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Wind farms are asking for a tax brake.

 Sev­eral big wind farm developers, includ­ing Sweden’s Vat­ten­fall and Den­mark’s Orsted, are seek­ing

Wind farm
tax breaks from the UK gov­ern­ment or enhanced sub­sidies as a sharp rise in costs puts Brit­ish projects at risk. Sev­eral com­pan­ies that won con­tracts in a gov­ern­ment auc­tion last year to build new renew­able power gen­er­at­ing capa­city from 2024 have warned min­is­ters the projects will be dif­fi­cult to deliver at the prices agreed, accord­ing to people involved in the talks. Last year’s sub­sidy auc­tion was the UK’s most extensive to date and secured enough capa­city to provide 12mn homes with cheap, low-car­bon power. The UK has 13.7GW of off­shore wind capa­city oper­a­tional but is seek­ing to increase that to 50GW by 2030 as part of an energy secur­ity strategy drawn up by min­is­ters last year, shortly after the full­s­cale inva­sion of Ukraine.

But some wind farm developers that secured con­tracts in last year’s auc­tion have either delayed or are hes­it­at­ing to take final invest­ment decisions on those projects. This reflects how cost rises of 20-30 per cent over the past 12 months made it more dif­fi­cult to jus­tify that spend­ing without extra gov­ern­ment incent­ives, said the people involved in the dis­cus­sions between the industry and min­is­ters. Developers of renew­able energy projects are tra­di­tion­ally incentiv­ised to invest in new schemes through annual auc­tions involving state sub­sidy agree­ments, known as «con­tracts for dif­fer­ence». These con­tracts help developers secure fin­an­cing for projects by guar­an­tee­ing a price for their power out­put.

The Swedish state-owned com­pany secured an agree­ment in last year’s sub­sidy auc­tion known as AR4 for the first phase of its Nor­folk project, the 1.4GW Boreas off­shore wind farm. Off­shore wind farm developers that were suc­cess­ful in the auc­tion were guar­an­teed prices of £47 per mega­watt hour in today’s money once their projects are oper­at­ing. In addition, US pres­id­ent Joe Biden’s recent Infla­tion Reduc­tion Act includes $369bn worth of tax cred­its, grants and loans to boost renew­able energy and slash emis­sions. The largest project pro­cured in last year’s auc­tion was Orsted’s 2.85GW Hornsea 3 wind farm off the coast of Nor­folk.

These included delay­ing the start date of their con­tracts so the ini­tial power out­put from projects could be sold at higher mar­ket prices than the lower guar­an­teed levels in con­tracts. Developers of renew­able energy projects are also con­cerned that pri­cing levels for the next auc­tion this sum­mer will be set too low by the gov­ern­ment. Simon Vir­ley, UK head of energy and nat­ural resources at KPMG, said the gov­ern­ment had «to find a way for­ward that enables these projects, and their asso­ci­ated sup­ply chain invest­ments, to go ahead» given the «excep­tional cost and sup­ply chain pres­sures» facing wind farm developers. The gov­ern­ment said that the con­tracts for renew­ables com­pan­ies «already provide pro­tec­tion to energy gen­er­at­ors», given they were linked to infla­tion.

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Comments

  1. Miles27 February 2023 at 09:35

    Prices have indeed gone up considerably so their requests are reasonable. The government must act NOW and make sure these companies get all the help they need to produce the energy the UK needs. This must be a priority.

    ReplyDelete
  2. Kyle M.27 February 2023 at 10:01

    The government must offer incentives that take care of that extra 20-30% cost rises. Otherwise we won't get the energy needed. It's that simple.

    ReplyDelete
  3. Q27 February 2023 at 10:38

    50GW by 2030 seems so far away now and if they don't do something very soon this will be just a dream. 13.7GW is not enough right now. We should get to 20GW within the year or so.

    ReplyDelete

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