Special inquiry on the Energy White Paper - Dear Gareth_ The by nyut545e2


									Gareth Thomas MP
PRASEG                                                                       Renewable Energy House
145 Fourth Floor,                                                          1 Aztec Row, Berners Road
                                                                                 London, N1 0PW, UK
35-37 Grosvenor Gardens,
London                                                                                 T 020 7689 1960
SW1W 0BS                                                                               F 020 7689 1969

Tuesday 13th May 2003

Dear Gareth,

The British Wind Energy Association welcomes the opportunity to participate
in PRASEG’s inquiry on the Energy White Paper.

You asked three key questions:
   • Is the vision of the White Paper a generally accepted view of the future?
   • Are the means in place to secure delivery?
   • What more, if anything, needs to be done?

BWEA believes that that the White Paper does indeed present a generally
accepted view of the future in highlighting both the need and the mechanism
for a move towards a low-carbon economy.

BWEA believes however that more needs to be done to secure this vision. The
barriers to further development of the UK’s vast wind resource are not
technical, but rather institutional and as such are entirely within Government
influence, specifically:

•   BWEA is concerned that as the industry moves closer towards
    2010 without a clear decision being made on renewable energy targets
    beyond that date, the strong interest in developing onshore and offshore
    wind energy could decline as a result of an expected fall in ROC values
    post 2010. Large-scale limited-recourse financed offshore projects in
    particular could find it increasingly difficult to obtain the necessary
    finances from the open market. An early review of the RO will be critical to
    address these and other issues.

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•   Access to the grid at reasonable cost is critical to generation projects.
    Constraints are already apparent and these look set to become worse.
    They tend to be institutional rather than technical hence increased political
    commitment to achieving solutions must be applied.

•   The wind industry is anxious for the ODPM to put in place the revised
    PPS22 Planning Guidance for Renewables in England. This programme is
    already running late and it currently looks unlikely to surface much before
    the end of 2003 and as such its impact on 2005/6 delivery is clearly going
    to be limited. Similar guidance in Scotland was published more rapidly and
    has already proved beneficial in promoting planning consents.

•   Radar related restrictions on wind farm siting due to low-flying military
    aircraft are continuing to prove problematic. There are numerous technical
    and organisational issues involved. BWEA believes there needs to be a
    greater political will to break this log-jam which is constraining both
    onshore and offshore wind projects.

•   Last, but not least, the ‘hearts and minds’ campaign to inform and win
    over the public decision-makers to the need for renewables is, BWEA
    believes, key to the successful acceleration of renewables capacity.
    Government has a key leadership role to play here and BWEA welcomes
    and encourages the work which has started under the auspices of the
    Renewables Advisory Board.

To summarise, all these issues have been correctly identified within the
Energy White Paper. BWEA welcomes this recognition and now urges
Government to rapidly progress their resolution so that targets and
aspirations can be achieved. BWEA would further suggest that Government
brings forward, as soon as possible, its planned 2005/6 review of the
Obligation. This will provide greater confidence in the continued growth of the
renewables industry, vital for the investor community.

More detailed responses to the key questions are given below.

BWEA would be happy to offer any further advice that PRASEG may require.

Marcus Rand
Chief Executive
British Wind Energy Association

1. The Government’s approach in the White Paper is based on modelling work
that suggests the switch to a low carbon energy can be done at little or no
cost to the economy. Have you reviewed their modelling work? Do you
consider it robust and realistic?

BWEA has not at this stage reviewed the modelling work and therefore is
unable to comment.

2. It has been suggested that targets for renewables, CHP and energy
efficiency post 2010 are inappropriate at this stage. Is this a view you share?
What impact (if any) do you consider the absence of targets will have?

BWEA agrees that it would be inappropriate to set new targets without first
having reviewed the effectiveness of the Renewable Obligation as a delivery
mechanism for increased contributions from renewables. However, BWEA
strongly believes, as noted above, that the importance of firm targets will
increase with time and will become critical to future investment by the time
the proposed 2005/6 review of the Obligation takes place. The absence of
such targets will greatly reduce investor confidence, thus creating a significant
barrier to further development of the sector. Hence our recommendation to
bring forward the review as soon as possible (see our response to Q12).

3. Do you consider that the measures set out in the White Paper will deliver
the “step change” in energy efficiency that the PIU called for?
If not, how should this be achieved?


