UK Announces Revised Financial Support for Wind Industry

In early December the UK Treasury announced its policy regarding support for wind energy. It was published as part of an overall UK infrastructure investment plan. The much anticipated announcement was a mixed bag for industry, with additional support for offshore wind and a reduction of support for onshore wind.

In a statement RenewableUK, the leading advocacy organization for wind energy in the United Kingdom, described the announced details as follows:

The reduction in financial support for offshore wind is less steep than had been mooted in the draft strike prices which were published in the summer – for the financial year 2018/19, the level of support has been increased by £5 per megawatt hour, from £135/MWh to £140/MWh.

Financial support for onshore wind has been reduced by £5/MWh from 2015 onwards compared to the draft strike prices, e.g. £100/MWh in 2015/16 has fallen to £95/MWh, and £95/MWh in 2017/18 has dropped to £90/MWh.

Much has been written about this shift in support towards offshore wind and Government officials have gone to some length to explain that the shift is a result of the onshore industry no longer needing the support, while offshore is still in its early stages. Chief Secretary to the Treasury Danny Alexander denied that the shift was in any way a response to NIMBY complaints about the siting of large on-shore wind farms.

Either way, the announcement will shake up the industry in the UK with the likely pull back of on shore projects, and a burst of anticipation at port facilities and other coastal regions such as Grimsby who will likely benefit as offshore wind continues its impressive growth.

As of Dec 2013 there are over 1,000 offshore wind turbines in UK waters producing over 3.5Gw of electricity to British homes and businesses. That type of scale has taken over a decade of work to reach. Now, with firm Government support announced, that growth can accelerate.

In the end, investors need to have a clear and stable path forward if they are to invest with confidence. For a long while the UK Government has made the expansion of renewable energy a cornerstone of its energy policy. This latest announcement reaffirms that commitment and will allow wind energy, (mostly offshore) to continue to expand its place in the UK energy production portfolio.

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