Government is consulting on plans to make developers of established renewable technologies, such as onshore wind and solar, compete for contracts from day one of its new support regime under Electricity Market Reform (EMR). The move followed pressure from Europe to phase out subsidies as quickly as possible and bear down on costs for consumers.
However, the managing director of RWE’s UK renewables arm is concerned the proposed system could allow developers to successfully bid but not follow through, meanwhile denying other projects a chance.
“We fully support the principle that the most economic projects get built,” said Julia Lynch Williams on Thursday. “ we have not seen the model of auctions working very well… You can get a project that bids, even if it is not confident it is going to go through. That is a lost opportunity .”
Nor was Lynch Williams convinced the process would yield significantly better value. The “strike price” guaranteeing onshore wind developers £95/MWh for their power, for example, was based on “very thorough analysis”, she said.
Lynch Williams was speaking to journalists at a breakfast briefing in London, in which she and chief operating officer Paul Coffey set out a new approach to growing RWE’s renewables business.
RWE Npower Renewables, which is to be rebranded RWE Innogy UK at the end of January, is moving away from wholly owning and operating its own renewables projects, they explained. Instead, it now aims to offer consented projects to the market and recycle the capital.
Coffey said: “In the past, we might have given people the impression, because of the capital constraints at RWE, things were coming to a stop. That is not the case.”
In 2013, RWE axed its Atlantic Array offshore windfarm and Tilbury biomass conversion, and downsized plans for Triton Knoll offshore windfarm. Undeterred, this year it expects to take investment decisions on some 900MW of renewable projects across Europe, including the 340MW Galloper offshore windfarm in the UK.
This depends on investors such as Greencoat buying stakes in windfarms and freeing up money to be reinvested.
“There is quite a liquid market in the UK for the buying of operational windfarms,” said Lynch Williams. “There is a lot of money out there that is looking for a place to go.”
This depends on a stable regulatory regime, Coffey cautioned: “As long as the regulatory environment remains relatively constant, investors are telling us today they are a willing to take on these projects. The risk is with all the discussions going on about EMR and is the EU about to drop its commitments to firm targets for 2030? They are the things that really make us wonder.”