Thames windfarm execs: We need more subsidy

Energy chiefs getting windy

One of the firms participating in the London Array project, under which the world's biggest offshore wind farm would be built in the outer Thames Estuary, has questioned the scheme's economic viability.

The Financial Times reported at the weekend that Paul Golby, chief executive of E.ON UK - which owns 30 per cent of the Array venture - says that "the economics [of the Array] are looking pretty difficult".

Offshore windfarms like the Array are much more expensive to build and maintain than onshore ones, costing roughly twice as much. The FT quotes energy major Centrica as estimating the cost of offshore capacity at £3m per megawatt, more than double what it costs to build nuclear stations.

The cost of the electricity produced is even worse than this figure indicates; wind farms' average output over time is around 30 per cent of their capacity, whereas nuclear stations typically run at 90 per cent. Thus, it costs more than six times as much to build a given level of power production using windfarms as it does using nuclear.

The FT quotes Sam Laidlaw, Centrica chief:

“We are planning to invest in 1,500MW of offshore wind capacity, but it is very expensive, both in capital cost and in maintenance.”

To be sure, nuclear plants need fuel and windfarms don't - but fuel costs are a very small proportion of what it costs to make nuclear energy. Most of the price goes on building, running and ultimately decommissioning the plant, and on storing wastes. And there are those who would argue that windfarm cost figures still don't take enough account of the need for backup gas-turbine power for calms or gales, and the consequent emissions and stress on the gas grid.

Either way, Golby, Laidlaw and their industry colleagues seem to feel that bigger subsidies will be required if they are to build the kind of wind base the government says it wants to see. They say that recent falls in gas and carbon prices have worsened the already-gloomy economic picture for offshore wind significantly.

The London Array seemed to be under threat last year when Shell, with a 20 per cent stake, pulled out of the project saying it was uneconomic. However, Shell's place was taken by the emir of Abu Dhabi. E.ON has 30 per cent, and the other half is owned by DONG Energy of Denmark. When complete, the Array is expected to yield sufficient energy to run 135,000 average UK homes*.

The FT says that the Crown Estates, owner of the seabed on which the wind turbines will be erected, is meeting with further potential investors this week. The government, strongly in favour of the scheme, is hoping that the negotiations may yield further funding for the Array. ®

*This includes heating, hot water and other energy consumption which in most British homes today is done using gas or heating oil. The Array prefers to say that it would generate "enough power for three-quarters of a million homes", but this considers present-day electricity use only, not the total energy consumed.