Wind industry demands rise in subsidies to combat falling pound

The UK wind industry is reportedly lobbying the Treasury to deliver an improved financial support package in next month's budget, or risk a wave of project postponements and cancellations.

The sector has already seen subsidies for offshore wind farms delivered through the Renewables Obligation (RO) scheme doubled as part of the government's strategy to deliver 33GW of offshore wind energy by 2020.

However, the British Wind Energy Association (BWEA) is now warning that further action is needed if the falling value of the pound is not to lead to project cancellations.

Currently, wind turbines are imported to the UK and the fall in the value of the pound against the euro and the dollar has meant that development costs have risen considerably, even as raw material costs have fallen in recent months.

Both BP and Shell abandoned plans for wind farms in the UK last year, arguing that projects in the US offered better returns, while Centrica has said it will have to reassess the economic viability of its £4bn UK wind investment programme.

Now industry insiders are fearful that without improved subsidies, growing numbers of investors will rein in expansion plans until development costs fall.

Speaking to The Guardian, Adam Bruce, chairman of the BWEA, said that while the industry was more "robust" than it was two years ago, "there are schemes that are under threat unless help can be obtained".

The BWEA is to submit a list of demands to the government, which it will argue are essential if the UK is to meet its EU target of generating 15 per cent of its energy from renewable sources by 2020. The list is expected to include calls for government loan guarantees for project developer, as well as short-term direct financial support for some projects.

However, while the industry remains dogged by short-term concerns, there was further evidence of its long-term health last week after Siemens announced it had signed a deal with Denmark's Dong Energy to supply up to 500 offshore wind turbines with a combined capacity of 1,800MW.

Anders Eldrup, chief executive of Dong, said that the deal was the "largest single offshore wind turbine supply agreement" in history and would help cement the company's position as the largest operator of offshore wind farms worldwide.

"Dong Energy has built approximately half of all offshore wind farms in operation in the world today," he said. "Entering into [the supply deal] provides us with an important tool for implementing our strategy of significantly expanding Dong Energy's position within sustainable energy."