address the fact that because it is relatively untried it has high capital costs.
A related problem is arising with the UK’s attempts to bring wave and tidal devices into commercial operation. The main subsidy, the Renewables Obligation, was designed to bring the most commercial technologies into operation fast and it has done exactly that, with onshore wind, small hydro and landfill gas the big winners. But since the RO went into operation the government’s aims have shifted: it wants diversity of renewables and extra support to bring on its fledgling industries. In response it has decided to introduce technology bands into the RO, in a proposal made in this year’s energy review. The proposal follows a similar proposal made by the Scottish Executive, which also aims to support the wave and tidal industry, some months ago.
Under the UK proposal some technologies – exactly which is still to be decided – would receive more than one Renewables Obligation Certificate for each MWh generated. The proposals were received warily by the renewables industry. First, this was because the government aimed to keep the number of ROCs generated broadly equivalent to the number of renewables MWh generated, which meant that some technologies – again, still to be decided – would have to be “banded down” to a fractional ROC per MWh. The obvious targets would be landfill gas and biomass co-fired in fossil fuel stations, which are major contributors to meeting the Obligation but were already in line to be eased out over the next few years. But onshore wind developers are far from convinced that they are not in danger of being banded down.
The banding proposal is at an early stage but even now presents problems: the UK government’s proposals are not compatible with those of the Scottish Executive, for example, but the ROCs from Scotland and England and Wales are intended to be fully tradeable. Banding in England and Wales requires primary legislation that will delay it until at least 2009 and the lobbying over the banding of different technologies has begun and will continue, as bands will be revisited every few years.
The change will support offshore wind, but may do so at the cost of confidence in the Obligation as a whole.
This photograph and that on p 20 show the Kentish Flats offshore wind farm (photo: Elsam/Vattenfall) UK “Round 1” wind farms