Chill wind as companies pull out of projects

By Fiona Harvey, Jim Pickard and Ed Crooks
Published: January 26 2009 23:17

The UK is losing its attraction for renewable energy generators, putting future energy security and the government’s climate change targets in jeopardy, Lord Smith has told the Financial Times in an interview.
The chairman of the Environment Agency said he was concerned about several recent announcements from big energy companies that they were reconsidering plans for offshore wind farms.

“I’m very worried by the fact that a number of companies have said they are no longer actively considering major schemes in the UK,” he said.
German energy group Eon is the latest company to reconsider its plans, the FT disclosed today. Paul Golby, Eon’s chief executive, said the economics of the London Array, touted as the world’s biggest wind farm, were “on a knife edge”.
Lord Smith highlighted BP as an example of a high-profile investor pulling out. The company last year said it would abandon plans to invest in UK offshore wind farms, preferring instead to put its money into onshore wind energy in the US. Shell made a similar announcement when it pulled out of the London Array last summer, leaving Eon and Dong, the other partners, to find a replacement. Centrica also said it would review its offshore wind plans.
Lord Smith said: “There must be a reason for these companies doing this. I would want to have a long serious look at that, at why these decisions have been taken and what we need to do to encourage BP and others back into the UK.”
Lord Smith, a cross-bench peer, said the government was in danger of missing European Union renewables targets unless swift action was taken.
“The government are saying the right things and doing some of the right things,” he said. “I would urge them to do a lot more.”
He said reviewing the renewables subsidy regime should take priority: “You have to look at the subsidy system to see if it is working properly. If it is deterring companies from investing, then you need to make changes.”
US President Barack Obama had moved much faster to foster the growth of green energy, Lord Smith said. “He is putting a lot of emphasis on . . . making the US a very attractive environment for companies to invest in. We need to be at least matching that, making the environment here in the UK encouraging to such investment,” he said.
Lord Smith added that the UK needed “serious investment” in research and development into renewable technologies, to avoid being left behind by Germany and the US. He pointed to tidal energy, saying the UK could be a world leader: “We are a nation surrounded by tides – it’s obvious.” But a tidal power industry would only grow up if the government provided the right incentives, he warned.
●The Department of Energy and Climate Change today published its shortlist of five tidal energy schemes for the Severn estuary. The biggest scheme on the list is for a barrage from Cardiff to Weston, which could generate 5 per cent of the UK’s electricity. Plans for smaller barrages and tidal lagoons were included, and £500,000 will be spent developing “embryonic” technologies such as tidal reefs.
Copyright The Financial Times Limited 2009