4. Renewables have been given a central role in the post White Paper energy
landscape. Do you consider this realistic? Will the 10% by 2010 target be met
on the basis of current measures? If not, what more do you believe needs to
be done?
BWEA welcomes the aspiration to double the 10% renewable energy target
by 2020 and believes that a greater role for renewables is both desirable and
deliverable, and is confident that Government’s expectation that wind power
will play the largest part is correct.
BWEA is firmly of the opinion that issues relating to grid access, financing,
planning, aviation (the Ministry of Defence) and the legal framework for
offshore development must be addressed as a matter of urgency in order for
both the 10% target and 20% aspiration to become realities. These issues are
presented in more detail below in answer to other questions.
5. What else do you believe should be done to ensure the Government
achieves its target of 10 GW from CHP by 2010, or do you feel that there are
now sufficient measures in place to secure the goal?
BWEA recommends the response of our colleagues at the CHPA.

6. The White Paper places a lot of emphasis on emissions trading. Are you
already involved in the UK Emissions Trading Scheme? If not, why not?
Revenue from Emissions Trading currently represents only a small portion of
the total revenue of wind energy developments; the bulk derives from the
ROC and the wholesale price of the electricity generated. Some of the
companies in membership of BWEA (primarily the larger vertically integrated
electricity supply companies that possess in-house trading operations) are
involved in emissions trading, the majority of members are currently not.
Nonetheless BWEA strongly believes that Emissions Trading in the UK will
have an increasing influence on renewable energy development and hence we
anticipate that our members will become increasingly involved in emissions
trading; if not directly then indirectly.

7. What implication do you feel the proposed EU emissions trading regime will
have for your work and the delivery of a low-carbon economy?

All generators in Europe will have to hold sufficient GHG allowances to
account for their emissions, which will radically change the drivers in the
European electricity generation industry and furthermore could be significant
in closing the gap between the costs of conventional and renewable
generation. The key issue from the perspective of the renewables industry is
that successful implementation of the Emissions Trading Scheme in the UK
will require convergence of the Renewables Obligation and the Greenhouse
Gas (GHG) markets.
The EU emissions trading scheme thus has far reaching implications and
although the detail is uncertain the scheme is forecast to create a demand
driven GHG allowance market. Such a market will confer advantages on wind
generators however it will also bring with it risks and threats. Principle
amongst these is concern about what the introduction of a scheme running in
parallel to the RO mechanism will mean for ROC prices in the short and long
term. This may have significant financing implications.
• BWEA welcomes the fact that conventional generation markets are
being forced rapidly towards an internalisation of their external
climate change impacts as this should result in a positive knock on
for wind generators. Nonetheless in order to ensure compatibility
between emissions and RO trading mechanisms it is vital that the
RO review currently scheduled for 2005/6 is brought forward.
8. Media commentators have suggested that the nuclear option is “on hold”
for five years to see if sustainable energy can deliver. Do you share such a
view? Are you confident sustainable energy will deliver?

BWEA would agree that the general perception is that the renewables
industry has been given a period of grace in which to prove itself. The status
of the industry in the period immediately preceding the proposed review will
be vital in determining further target setting.

While greatly increased contributions from wind energy are likely within the
time period specified, (there is now over 1.3GW of new wind capacity which
has secured the necessary planning consents and is ready for construction
over the next two years alone), achieving this will be challenging. Much has to
be done to convert planning consents into operational projects, and BWEA
would highlight the importance of grid access and financing in realizing this

9. Are you satisfied with the current departmental split between the DTI and
DEFRA? If not, what would you like to see happen? Which do you think the
long term role should be of the Energy Saving Trust, the Carbon Trust and
Renewables UK? Should they all remain separate?

BWEA is not satisfied with progress being realised under the present
departmental split of renewable energy responsibilities and feels that the
current allocation of responsibilities and interdepartmental working is not
effective and could jeopardise central Government targets and policies set out
in the Energy White Paper.

