Cuts in subsidies likely to cancel major wind farm project in Scotland

Every day we are reading about the somewhat chaotic state of support from the UK government for sustainable energy. Some of the policies are safeguarded by EU renewable energy and energy efficiency objectives, but there is still considerable room for manoeuvre by the national government. Mure Dickie and Pilita Clark write in The Financial Times about the latest developments with a wind farm proposal in Scotland.

 

Scottish wind farm project faces collapse after subsidy U-turn

A planned £2bn wind farm off the coast of Scotland is in doubt after the cancellation of a subsidy deal.

The decision, which follows a delay in the project while a judge considers its impact on bird life, is expected to have a chilling effect on the offshore wind industry in the UK.

Unless reversed, the decision to terminate its “contract for difference” subsidy is likely to doom the 448MW Neart na Gaoithe project off the Forth estuary, undermining efforts to meet UK and Scottish carbon emissions targets.

Mainstream Renewable Power, the international energy company developing the project, said it “strongly disputes the validity of the termination notice” issued by the Low Carbon Contracts Company, a group established by the Department of Energy and Climate Change.

The Neart na Gaoithe project is understood to be ready to proceed, but a final investment decision cannot be made without resolution of a legal challenge brought by the Royal Society for the Protection of Birds, which says it and three other offshore wind projects threaten the lives of thousands of seabirds.

Edinburgh’s Court of Session held a hearing in May 2015 to review the Scottish government’s approval of the projects, but judge Lord Stewart has yet to issue his ruling.

The LCCC declined to comment on its decision to terminate the subsidy, which was made in late March but was not publicly announced beyond an entry on the company’s subsidy register.

The LCCC, which acts for the government as a counterparty for CFD subsidy deals, said that in general it had the “right but not an obligation” to terminate them if a project did not achieve agreed milestones.

A Mainstream spokesman said the consortium behind the wind farm “continues to work hard to ensure that this £2bn significant energy infrastructure project will be built as planned”.

The project’s financial backers are believed to be still ready to commit themselves to the wind farm, but the spokesman said a subsidy contract was “required to bring this project to commercial operation”.

Neart na Gaoithe is one of seven offshore wind farms awarded subsidy contracts since 2014 and one of only two to win subsidies in a competitive auction.

Its contract guaranteed it a price of £114 per megawatt hour for its electricity, making it one of the cheapest offshore wind power subsidies issued so far.

The prospect that a big project could effectively be killed by delays in a legal case raises questions about integration of the UK planning and energy subsidy systems.

RSPB Scotland said there could be “better join up” between the Edinburgh government’s planning process and the management of wind farm financing by LCCC and the UK government.

But the charity said the primary concern was “ensuring that renewable energy is delivered without harming wildlife” and the way in which consents were issued meant it had “no option” but to challenge the decision in court.

Project backers have said Neart na Gaoithe would result in £1.1bn of spending in Scotland, with 500 jobs in construction and 100 staff needed over the 25 years it would be in operation from about 2020.

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