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Wind subsidies gone in 10 to 15 years says U.K. study

By Paul Dvorak | June 1, 2011

Offshore wind relies on government support to develop into a commercially viable technology. In Britain, the industry is seen as one of the main renewable energy sources to help meet emission-reduction targets. “Subsidy policies, as well as being a means of delivering carbon reduction targets, are viewed by governments as a foundation on which offshore wind generation can grow to a point where it can develop without subsidy,” Price Waterhouse Coopers said in its offshore wind power survey.

Nearly half of the government bodies interviewed said they expected offshore wind to survive without subsidies in 10 to 15 years, while 17% of respondents counted on less than 10 years and an equal share thought 15 to 20 years were needed.

The major factor in determining whether a nascent technology can survive without state support is the cost. The average construction cost per megawatt varied among questioned European offshore wind power developers, with 38% of survey respondents saying their average cost came to less than $3 million, while 31% quoted $4 to 5 million.

But most building contractors and manufacturers of wind-farm components asked in the survey expected the cost for construction and turbines to drop in the next five years, making it cheaper to install new wind farms. 80% of those who forecast a decrease said costs could drop 10 to 20%.

“Nearly all developers surveyed said supply-chain capacity constraints are a significant problem for offshore wind construction to such an extent that 82% said they create the risk of a seller’s market,” PwC found in its poll. Installation vessel availability, port infrastructure, and engineering presence have negatively affected offshore wind power projects in the past.

The survey also showed that the Fukushima nuclear accident in Japan dampened financial institutions’ perception of nuclear power. Before the event, more than half of respondents said offshore wind was less or much less attractive than nuclear power, while 75% of respondents said after the accident their sentiment had shifted negatively against nuclear. “Whatever the exact outcome, the Fukushima emergency is likely to shift the energy policy balance toward renewables,” PwC said. “While it won’t raise a red flag to investment in nuclear, it could spur further moves by nuclear companies into renewables.”

Price Waterhouse Coopers LLC
www.pwc.co.uk

 

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