Government must accept ‘economic sense’ of subsidising onshore wind

A leading investor in renewable energy has told Utility Week the government must accept the economic argument that excluding onshore wind from subsidies “makes no sense”.

Richard Crawford and Jaz Bains, of The Renewable Infrastructure Group (TRIG), also warned the Conservatives that their pledge to reach 40GW of offshore wind capacity by 2030 was “very challenging” and that a framework for incentivising investment was urgently needed.

They spoke to Utility Week on the back of the company’s financial results for 2019, during which it further diversified its investments away from the UK. However, Crawford, who is director at InfraRed, TRIG’s investment manager, said he expected a more active 2020 in the UK as more offshore wind projects come online.

TRIG currently operates 74 projects – mainly wind projects and solar PV – across the UK, Ireland, France, Sweden and Germany. During 2019, it made seven acquisitions, including 25MW Little Raith windfarm in Scotland.

Last month, the group took on its first subsidy-free windfarm – the 35MW Blary Hill on the Kintyre Peninsula in west Scotland.

Crawford said TRIG was keen to do more of these projects in the UK and that, at least in Scotland, the economic model makes sense.

TRIG’s portfolio has shifted from an 80 per cent focus on the UK three years ago, to 55 per cent at present. Crawford said this was partly due to political uncertainty in the UK but also because of a more proactive attitude to encouraging renewable investment from other countries.

Asked whether the government needed to tackle the issue of subsidies for onshore wind and solar, Crawford said: “From a point of view of provision of renewables at the best pricing the attraction is clear. I can understand the planning issues and making those decisions locally but it’s for the politicians to weigh up that balance.”

Bains, director at RES – TRIG’s operations manager – added: “The cheapest form of renewable in the UK is onshore wind and it’s been sidelined mainly because the Conservatives want to appease the voters who don’t want buildout in England. Scotland is still going strong on onshore development so once they overcome and understand the economics, it makes no sense to exclude onshore wind.”

On the Conservative’s ambitious pledge to reach 40GW of offshore wind by the start of the next decade, Crawford said this was “a very challenging” target and that building blocks were not all in place yet.

Bains said: “A new offshore project can take seven to 12 years. It’s tens of millions in investment and before anyone wants to start investing, they want a line of sight on what is going to be happening at the time they start building. What is the reward mechanism going to be? The government has to put something in place to encourage further development.”

Crawford added that the work needed onshore to upgrade the grid and balance supply and demand added complexity.

“When things are done quickly they tend not to be done as well. If government wants to do this at pace it needs to look at the way the market functions with that number of renewables on system. They need to look at how is that power going to be most sensibly used, how is it going to be distributed. And that the reward mechanisms are in place to incentivise that level of build-out.”

TRIG currently operates one energy storage project but Crawford said he saw further opportunities to develop this side of the business.

He added: “At the moment we are seeing the best opportunities come when these projects can be built alongside renewables because you get cost savings and ultimately the better economics. That’s probably the better opportunity at the moment, rather than standalone.”

During 2019, TRIG’s portfolio generated 3,036GWh of electricity and was valued at £1.7 billion – up from £1.3 billion at the end of 2018. Profit before tax grew from £123 million to £162 million year on year.

Alongside its results, TRIG announced the appointment of Tove Feld as a non-executive director. Feld was previously chief technical officer at Orsted as well as head of engineering solutions for offshore wind at Siemens Wind Power.