‘Inherent conflict’ between boosting supply chain and lowering wind prices

There is an “inherent conflict” between the push to boost the UK offshore wind supply chain and efforts to cut prices for consumers under the Contracts for Difference (CfD) scheme, RWE UK country chair Tom Glover has cautioned.

Giving evidence to the House of Commons Welsh Affairs Committee, which is conducting an inquiry into renewable energy, the RWE boss expressed support for the government-industry agreed target to increase UK content to 60 per cent of new projects.

“Of course, everyone wants local content and local jobs, but there is this inherent conflict that we are in a competitive CfD process that is price driven.

“We are, quite rightly for the electricity consumer, trying to get our costs for the CfD bids as low as possible. On the other hand, we have local jobs and infrastructure requirements.

“That a good ambition but it’s tough already and we have to be careful that if you make it too tough, either prices go up and consumers suffer or projects don’t get delivered: we need a bit of balance.”

He also told the committee that RWE is not developing wind projects in mid Wales, even though there are “big opportunities” in that part of the country, because of lack of capacity on the local transmission system.

Glover, who is also chief commercial officer for the German-owned company’s renewables arm, urged the UK and Welsh government to put pressure on National Grid Electricity System Operator to earmark mid-Wales for one of the £2 million funding pots it can make available for early-stage work on potential grid upgrades.

He said that proposals to develop up to 50GW of floating offshore wind farms in the Celtic Sea would require an upgrade of the south Wales transmission grid, which stretches as far as the company’s gas-fired power plant in Pembroke.

The electricity that could be generated by these wind farms, combined with the concentration of infrastructure around the Milford Haven liquefied natural gas terminal, offered the potential for creating hydrogen hub in the area, Glover added.

Paul Hewett, CEO of renewable energy operator and developer Belltown Power, told the committee that “by far” the biggest problem facing the growth of renewable power in mid-Wales is lack of grid capacity.

“There is over 2GW of early-stage projects that cannot be developed in mid Wales without an upgrade of transmission infrastructure,” he said, adding that Belltown is only developing “one or two” small scale scheme in the area by squeezing out existing capacity on the distribution network

Hewett also warned it is “slightly dangerous” to focus on small-scale, community renewables projects. Such schemes, often owned by their local communities, are often seen as a good way of wooing people in rural areas to back wind and solar projects by providing a stake in any profits generated.

But he said that small scale wind and solar projects are “incredibly expensive” and have not dropped in price over the last five years ago, during which time the cost of turbines deployed on larger schemes has plunged.

“Those projects are not a viable way to deploy the GWs of the capacity we will need to tackle climate change.

“We have to be realistic about what we need to tackle climate change and at the moment only large-scale projects are economically viable ways of tackling the problem.

Hewett said that while balancing local supply and demand using small-scale renewables is a “nice idea” in rural areas, it does not work for the majority of the UK population living in larger towns and cities.

“We don’t have the ability to power our national needs by balancing supply and demand: we have to be focused on meeting demand from where the supply is available.”

He also highlighted a “discrepancy” between national political commitments to tackling climate change and planning decisions on the ground for onshore wind projects.

“There is a discrepancy between where the government’s strategic thinking is and what the local public is thinking,” Hewett said, adding that the UK government must educate the public on the measures required to tackle climate change.