Clarity will breed confidence in UK offshore


June 26, 2015

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She was the speaker everyone wanted to hear.

The Global Offshore Wind 2015 conference, run by RenewableUK, started in London on Wednesday morning with a full conference room. For most, this was the first chance to hear from Amber Rudd, the UK’s new secretary of state for energy and climate change.

She has already wielded the axe for the onshore sector. Would offshore wind be next? The question is important to the global offshore industry because the UK is the world’s largest offshore wind market, with 5GW installed, and one of its key players.

If growth in the UK were to be curtailed then it would be a setback for investments in Europe, Asia and North America.

But, thankfully for those in the sector, Rudd talked positively: “The industry now supports 14,000 jobs, and represents one of the 21st century’s biggest industrial success stories,” she said.

Her message was that the government would continue to support offshore wind in UK waters, but with caveats. UK leaders want to support the growth of a sector that has the potential to export products and knowledge globally, but offshore wind would have to keep driving down the cost of energy and win over the UK public.

One concern in the room was lack of clarity on the future of the Levy Control Framework after 2020/21.

The LCF is a cap on how much money can be levied on consumer energy bills to support new ways of generating energy in place of coal-fired power stations. Those taking investment decisions now on large offshore wind farms need more certainty. Rudd could not give that certainty: “Conversations with the Chancellor will happen at some stage. I hear you and I will come back on it,” she said.

And another concern was on the second Contracts for Differenceauction, which is set to happen this October. Rudd said she could not make a precise commitment on the size of funding in that auction or the timing of it, but would do so “in the next few weeks”.

This sounds good in theory but those in the audience, when polled in the second session of the day, were less confident about the future. This is understandable. The Conservative government has shown it is willing to axe support for onshore wind investors, and those in offshore wind will only gain confidence if Rudd makes a positive announcement on CfD.

The panellists in that session, however, were more positive.

Scottish energy minister Fergus Ewing was “heartened” to hear Rudd support offshore wind, and said it would play an important role in the UK energy mix until 2030. He added that his impression was there would be something to replace the LCF after 2020/21.

And Benj Sykes, vice president and head of asset management at Dong Energy, said he was confident and urged the audience to be more positive.

But confidence has to be earned. The UK offshore industry may be on track to achieve its 2020 goals, but it needs tangible government support if investors are to get the confidence to make investment decisions that will spur the offshore industry on to 2030, both in the UK and overseas.

It is good that Rudd had some positive words for the industry. Now we need to see actions.

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