Scotland slams UK's FID exclusion

Scotland has slammed the UK government’s recent announcement that three Scottish offshore wind farms may be too expensive for an early investment contract, further ratcheting the tensions between the two with regard to renewables.

In early December the Department of Energy and Climate Change (DECC) revealed a list of seven offshore wind farms which remain in contention for an early Contract for Difference (CfD) under the incoming Electricity Market Reform package.

Although some in the industry remain cynical about the government’s motivation for dangling early CfDs in front of some projects, others say they would allow for an earlier investment decision in some cases – adding much-needed momentum to the UK’s supply-chain.

Mainstream Renewable Power, whose 450MW Neart na Gaoithe project was one of the seven to make the cut in early December, seized on the news, saying that an early CfD would be a “key driver” in its ability to reach financial close in 2014.

However, on Thursday DECC surprised the industry by saying that just four of the remaining seven offshore wind farms are considered “provisionally affordable” in the context of its near-term budget.

The three projects which were excluded are all in Scottish waters, including Mainstream's Neart na Gaoithe; SSE and Repsol’s 1GW Beatrice; and Repsol and EDPR’s 1.05GW Inch Cape.

The four projects deemed “affordable” are all off the coast of England, three of them owned by Dong.

DECC did leave itself scope to change its mind when it makes a final decision on the early CfDs in spring 2014.

But that is not good enough, claims Scottish Energy Minister Fergus Ewing, who today publicly called on DECC to reverse its decision on the Scottish projects before next spring.

Yesterday’s announcement “has serious implications for Scotland’s ability to release the power of offshore wind, and increases uncertainty for both developers and investors”, Ewing says.

“We believe the Scottish projects have a strong case for being included in the [final investment decision]-enabling plan.”

It has been a rough week for Scottish offshore wind, with ScottishPower having recently walked away from its 1.8GW Argyll Array project off Scotland’s west coast, saying that the economics no longer stack up for the foreseeable future.

Scotland, which will hold an independence referendum next September, is butting heads with Westminster on a number of important issues related to renewables.

Ofgem, the UK's energy regulator, recently delayed the publication of a critical review of the country's transmission-charging regime, which important implications for wind, wave and tidal projects in remote corners and islands of Scotland.