Bloomberg News

International Power Rejects U.K. Sea Wind on Need for Subsidies

October 14, 2011

Oct. 14 (Bloomberg) -- International Power Plc said the engineering challenges of building offshore windfarms in the U.K. and their overdependence on subsidies make them unattractive compared with other types of generation.

“There are two reasons we have not gone into offshore wind in the U.K.,” Chief Executive Officer Phil Cox said in an interview at Bloomberg’s London bureau this week. “It’s a far more hostile environment from an engineering point of view that requires partners with very strong expertise and the second is sustainability of incentives.”

The U.K. government said in July it wants to see a fivefold increase in wind power by 2020 from turbines based on land and offshore. Incentives to promote construction have included renewable obligation certificates, which can be sold in the market to energy suppliers generating carbon dioxide. A new system being considered would require low-carbon developers to submit a price they would accept for producing power.

Offshore wind, which currently has generating capacity of 1.3 gigawatts in the U.K., the most in the world, can be boosted to 18 gigawatts by 2020, according to Energy Minister Charles Hendry. To achieve that goal, the cost of the technology needs to be brought down to 100 pounds ($158) a megawatt-hour of generation from about 190 pounds, the minister said.

International Power would be more comfortable when the cost of renewable generation is close to the underlying cost of power in the market, Cox said.

Baseload power for next-working day rose 3.2 percent to 48 pounds a megawatt-hour, broker data shows. The contract for next month increased 0.6 percent to 53.8 pounds. Baseload is delivered around the clock.

Renewable projects being considered by the utility in the U.K. include onshore wind farms and converting its Rugeley coal- fired power station so it can burn biomass.

Britain derived 7.4 percent of its electricity from renewables last year. That proportion must rise to 30 percent for the U.K. to meet its European Union-set target of getting 15 percent of all energy from renewable sources by the end of the decade.

--Editors: Stephen Cunningham, Alex Devine.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus