Innovation slashes UK offshore costs to ease pain of new CCL rules
The UK's removal of Climate Change Levy (CCL) exemptions for renewable energy projects puts further pressure on developers to improve on the latest record-low offtake prices of GBP114-119/MWh through large scale deployment of the most advanced turbine and grid technology.
UK Chancellor George Osborne announced in July that renewable energy projects would no longer receive Climate Change Levy exemption certificates (LECs) which have provided generators with around GBP4/MWh in extra revenue.
The Conservative government's move comes amid wide-ranging cuts across UK State departments to meet deficit reduction targets and follows significant cost reductions in a wind power market dominated by European firms.
Renewable electricity has been exempt from the CCL since its introduction in 2001 and the UK had installed 5 GW of offshore wind capacity by June 2015, some 1,450 turbines, according to industry group RenewableUK.
As developers install more projects in UK waters, advancements in technology allowed ScottishPower Renewables to announce it had lowered the cost of offshore power to £119/MWh for its 714 MW East Anglia ONE project in the latest contract round held earlier this year.
By securing a Contract for Difference (CfD) at this price, the company has sliced the cost of offshore power by over £20/MWh compared with CfDs secured in 2014, the company said.
In the same contract round, Mainstream Renewable Power announced a CfD at GBP114/MWh for its 448 MW Neart na Gaoithe project in Scotland, with additional savings made on introducing Siemens' new Offshore Transmission Module (OTM).
Offshore developers will certainly miss the revenues from CCL exemptions, but on-going technological advancements will allow the offshore sector to close in on conventional generation costs.
Other support mechanisms for offshore wind also remain in place, including the Renewable Obligation Scheme for which suppliers pay generators to meet green energy requirements. In contrast, onshore wind developers will not be eligible for the renewable obligation scheme from April 2016, a decision which was announced by the government in June and sent shockwaves through the sector.
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