BWEA’s opinion is that there are difficulties in cross-working between
Government departments to consistently push forward a focused renewable
energy agenda. Each department has different priorities and often conflicting
remits. There are three key areas in need of improvement:

i) The Offshore consents process
see Q12

ii) Securing a positive planning framework
see Q10

iii) Overcoming the barriers in relation to aviation concerns
Before reaching the planning stages for a proposal, a developer must be
confident that it will not run into serious opposition from the Ministry of
Defence on either low flying and/or radar impact grounds. Due to the costs
involved in taking a project through to planning, developers now elect to
consult MoD at the scoping stages, leading to a more speculative process and
therefore great numbers of inquiries being submitted to MoD. Until recently,
MoD objected to around 50% of these and still objects to 35%. This is
another typical example where one Government department is carrying
forward its responsibility (to airport/aircraft safety), while conflicting with the
objectives of another, namely the DTI’s renewable energy targets.

There are severe resources limitations (in terms of staff, research and
implementation) which are constraining MoD efforts to resolve the potential
conflicts between wind turbines and radar. An agreed consultation process is
up and running and currently being refined by industry and MoD. However,
there is such a backlog that clearly more staff resources are required. DTI
have funded a number of research studies which are being undertaken and
point to technological solutions, but these come at a cost.

BWEA believes there needs to be recognition that both the Government
commitment and the wind industry has grown to such an extent that it is
impacting upon other sectors and policy areas across all levels of Government
and inevitably there are resource implications as a result. If central
Government wants the wind industry, and indeed the wider renewables sector
to deliver, then all levels of Government need to cooperate and contribute to
facilitating the process. This requires both resource commitments and
effective interdepartmental working.

• BWEA recommends that a dedicated cross-working team is set up
at Government level to investigate measures to resolve sticking
points in achieving the wider Government aim for renewable energy.
This core team would identify problem areas and facilitate policy
change throughout and between departments.

10. What changes to the planning system do you think are needed to help
assist sustainable energy options?

i) Urgent requirement for national planning policy guidance

Securing planning permissions is one of the most serious and influential
challenges facing the wind industry, primarily due to the delay at all levels of
Government in producing dedicated planning policy for this sector. If there is
a similar delay in providing clear policy guidance for other renewable
technologies then their progress towards commercialisation may also be
delayed and frustrated beyond normal planning procedures.

Planning approval rates in England and Wales illustrate the essence of the
problem, falling well below the national average. While Scotland has an
approval rate of 96.6%, this is almost double that of England at 51.9% and
three times the 33.5% approval rate in Wales. These figures still do not fully
reflect the scale of the problem as they factor in successful appeal decisions.
Indeed, taking account of recommendations at the local and devolved
parliament level, the approval rate in Wales averaged a mere 12.6% from
January 1999 – October 2002 if decisions had not been contested.
The quality and clarity of national guidance is clearly a deciding factor which
can be seen in Scotland, where developers and planners alike are working
within a clear planning policy framework with National Planning Policy
Guidance note 6 (NPPG6). Yet, in England and Wales the picture is quite
different as developers and planners are working with policies designed at a
time when only one wind farm existed in the UK. Now there are nearly one
hundred operational wind farms with fifty waiting to be built and a further
sixty in the planning system. This is a form of development that is being
encountered by greater numbers of local planning authorities.

The repercussions of not producing national planning policy as soon as
possible in England and Wales would exacerbate the already uncertain and
inconsistent approaches being made in different parts of the country. One
example worthy of comment is Devon, where every single application for wind
energy development to date has been refused. Devon is the second largest
county in England, with a good wind resource, but its various district councils
are patently failing to reflect the strong encouragement of Government to the
development of renewable energy resources. The deficiency in up-to-date
guidance is a void which those who oppose wind energy at a local level are
currently exploiting in Devon and other areas of England.

The absence of national planning policy is felt equally at the regional level
whereby Regional Assemblies and/or Regional Development Agencies looking
to produce regional plans have no national guidance to work with. This
impacts heavily on decision making at local level because local policy must
conform to regional local policy.

Whilst BWEA welcomes the dynamic approach to renewable energy
development taken by the Scottish Executive through the publication of
NPPG6 and the handsome implementation of the advice in that document at a
local and national level, it cannot be sensible to encourage a concentration of
development activity in only one part of the UK. This is however what is
happening on the ground, both as a result of failure of the National Assembly
in Wales to update its renewable energy advice and of delays in the
publication of PPS22. Another aspect to the imbalance of UK planning advice
between Scotland, England and Wales is that Scotland is in danger of
attracting too much development attention in the short term, a trend which
may well produce difficulties in securing planning permission in the medium
and longer term. There is an urgent need to readdress this imbalance through
the production in England and Wales of positive national planning advice.

