Rising costs threaten wind farms

By Fiona Harvey, Environment Correspondent
Published: April 8 2009 23:06

At least five big wind energy projects are in danger of being delayed or shelved owing to higher costs and a shortage of credit, the British Wind Energy Association said on Wednesday.
The projects, which are offshore, amount to about three gigawatts of wind energy capacity or almost a 10th of the amount needed to meet government targets. All were expected to receive final agreement on their funding this year but sterling’s decline has raised the cost of some imported turbine components while project finance conditions have now tightened.

The five include the London Array, the UK’s biggest proposed offshore wind farm, as well as projects in Lincolnshire and Wales.
The rate of new applications to build wind farms was falling and independent onshore developers were struggling to find finance, the BWEA said, while offshore projects were most at risk of delay. Several prominent energy companies have scaled back their commitment to renewables, including BP, Shell and Iberdrola.
Maria McCaffery, chief executive of the BWEA, said: “The current economic climate has caused a number of developers to put projects on hold, threatening the UK’s targets and leaving the country exposed to volatile fossil fuel prices.”
She urged Alistair Darling, the chancellor, to include more support for renewable energy in the Budget. “Building a clean energy sector in the UK is an important part of our economic recovery, and we need to maximise the opportunities to develop sustainable energy projects which would otherwise be delayed by the recession,” she said.
Wind farm developers are also looking to raise funds from the European Investment Bank, which is investing €800m (£723m) a year in renewable energy around Europe. Eon, Dong and Masdar, the owners of the London Array, have applied for funding but if granted it would make up only a small part of the estimated £3bn cost of the project.
Wind farm development costs should have fallen, as lower commodity prices have cut turbine prices. But a weak pound has made imports more expensive, cancelling out the gains.
Copyright The Financial Times Limited 2009