Centrica threatening to pull plug on £2bn offshore wind farm plan

November 4, 2013 by  
Filed under Green Energy News

Subsidies for wind farms will be paid for through levies on consumer energy
bills, just as ministers are attempting to reduce such “green taxes” that
companies, including Centrica, have blamed for pushing up household energy
bills.

British
Gas raised prices by 9.2pc last month
and defended its right to make
a 5pc post-tax profit, the highest of the Big Six suppliers, so as to fund
investments.

“We believe these are fair profits, funding investments in UK energy
infrastructure and securing future energy supplies for the UK, keeping homes
warm and keeping the lights on,” the company said.

Its probable abandonment of Race Bank would, however, be its third
high-profile withdrawal from planned UK investments on the grounds that
subsidies footed by consumers were too low.

In February, it
abandoned its 20pc stake in EDF’s planned Hinkley Point nuclear plant
,

writing off £231m, after complaining the returns were not attractive given
the timescale and high cost. EDF last month agreed a subsidy deal for the
project that analysts say could yield £1bn a year in pre-tax profits.

In September, Centrica
wrote off £240m for planned gas storage facilities
,
which it
had argued should be subsidised to avoid price spikes when supplies ran low.

Michael Fallon, the Energy Minister, rejected the claim, telling The
Telegraph
at the time: “I
am not prepared to see fuel bills rise further just to give Centrica
additional subsidy.”

Centrica had planned to invest up to £200m of the Race Bank project with
partners funding the rest. It opened talks with the government about terms
of a subsidy deal earlier this year.

In May, chairman Sir Roger Carr warned: “If the Government wish to have as
part of their mix the renewable wind offshore, there is a price for that. We
are happy to deliver the product provided we get the return that is
reasonable. If we do not get the return it is not something, like nuclear,
we can contemplate.”

In June, ministers unveiled the proposed levels of subsidies for offshore wind
farms for the rest of this decade, which the company believes are too low.

Under the plans, wind farms that begin operating in 2014-15 will be offered
£155 for every megawatt-hour of power they generate over a 15 year contract,
about three times the market price of electricity, with the difference paid
for in subsidies.

The subsidised price would fall 10pc to £140/MWh for projects starting up in
2017-18 and £135/MWh the year after.

The Committee on Climate Change, the government’s official adviser, said
in
September that the cut was too steep and the plans would “put required
investment at risk”
.

It said investors were also spooked by suggestions ministers envisaged as
little as 8GW of offshore wind would being running by 2020, compared with
previous plans for as much as 18GW, up from 3.3GW now.

Mr Fallon told The Telegraph this weekend that he was still
reviewing consultation responses over the draft subsidy levels and could yet
increase them
, but that some wind farm developers were happy with
the existing plans.

Centrica began planning Race Bank in 2004 and was granted consent for the
project from the Department of Energy and Climate Change in July 2012. It
had hoped to take a final investment decision early this year but said last
month that any decision had now slipped into 2014.

Its plans for another offshore
wind farm were rejected because it would have killed too many Sandwich terns
.

Centrica declined to comment.

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