• ODPM should prioritise or provide additional resources to ensure
the production of PPS22 with no further delay. The absence of
national planning policy means the absence of local planning policy
leading to inconsistent and unbalanced decision making. The
objectives of the White Paper can only be met within a positive
planning framework.
ii) Interdepartmental working (See also Q9)

BWEA welcomed the thrust of the policy and commitment outlined in the
Energy White Paper. It ‘recognises planning as a serious problem for
renewables’ and indicates the intention for national guidance to be used ‘by
local authorities and developers to promote renewable energy through the
planning system’ which reinforces the need to provide a positive planning
framework through which this industry can flourish.

BWEA is aware that priorities and remits differ across departments and
understand that while the need for renewable energy deployment is being
encouraged at the DTI, it is not necessarily a top priority for ODPM. BWEA
would strongly recommend that more resources and priorities are given to
renewable energy at the ODPM, leading to a more proactive approach to
planning for renewables as described in the White Paper.

• As outlined in the response to Q9, BWEA believes a dedicated
cross-working renewables team should be established to provide
impetus to all relevant departments and coordinate a positive
approach to renewables between them.

iii) Planning policy to provide for incorporation of renewable energy into
development proposals

Local planning authorities remain unable to incorporate policies into their local
plans requiring renewable energy to be incorporated into buildings. Such a
policy could have huge benefits by reducing energy demand, and in-so-doing
increasing savings in greenhouse gas emissions. This additional contribution
from renewables can only serve to help meet UK Government targets.

Incorporating renewable energy into new developments will also provide a
trigger to manufacturers of appropriate renewable energy equipment. This
could have significant benefits to local economies.

BWEA would recommend that efforts are made to investigate changes in
planning legislation that would allow for policies to be introduced into local
plans to stipulate a percentage of predicted energy demand to be met
through micro renewable energy schemes within developments. This local
plan policy development should then be encouraged through national and
regional planning policy.

• Government should investigate legislation that would allow for the
introduction of local plan policy to stipulate the incorporation of
renewable energy into new development proposals. Such policy
development should then be encouraged at national and regional
11. What is your analysis of the performance of OFGEM in helping to deliver
an increase in sustainable energy? What changes to our transmission,
distribution and supply systems do you think are necessary to help deliver the
White Paper objectives?
BWEA created a sub-body of membership, the Wind Developers Grid Forum,
in late 2002 as a direct response to the need for a coordinated approach to
tackling the numerous grid-related issues which face wind farm developers
during the development, construction and operation of both on- and off-shore
The Forum consists of 10 or so BWEA member companies, either wind farm
developers or electrical engineering specialists intimately acquainted with
issues pertaining to connecting wind farms to the Grid. The Forum drafts
position papers for wider circulation and comment within BWEA ahead of
formal submission. BWEA’s response to this question is drawn from the work
of the Forum over the last few months.

What is your analysis of the performance of Ofgem to date?
BWEA has worked with Ofgem on a number of issues over the years;
principally amendments to the various Grid Codes, the introduction of NETA
and the pending introduction of BETTA. These two matters are considered in
more detail below;
Amendments to the Grid Codes. In this section we refer specifically to;
-   Generation Licence Exemptions
-   Amendments to the E&W Grid Code
-   Amendments to the Scottish Grid Code
-   Introduction of a GB Grid Code
For more than a year BWEA has been involved in proposing amendments to
both the Scottish and the England & Wales Grid Codes, to ensure that the
specific technical parameters of wind turbines are correctly incorporated into
the Grid Codes such that there are clear, explicit and fair rules under which
wind farms will able to connect to the UK Grid, thus clearly signalling to all
developers the ‘rules of the game’. Even more important is the fact that a
transparent and stable set of technical conditions is vital for financiers. The
work of the BWEA Finance Forum (as outlined in Q12) has clearly shown that
Grid-related risks represent one of the most significant risk categories that a
financier will need to resolve before financial closure.
Despite the clear need for the modifications required, BWEA does not feel
that, at a political level, there is appreciation of the need to conclude these
consultations in a satisfactory manner as soon as possible. All the
modifications are taking what is, in BWEA’s view, an excessive amount of
time. In addition; the proposals that we have thus far seen from the Scottish
Grid Code Review Panel (SGCRP) (for the Scottish Grid Code) and from
National Grid Transco Plc (NGT) (for the England and Wales Grid Code) do
not recognize what is technically possible given the current state of wind
turbine technology. BWEA is of the opinion that there is a disconnect between
the Government’s stated intention to encourage the development of
renewable generation and the effort that NGT and the SGCRP are devoting to
ensuring that wind generated electricity can meet the renewable targets.
• BWEA believes that Ofgem could do more to encourage NGT and
SGCRP to work with the wind industry to ensure that any Grid Code
amendments are reasonable, technically achievable, do not
discriminate against wind generation and are introduced in a timely

