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Wind farms seek state aid to keep moving

Guardian Environment 8th March 2009

Britain's wind industry is calling for ­government support to shield it from the falling pound and ensure existing wind farm projects go ahead. The British Wind Energy Association is to submit a list of demands ahead of next month's budget calling for government loan guarantees and other measures amid City forecasts that the global wind industry is heading for a 20% decline this year.

The UK sector has won a deeper level of subsidies to make the recently launched third round of offshore wind licensing more attractive, but argues wider action is still required to save existing schemes.

Adam Bruce, chairman of the BWEA, said urgent action was required: "If this [downturn] had happened two years ago it might have killed the industry. It is much more robust now, but clearly there are schemes that are under threat unless help can be obtained."

The BWEA says it cannot confirm what kind of help it wants from ministers because this is still being worked out, but loan guarantees and specific aid from the European Investment Bank might be in the mix. The industry says it would also like some short-term ­financial ­support similar to what the ­government is ­providing for the private finance ­initiative (PFI).

A key difficulty faced by British wind farm developers is that all turbines are imported when the value of the pound is very low against the dollar and euro. Vestas, Britain's biggest turbine maker, ships equipment from Denmark, ­pushing up the relative cost for UK wind developers.

The irony, Bruce says, is that in 2003 Vestas set up a turbine factory at Machrihanish, Scotland, only to close it down last year with the loss of 92 jobs because it said there was too little demand.

Faced with these problems, the Royal Bank of Scotland and other ­leading backers of British wind farms have been pulling in their horns over project financing.

Centrica, the owner of British Gas and one of the biggest investors in wind with a £4bn programme, has already sounded the alarm over the perilous economics of the industry. The company said late last year that soaring costs, coupled with the rise in the cost of financing, meant that "we need to revisit all our numbers to ensure that our projects are economic before we give them the go-ahead".

Alternative energy analysts at HSBC expect the ­industry to shrink by 20% this year although they are still hopeful that economic stimulus measures in Britain, the US and China will trigger some kind of bounce back in the second half of 2009.

BP and Shell shook confidence in the UK industry when they abandoned all plans for developing wind farms in ­Britain last year in favour of the US, where the tax treatment – and planning regime – is considered far more favourable. The exit of Shell was a particular blow because it was backing the world's ­biggest offshore wind farm, the London Array, off Kent.

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