BP turns back on UK wind sector

The government and the UK wind industry have today dismissed suggestions that more attractive incentives will be required, after BP confirmed it was to focus all its wind energy investment on a US market that it regards as more " economically viable".

The company said that while it remained committed to investing $8bn (£5bn) globally in a range of different renewable energy projects around the world, its future wind energy investments would be focused entirely on the US.

The company is now expected to divest its stake in a wind farm in India and ditch plans for a small-scale onshore wind farm in the UK.

A spokesman for the company insisted that the decision was not a reflection on UK wind energy policy, arguing that US onshore wind farms simply offered potential for better returns.

"There is more opportunity for scale in the US where there is a lot of empty land, a lot of wind, and a commercial and planning environment that makes projects viable," he said. "The UK is much more crowded and there isn't as much space for onshore, and when you look offshore costs are significantly higher."

However, the decision, which follows Shell's move this summer to sell its stake in the London Array wind farm in favour of US projects, will still be seen as a blow to the government's repeated claims that the UK has emerged as one of the premier locations for investment in wind energy.

It will also re-open the debate over whether UK incentives are generous enough to attract international renewables investment, particularly at a time when president-elect Barack Obama has pledged to deliver a raft of incentives and a huge increase in funding to drive the US renewables sector.

A spokeswoman for the UK Department of Energy and Climate Change (DECC) downplayed the BP decision insisting that the outlook for the UK wind industry remained positive. "Investment is fluid and it is a competitive market," she said. "Some investors will back the market and others will choose not to – but overall investment is still rising."

Charles Anglin of the British Wind Energy Association (BWEA) similarly insisted that the UK remained an attractive arena for wind energy investment and that projects were continuing to find funding.

"Obviously if the support mechanism were more generous, it would make the UK a more attractive place to invest," he said. "But we are not in a problem area at the moment – commodity prices are beginning to come down, offshore sites will be identified next year, and the government is introducing new banded incentives in the energy bill."

He added that while it was a "no-brainer" for the oil majors to invest in lower risk onshore projects in the US that are backed by major tax breaks as opposed to higher risk offshore developments in Europe there was a possibility they would be attracted back to Europe as the offshore sector matures.