NETA/BETTA. NETA has been, and BETTA will be, damaging to renewables.
Imbalance charges penalise renewables (particularly smaller generators) and
part-loading caused by the 6-8 largest UK generators seeking to act as self
sufficient ‘islands’ within NETA (hence free of balancing charges) is giving rise
to significant part-loading emissions (which runs counter to what the
Government is currently trying to achieve by way of CO2 emissions
BWEA has been advised that intermittent renewables should seek to avoid
NETA charges by developing electricity storage facilities. BWEA is of the view
that these suggestions are not particularly helpful, nor do they reflect the
reality of the situation which is that the variation in output of wind generation
relative to daily demand variations is currently insignificant.

• BWEA would like to see consideration given to a fundamental
review of NETA that will make it less onerous for renewables
generators and, particularly, for smaller generators, to connect.

What changes to our transmission, distribution and supply systems do you
think are necessary to help deliver the White Paper objectives?
Detailed Technical Study on Grid Capabilities to absorb wind-
powered generation capacity. There is much debate at the present time
about the technical ability of the UK Grid to support the connection of wind
generated electricity; unfortunately this debate is taking place in a vacuum.
To date there has been no detailed study, carried out in a manner acceptable
to all involved parties, on the ability of the Grid to absorb significant amounts
of installed wind capacity while maintaining overall system stability.
• Given the significant amounts of wind capacity coming onto the
system between now and 2010 (with even more to follow after that
date) it is vital that this detailed technical study is initiated as soon
as possible. Only once the results of this work are available will it be
possible to make informed decisions about the need for, and hence
the specific wording of, revisions to the Grid Codes in order to
incorporate the specifics of wind generation technology.
GB Grid Code, England & Wales Grid Code and the Scottish Grid Code
As has previously been mentioned, BWEA is currently involved in amendments
to both the E&W and the Scottish Grid Codes. BWEA notes that both of these
sets of amendments will, by-mid 2005 at the latest, have had to have been
incorporated into a single GB Grid Code.

The amount of work required for each of these consultations is significant.
This is especially true for our nascent wind industry which is resource
constrained and hence does not have as much time, money or manpower to
devote to consultations as is the case with mature sectors of the power
industry. In this regard BWEA notes that it does not seem sensible to have
two parallel consultations (E&W Grid Code and the Scottish Grid Code)
running on a common issue when both are imminently going to merge into a
single GB Code.

• BWEA believes that consideration should be given to merging the
three parallel consultation processes relating to the E&W Grid Code,
the Scottish Grid Code and the GB Grid Code, into one.

The Provision and Regulation of Offshore Grid Infrastructure. In
terms of grid infrastructure there will be two principle forms of offshore
i)        the first type will seek to build and own their grid connections to the
          onshore grid.
ii)       the second type, for which centralized coordination of the construction
          and operation of grid infrastructure will probably be needed, will
          involve several developers building a number of separate developments
          each of which will connect to shared offshore grid infrastructure.

To reflect these dual needs BWEA believes that there needs to be a dual
system of offshore grid ownership. On one hand, developers need to be able
to build, own and operate their own transmission and distribution networks
where necessary. On the other hand, serious consideration must be given to
the extension of TSO and DNO licences offshore. On this latter point BWEA
was disappointed to note the statement in the DTI’s Future Offshore
      ‘The Government’s conclusion is that, although extending the licences of
      the TSOs and DNOs offshore might be a workable solution, there are no
      compelling reasons for adopting this approach, rather than leaving the
      responsibility for providing infrastructure with offshore generators and
      third party providers. In particular, it is not clear that the regulated
      businesses of the transmission and distribution companies would have
      better incentives to invest efficiently in new cables than non-regulated
BWEA does not agree as this would rule out the option of having a centralised
and coordinated approach to the construction of offshore grid networks where
it is appropriate for linking together a number of wind farms (i.e. option ii)
• BWEA believes that TSO and DNO licences should be extended.
However individual developers should nonetheless retain the right
to be able to construct, own and operate their own grid
infrastructure where necessary.
As recognized by the DTI in the Future Offshore consultation, BWEA
believes that the real issue relates to providing the TSO with the
correct financial incentives to adjust for the higher risks involved
with developing offshore (as opposed to onshore) grid

