U.K. Expands Its Offshore Wind Energy

Plan to Produce One-Fourth of Country's Needs Boosts Green Firms, Involves Big Costs, Technical Risks
By SELINA WILLIAMS and GUY CHAZAN
Britain staked out a leading role in offshore wind energy Friday, announcing plans to develop 32 gigawatts of generating capacity in U.K. waters by 2020.
The project would cover a quarter of the country's electricity needs but involves enormous costs and technical risks.

Renewable energy is becoming big business and one of the biggest bets these days is offshore wind farms. WSJ's environment columnist Jeff Ball reports.
The selection of successful bidders for nine wind-farm sites in U.K. waters is a shot in the arm for the global wind-power industry, and will put the U.K. firmly on the path to a low-carbon future.
Britain will have to overcome significant obstacles to achieve its targets. Developers operating in U.K. waters face rising production costs, a weak supply chain and a lack of connections to onshore electricity grids.
The U.K. aims to become a leader in a sector still in its infancy. Only 150 gigawatts of wind-energy capacity is currently operational world-wide, and of that, only 1% is offshore -- barely half of it in the U.K., according the British Wind Energy Association.
Friday's announcement represents a ramp-up in global capacity and will benefit companies making everything from wind turbines to installation vessels. In past years, the U.K. held two licensing rounds for offshore wind farms, awarding eight gigawatts of capacity. Friday's third round is for four times that -- 32 gigawatts -- and will require the installation of about 6,400 turbines over the next 10 years.
Construction of the Round Three projects is due to start in 2014 at the earliest. The scale of the task has been compared with the development of North Sea oil and gas in the 1970s, which revolutionized the U.K.'s energy landscape.
The increase is essential if the U.K. is to achieve its green targets, which are some of the most ambitious among industrialized countries. Britain is committed to producing 15% of its energy from renewable sources such as wind, solar and wave power by 2020. At present, it generates 2.4% from such sources.
Each Round Three project will involve banks of large turbines anchored to the seabed that rotate in the moving air and power an electric generator. The turbines will be taller than 40-story skyscrapers. Each blade on the turbines will extend almost 200 feet. Also, these sites generally are further from land and in much deeper waters than those awarded earlier.
Some analysts say such enormous wind farms, far off in the stormy waters of the North Sea, remain a risky investment, given their size and the technical challenges posed by their construction. It is also harder and more costly to maintain and repair wind farms that are out at sea than those onshore.
Meanwhile, costs for constructing wind turbines have escalated in recent years, roughly doubling from £1.5 million ($2.4 million) per megawatt in the first-round projects to £3.1 million for Friday's round, according to the BWEA. Small wind-power projects have been delayed in the U.K. as investors waited for the government to increase its financial support for the sector.
But a senior official at the U.K.'s Crown Estate, which owns the seabed out to the 12-nautical-mile territorial limit around the country, said that having a manufacturing and supply base in the U.K. would make the projects cheaper to build.
"Once the supply chain and the whole industry is mobilized, it will force the pace of development, just like it did in the North Sea oil and gas sector," said Rob Hastings, the Crown Estate's director of marine estate.
The government's claims that expanding offshore wind capacity could create thousands of green jobs in the U.K. have been met with skepticism. Currently, most parts for wind power, such as towers, blades and control systems -- are produced in continental Europe.
Successful bidders in the Third Round include European utilities such as RWE AG and E.On AG of Germany; U.K. energy supplier Centrica PLC; Scottish & Southern Energy PLC, Iberdrola SA of Spain, and Sweden's Vattenfall.
Write to Selina Williams at selina.williams@dowjones.com and Guy Chazan at guy.chazan@wsj.com