U.K.-based energy company SSE is stepping back from its offshore wind investments, a move that industry stakeholders say signals the need for policy certainty.
SSE has revealed plans to reduce its stake in the approved 750 MW Beatrice offshore wind project from 75% to no more than 50%. Furthermore, the company has decided not to proceed in the long term with its stakes in four other offshore wind projects: Galloper (50% ownership stake), SeaGreen (50%), Forewind (25%) and Islay (100%).
SSE says the decision follows a comprehensive review of the company's offshore wind portfolio and is in line with an ongoing need to streamline its business. The company has also announced it is freezing its domestic electricity and gas prices until 2016 and instituting measures to bring down business costs, including the loss of about 500 jobs.
"In offshore wind farm development, there are two major, related hurdles that projects currently have to overcome," explains Jim Smith, SSE's managing director of generation development. "The first is the Levy Control Framework, which has the reasonable objective of controlling costs to customers from government energy policies – but which also means there is limited support for offshore wind. The second is cost – the future of offshore wind farm development depends on a sustainable and lower-cost supply chain."
Smith later adds, "Taking [Beatrice] forward to subsequent stages of development and construction will be challenging, but achievable, and that is what we are working toward.
"While increasing our commitment to the development of Galloper, SeaGreen and Forewind is not the right option for SSE at present, in the context of our wider investment plans, we will continue to work with partners and other stakeholders to achieve the most positive possible outcome for each project."
Trade group RenewableUK says SSE's plans highlight the dangers of policy uncertainty.
Maria McCaffery, chief executive of the group, comments, "As the SSE announcement makes clear, there are some aspects of policy which are troubling developers, so policymakers should take notice. The lack of clarity about the government's support for offshore wind past 2020 is in stark contrast to its support for nuclear, where they've set out a clear package of financial support."
Lindsay Leask, senior policy manager at Scottish Renewables, agrees.
"These decisions reinforce the uncertainty which developers have about the future of the offshore wind sector, and reinforce that continued, strong support from both the Scottish and U.K. governments is absolutely critical to the future of the industry,’ says Leask.
"In turn, the sector needs to continue to work hard to deliver cost reductions which will further prove that offshore wind is an economic alternative to other forms of generation."