12. Do you believe there is sufficient access to capital (private and public
sector) to help fund the necessary investment in sustainable energy options?
If not, what do you believe needs to be done to boost investment from both
the public and private sector?
BWEA held the first meeting of the Offshore Wind Finance Forum in October
2002. This Forum brings together city financiers, insurers, wind farm
developers, electricity suppliers, turbine manufacturers, engineering
contractors and lawyers and was convened in order to tease out the issues
that are preventing and/or delaying sufficient levels of capital being made
available to finance offshore wind farms. The Forum has developed a detailed
‘Risk Register’ which lists and ranks 47 risks based on their perceived
likelihood of occurrence and their impact in the event that they occur. Our
answer to Q12 is drawn from the work of the Finance Forum and is divided
into three broad areas on which financiers are currently seeking resolution:
Grid, Finance and Legal.
Without going into the detail of the risks contained in the Register it would be
fair to say that most of the risks highlighted relate to the fact that global
offshore wind technology has almost no track record. What this means in
practical terms is that most of the risks associated with development are
difficult to quantify and hence financiers tend to build large contingency
premiums into their debt costs. These (and other) additional costs mean that
offshore wind developments are in the region of 30-40% more expensive
than those onshore.
Grid Issues
As already stated, Grid issues rank highly with financiers and it is therefore
vital that a rapid resolution of the issues raised in answer to Q11 is achieved.
Financing: Government Support: ROCs - the mechanism
When assessing the project economics a financier will want to see that gross
revenues will cover costs with a margin sufficient to cover the risk that the
financier has assumed by agreeing to finance the project. In looking
specifically at wind farm revenues the financier will initially note that the
Renewable Obligation Certificate (ROC) is vital to ensuring project viability
hence it is crucial to the ongoing development of offshore wind (and of lesser
significance for onshore developments).
The ROC mechanism has been very successful at stimulating new
developments onshore and ROC price variability has not been a major issue.
The reasons for this are,
1) as already discussed, onshore development costs are 30-40% lower than
2) there is now 30,000MW of wind capacity installed onshore worldwide
   which means that the various risks associated with onshore development
   can be measured and costed with a reasonable degree of accuracy.
   Consequently financial risk premiums are significantly lower. As a result of
   these two points the wholesale price of electricity + the ROC together
   provide sufficient revenue to make onshore projects financially attractive.
3) onshore projects are small relative to those envisaged in Round One and
   beyond. Banks are more willing to accept ROC price variability risk on a
   portfolio of relatively small onshore wind developments than they would
   be to accept such risk on a single, large, high risk offshore project.
While there is clear evidence that the ROC is hastening the pace of onshore
developments BWEA has reservations about the ability of the ROC system, in
its current format, to provide a similar stimulus to future offshore projects.
The Government has set a target of 10% of the UK’s electricity from
renewable sources by 2010. It is this target that supports the ROC price. At
the present time the target has not been increased beyond 2010 which means
that there will be downward pressure on the ROC price after this time
(assuming that by 2010 the renewable target has still not been extended).
Government intends to undertake a review of the RO in 2005/6, at which time
it will make a decision on whether or not to increase the 10% target beyond
2010. Between now and 2005 the industry, and particularly financiers, are left
with limited means of estimating what will happen to prices post 2010.
Projects that are currently in the ‘concept’ stage of project planning are
unlikely to be completed before the end of 2005 at the earliest which means
that financiers, who typically will seek to recover debt capital over 10 years,
are able to count on only 4 years of ROC revenue. This issue is, given their
already marginal economics, of particular significance for offshore
developments. As a result of this, BWEA strongly urges the Government to
bring forward the review of the RO (currently scheduled for 2005/6) to begin
as soon as possible. BWEA believes such action would also send a strong
message to potential financiers of existing Round One offshore projects.
• The combination of
   -   high risk premiums
   -   significantly larger projects
   -   the desire of companies to get larger projects off balance sheets
   -   the much higher value at risk (VAR) that banks must deal with and
   -   the fact that the value of the ROC post 2010 is currently unclear
means that it will be very difficult to obtain financing for large scale
offshore wind farm projects. If the offshore industry is to reach its
full potential and hence if the UK is to meet its 2010 renewable
energy targets, it is imperative that the attractiveness of offshore
wind to limited recourse financing is increased.
• BWEA believes that the review of the Renewable Obligation should
be bought forward and that, subject to the outcome of the review,
the 10% target should be extended as soon as possible.

Financing: Government Support: Capital Grants
The Government has stated that capital grants would be made available to
assist the first offshore wind farms and it has subsequently made awards
totalling £62 million to the first 6 sites to have received planning consent.
BWEA is concerned that the capital grants are not as effective as they could
be, principally because a developer does not know, until it is officially
announced late in the project planning phase, how much he will receive if,
indeed, he will receive anything. Government has been extremely supportive
in stating that if additional funds are needed, they will be granted.
Unfortunately this is insufficient for financiers who, when modelling project
economics, will always take the worst case and hence will assume that capital
grants will not be available.
• BWEA believes that it would be beneficial to have a capital grants
process that is much more predictable (for instance something akin
to accelerated depreciation) and hence that can be included as part
of the revenue stream by financiers at the modelling stage.

Legal & Consents Regime for offshore wind
Experience from Round One has shown that the offshore wind farm
consenting regime is not ideal. In addition to which BWEA also notes that
there is currently no legal basis in accordance with which wind farms can be
developed beyond 12 nautical miles. The Government could be acting ultra
vires if it permitted development (other than oil & gas) on the UKCS outside
12nm. This is potentially a serious problem because third parties could then
challenge the legality of such developments. The absence of an appropriate
legal regime effectively rules out any development outside 12nm.
New legislation beyond 12nm is therefore urgently required for two purposes;
to establish a legal regime and to create a streamlined consents process.
Legal risk is another significant risk that was identified within the BWEA
Offshore Wind Finance Forum hence it is important that, in order to bring
down costs and speed offshore developments, this risk be removed as soon
as possible. BWEA is aware that DTI is already seeking to have an Offshore
Wind Bill included in the Queen’s speech at the opening of Parliament in
November. If, however, the Bill is not included in the next session there will
be additional uncertainty as we wait for the 2005 session.
• BWEA would strongly welcome any support that can be given to
getting this key legislation included in the Queen’s speech for this

13. What is your assessment about whether the workforce needs of
sustainable energy are being met and what further steps are required?

Renewables UK have commissioned a definitive analysis of the renewables
sector, which should do much to identify gaps in both workforce needs and
the supply chain which must be addressed if the renewables industry is to
meet targets laid out for it.

It is BWEA’s opinion that skills shortages are likely to increase, across all
sectors of the industry, but particularly with regard to specialist staff, for
example in electrical engineering disciplines. Encouraging closer links with
universities, etc in providing graduates with applied skills for development and
related engineering and other support skills will help to reduce any short-fall.
Technology transfer from the existing oil and gas sector will be necessary and
more influence needs to be exerted in these sectors, through for example, the
PILOT programme.

14. Are there any specific measures you have not outlined above that you
would like to see taken forward to help deliver the goods of the White Paper?

There is without doubt a role for Government in explaining to the public why
the basis of generation needs to change and why encouraging the
understanding and appreciation of the role of renewables is necessary.
Whatever the industry publishes (no matter how legitimate) it is at risk of
being dismissed as propaganda. The ‘hearts and minds’ campaign will be of
enormous value in helping people understand.

Without a supply of skilled personnel there is a real risk that the ability of
industry to expand in the future will be hampered. Following on from this,
promotion of wind energy opportunities to UK companies that can be a part of
a greater wind energy supply chain also needs to occur. Without such an
integrated approach, jobs through industrial advancement and R&D are going
to be more difficult.

These two, together with financing, planning and grid related issues, have all
been identified as work programmes for the Renewables Advisory Board;
BWEA looks forward to working closely with the Board and the early
publication of the results of its labours.

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